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[Execution Copy] AMENDMENT NO. 1 TO EMPLOYMENT AGREEEMENT This Amendment No. 1 (“Amendment No. 1”) to the Employment Agreement dated as of November 21, 2005 (the “Employment Agreement”) between Loral Space & Communications Inc., a Delaware corporation (the “Company”), and Avi Katz (the “Executive”) is entered into as of June 19, 2006. WHEREAS, the Company and Executive are presently parties to the Employment Agreement; and WHEREAS, the Company and Executive desire to amend the Employment Agreement as set forth herein; NOW, THEREFORE, the Employment Agreement is hereby amended as follows:   1.   Capitalized terms used herein without definition shall have the meaning ascribed thereto in the Agreement.   2.   Executive’s Base Salary in effect prior to July 1, 2006 (the “Effective Date”) was $438,048 per annum (the “Original Base Salary”). Effective as of the Effective Date and for the period ending on the day preceding the expiration of the Term, Executive’s Base Salary as set forth in Section 4(a) of the Employment Agreement, shall be $394,243 per annum (the “New Base Salary”). Except as otherwise set forth in this Amendment No. 1, the New Base Salary shall be and become the “Base Salary” for purposes of the Employment Agreement.   3.   Executive’s Target Annual Bonus in effect prior to the Effective Date was forty percent (40%) of Executive’s Original Base Salary (the “Original Target Bonus”). With respect to the Company’s MIB Program for the 2006 fiscal year or any subsequent fiscal year during the Term and Executive’s entitlement to an Annual Bonus thereunder, Executive’s “Target Annual Bonus” under Section 4(b) of the Employment Agreement shall be fifty percent (50%) of Executive’s Original Base Salary (the “New Target Annual Bonus”). The New Target Annual Bonus shall be and become the “Target Annual Bonus” for purposes of the Employment Agreement, provided, however, that if at any time during the Term Executive’s Base Salary shall be increased, for purposes of calculating Executive’s Target Annual Bonus the Original Base Salary shall be adjusted to reflect the same percentage increase as the percentage by which his Base Salary was increased (“Adjusted Original Base Salary”). For example, if Executive’s Base Salary is increased by 5%, for purposes of calculating the Target Annual Bonus, the Original Base Salary shall be increased by 5%. For purposes of calculating Executive’s Annual Bonus for 2006, any Annual Bonus paid shall be reduced by the amount of Base Salary Executive received in the period from January 1, 2006 to the Effective Date (the “Interim Period”) that is in excess of the New Base Salary he would have received had the New Base Salary been in effect during the Interim Period. In addition, if during the Term Executive becomes a participant in a long term incentive plan or other similar plan under which annual grants of stock options or other equity based awards are awarded to Executive based on target multiples of Base Salary, Executive’s Base Salary for this purpose shall mean his Adjusted Original Base Salary.   4.   On the day preceding the expiration of the Term, Executive’s Base Salary shall revert to and shall be and become his Adjusted Original Base Salary and, with respect to his participation in the Company’s MIB program in respect of periods after expiration of the Term, his Target Annual Bonus shall revert to and shall be and become 40% of his Adjusted Original Base Salary (the “Restored Target Annual Bonus”) (for the avoidance of doubt, this means that Executive’s Target Annual Bonus for the 2007 fiscal year payable on or before March 15, 2008, if earned, shall be the sum of (x) his New Target Annual Bonus for the period commencing January 1, 2007 and ending on the expiration of the Term plus (y) the Restored Target Annual Bonus for the period commencing upon expiration of the Term and ending on December 31, 2007).   5.   If (x) Executive’s employment with the Company is terminated upon the expiration of the Term or (y) the Term under the Employment Agreement is not renewed or extended and Executive continues to be employed by the Company after the Term on an “at will” basis and Executive’s employment is thereafter terminated, Executive shall be designated by the Plan Administrator thereunder as an “Eligible Employee” and covered by, and entitled to severance benefits under, the severance policy adopted by the Board of Directors and in effect on the date hereof (a copy of which has been provided to Executive and is attached hereto as Exhibit A) or such other severance policy generally applicable to employees of the corporate office as may then have been adopted in good faith by the Board of Directors and then be in effect. For purposes of calculating severance to which Executive may be entitled with respect to a termination of Executive’s employment upon or after expiration of the Term, references in the applicable severance policy to Base Salary shall mean Executive’s Adjusted Original Base Salary in effect upon expiration of the Term as such may have been further increased after expiration of the Term and prior to the date of termination. Adjusted Original Base Salary shall also be used for purposes of calculating any earned and accrued, but unused vacation pay to which Executive may be entitled upon termination either during or after the Term.   6.   Notwithstanding any provision in the Employment Agreement to the contrary, if any provision of the Employment Agreement (or of any award of compensation, including equity compensation or benefits) would cause Executive to incur any additional tax or interest under Code Section 409A or any regulations or Treasury guidance promulgated thereunder, the Company shall, after consulting with Executive, reform such provision to comply with Code Section 409A; provided that the Company agrees to maintain, to the maximum extent practicable, the original intent and economic benefit to Executive of the applicable provision without violating the provisions of Code Section 409A. Notwithstanding any provision in the Employment Agreement to the contrary, any payment otherwise required to be made thereunder to Executive at any date as a result of the termination of Executive’s employment shall be delayed for such period of time as may be necessary to satisfy Section 409A(a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended from time to time (the “Code”). On the earliest date on which such delayed payments can be made without violating the requirements of section 409A(a)(2)(B)(i) of the Code, there shall be paid to Executive, in a single cash lump sum, an amount equal to the aggregate amount of all payments delayed pursuant to the preceding sentence.   7.   Provisions of this Amendment shall survive any termination of employment and the expiration of the Term if so provided herein or if necessary or desirable fully to accomplish the purposes of such provision, including, without limitation, the obligations of the Company under Section 5 hereof.   8.   Except as expressly amended by this Amendment No. 1, the Employment Agreement remains in full force and effect and nothing in this Amendment No. 1 shall otherwise affect any other provision of the Employment Agreement or the rights and obligations of the parties thereto. IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment No. 1 as of the day and year first above written. LORAL SPACE & COMMUNICATIONS INC. By:  /s/ Michael B. Targoff Name: Michael B. Targoff Title: Chief Executive Officer /s/ Avi Katz  Avi Katz

Exhibit 10.1.16   [GRAPHIC APPEARS HERE]   2005 HIGH PERFORMANCE INCENTIVE PROGRAM   The High Performance Incentive Program (HPIP) is designed to recognize and reward those employees of Pacific Capital Bancorp (the Company) who have contributed meaningfully to the increase in shareholder value, profitability and customer centricity of the Company. Additionally, the plan’s objectives include the following:     •   Create greater alignment with the Core Bank Performance*   •   Encourage teamwork within departments and across business units   •   Ensure that our total compensation is competitive   The High Performance Incentive Program is linked directly to achieving the company’s annual Core Bank Net Income goal. Every employee is important in achieving our goal.   *Does not include revenue and expenses from Refund Anticipation Loan and Refund Transfer business.   KEY ELEMENTS   Success Factors   Three Success Factors determine an annual Incentive award:   •   Bank Performance   •   Department Performance   •   Individual Performance   Ø Bank Performance The Company’s annual business planning and budgeting process outlines the objectives to be achieved for the year. Our goal for 2005 is Core Bank Net Income at or above plan.   Ø Department Performance The performance of each department is dependent upon the combined efforts and focus of all its employees. To ensure that there is a common framework, the following metrics will apply to all departments:   •   Revenue Generation   •   Expense Management   •   Customer Value Added   •   Risk Management (e.g. Regulatory and Governance Compliance)   Departments may have different components for these metrics depending upon their function. It is important that all employees understand their role in achieving the department goals.   Ø Individual Performance In addition to the responsibilities each individual has in performing his or her job, individual goals will be established that contribute directly to the Company’s annual business goals. The individual’s goals will support the Department’s metrics, must be significant, and directly support the profitability or contribution of the business unit’s achievement of the annual business plan, compliance and risk mitigation, and the leadership and development of employees if the individual is in a leadership role.   1 -------------------------------------------------------------------------------- Goals and Weightings To ensure that all employees are aligned toward the Bank Performance, every employee will have a minimum of 15% weighting in this goal category. Positions in higher grade levels generally have the responsibility to guide a business unit and to more directly impact the overall Bank performance. The goals in the higher grade levels, therefore, will be weighted more heavily to the overall Bank performance. The goal setting process and weighting should correlate directly to the individual’s responsibility level and ability to measure his or her impact on company performance. It is recommended that not more than three to four goals are established to ensure that the employee has the right focus.   Plan Funding Our ability to fund incentive payouts is dependent upon our overall success in achieving the Core Bank’s net income goal. Funding levels will reflect the degree of success in attaining the Core Bank’s net income goal and in turn, will establish the dollar level of the incentive pool. If the Bank does not achieve the Threshold level, there will be no payout of incentives even if a Department and/or Individual has met or exceeded his or her goals.   Levels   Bank Goal Achievement   Funding Level of Pool Below Threshold   < 95% of Goal   No funding Threshold   95% - 99% of Goal   75% funded Target   100% -110% of Goal   100% funded Stretch   110% - 120% of goal   120% Super Stretch Bank level only   > 120% of goal   Funded up to a cap of 150%   2 -------------------------------------------------------------------------------- Guidelines for Determining Individual Award The department leader is responsible for recommending the appropriate incentive awards based upon the individual contributions of each eligible employee. Award percentages will differ based upon the level of goal achievement and performance of the employee. An individual must have achieved an “Expectations Achieved” overall PACE rating for the past 12 months to be considered for any award. Base compensation rewards the employee for performing his or her responsibilities; the HPIP incentive recognizes the “above and beyond” contributions of the employee.   Grade    Below Threshold   Threshold   Target   Stretch 18-19, T6    0%   Up to 18.75%   Up to 25%   Up to 31.25% 17, T5    0%   Up to 15%   Up to 20%   Up to 25% 15-16, T3-T4    0%   Up to 11.25%   Up to 15%   Up to 18.75% 13-14, T2    0%   Up to 9%   Up to 12%   Up to 15% 7-12, T1, D1-3    0%   Up to 3.75%   Up to 5%   Up to 6.25%   An Adjustment Factor can be used that takes into consideration the employee’s contribution to Individual, Department and Bank goals relative to other employees in the department. It also should take into account other factors such as overall PACE rating, pro-ration for new employees, risk management and leadership.   TERMS AND CONDITIONS   Eligible Participants All regular status employees of Pacific Capital Bancorp who are paid on a 100% salaried basis through the program year and who are actively employed at the time of distribution are eligible for consideration. Eligibility, however, does not guarantee payment. Employees who participate in variable or commission pay programs or the RAL department incentive program are not eligible for the HPIP Program.   3 -------------------------------------------------------------------------------- Employees who are hired during the year but prior to October 1, 2005, will be eligible on a prorated basis. Employees who change from a 100% salaried position to a variable or commission pay plan during the business year may be eligible for HPIP on a prorated basis. Employees who retire from the Company (in accordance with the Company’s retirement criteria) after the first quarter of the year will also be eligible on a prorated basis.   When an employee transfers to a new business unit during the year, it is important that the new leader collaborates with the former leader to document accomplishment level for the previously set individual goals and business unit goals. The new leader and employee will then determine and document new individual and department goals for the balance of the year.   Program Year The HPIP is effective January 1, 2005 and will be in effect during the plan year defined as January 1 through December 31, 2005. The Program will be reviewed and updated annually to ensure alignment with the Bank’s strategic plan and business goals.   Program Administrator The Program Administrator is the Director of Human Resources of Pacific Capital Bancorp. The Program Administrator reviews all recommendations prior to submission to the Compensation Committee of the Board of Directors and has responsibility to ensure fair and consistent consideration of participants. The Program Administrator may recommend modifications in the program design and review the effectiveness of the plan on an annual basis.   Payment Funding of the program and payments are subject to approval by the Compensation Committee of the Board of Directors, and if approved, payment will be made in February 2006.   Termination of Employment To encourage employees to remain in the employment of the Company, a participant must be employed on the date of the actual incentive payout. Any termination (except by reason of death or official company retirement), prior to the incentive payment date will serve as a forfeiture of any award.   Disability or Death If a participant is disabled by an accident or illness, and is disabled long enough to be placed on long-term disability as defined by the Company’s LTD plan, his or her incentive award for the Program period shall be pro-rated so that no award will be earned during the period of long-term disability.   In the event of death, the Company will pay to the participant’s estate the pro-rata portion of the award that the participant would have received if he or she had lived to the end of the Program year.   Miscellaneous The Program will not be deemed to give any participant the right to be retained in the employ of the Company, nor will the Program interfere with the right of the Company to discharge any participant at any time.   Pacific Capital Bancorp reserves the right to modify this program at any time.   4

Exhibit 10   PURCHASE AND SALE AGREEMENT     BY AND AMONG     TELEVISION STATION GROUP HOLDINGS, LLC TELEVISION STATION GROUP, LLC TELEVISION STATION GROUP LICENSE SUBSIDIARY, LLC, WBNG, INC. AND WBNG LICENSE, INC.     DATED AS OF JANUARY 13, 2006   --------------------------------------------------------------------------------   TABLE OF CONTENTS       Page       ARTICLE 1 DEFINITIONS 1       1.1 Certain Definitions 2       1.2 Certain Additional Definitions 12       ARTICLE 2 PURCHASE AND SALE OF BROADCASTING ASSETS 16       2.1 Purchase and Sale of Broadcasting Assets 16       2.2 Purchase Price; Allocation of Purchase Price 16       2.3 Assumption of Obligations 18       2.4 Purchase Price Adjustment 19       2.5 Purchase Price Deposit and Escrow Agreement 22       2.6 Payment of the Purchase Price 22       ARTICLE 3 THE CLOSING 23       3.1 The Closing 23       3.2 Closing Deliveries of the Sellers 23       3.3 Closing Deliveries of the Purchaser 25       ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE SELLERS 26       4.1 Organization 26       4.2 Authority 26       4.3 No Violation; Third Party Consents 27       4.4 Governmental Consents 27       4.5 Real and Personal Property 28       4.6 Title to Broadcasting Assets 29       4.7 Intellectual Property and Proprietary Rights 29       4.8 Business Contracts 30       4.9 Business Licenses 32       4.10 Business Employees 32       4.11 Employee Benefit Plans 32       4.12 Financial Information 33       4.13 No Undisclosed Liabilities 34   i --------------------------------------------------------------------------------       Page       4.14 Litigation; Governmental Orders 34       4.15 Compliance with Laws 35       4.16 FCC Matters 35       4.17 Taxes 35       4.18 Labor Matters 36       4.19 Environmental Matters 36       4.20 Cable and Satellite Matters 37       4.21 Digital Television 38       4.22 Transactions with Affiliates 38       4.23 Advertising 39       4.24 Limitations on Representations and Warranties 39       ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 39       5.1 Organization 39       5.2 Authority 39       5.3 No Violation 40       5.4 Governmental Consents 40       5.5 FCC Matters 41       5.6 Availability of Funds 41       ARTICLE 6 COVENANTS AND AGREEMENTS 41       6.1 Conduct of Business 41       6.2 Access and Information 43       6.3 Title Insurance; Survey and Lien Search 44       6.4 Further Actions 46       6.5 Consents 47       6.6 Updating of Information 48       6.7 Conveyance Free and Clear of Encumbrances 48       6.8 Fulfillment of Conditions by the Sellers 48       6.9 Fulfillment of Conditions by the Purchaser 49   ii --------------------------------------------------------------------------------       Page       6.10 Confidentiality; Publicity 49       6.11 Transaction Costs 49       6.12 Retention and Delivery of the Sellers Records 49       6.13 Employees and Employee Benefit Matters 50       6.14 Control of the Station 52       6.15 Digital Television Build Out 53       6.16 Further Assurances of Sellers 53       6.17 Further Assurances of the Purchaser 53       6.18 Bulk Transfer 53       6.19 No Shop 53       6.20 Make Obligations Current 54       ARTICLE 7 CLOSING CONDITIONS 54       7.1 Conditions to Obligations of the Purchaser 54       7.2 Conditions to Obligations of the Sellers 55       ARTICLE 8 RISK OF LOSS; FAILURE OF BROADCAST TRANSMISSION 56       8.1 Risk of Loss 56       8.2 Interruption of Broadcast Transmission 57       8.3 No Limitation 57       ARTICLE 9 NON-COMPETITION; NON-SOLICITATION; AND CONFIDENTIALITY 57       9.1 Non-Competition; Non-Solicitation 58       9.2 Confidentiality 58       9.3 Equitable Relief 58       ARTICLE 10 TERMINATION 59       10.1 Termination 59       10.2 Effect of Termination 60       ARTICLE 11 INDEMNIFICATION 62       11.1 Indemnification by the Sellers 62   iii --------------------------------------------------------------------------------       Page       11.2 Indemnification by the Purchaser 64       11.3 Procedure for Indemnification 65       11.4 Tax Treatment of Indemnification Payments 67       ARTICLE 12 MISCELLANEOUS 67       12.1 Survival 67       12.2 Notices 67       12.3 Assignment 68       12.4 Specific Performance 69       12.5 Amendments and Waiver 69       12.6 Entire Agreement 69       12.7 Representations and Warranties Complete 69       12.8 Third Party Beneficiaries 70       12.9 Governing Law 70       12.10 Neutral Construction 70       12.11 Severability 70       12.12 Headings; Interpretation; Schedules and Exhibits 70       12.13 Counterparts 71   iv --------------------------------------------------------------------------------   TABLE OF SCHEDULES   Schedule 1-A   Trade Agreements       Schedule 1-B   Barter Agreements       Schedule 1.1   Permitted Encumbrances       Schedule 4.3   No Violation; Third Party Consents       Schedule 4.4   Governmental Consents       Schedule 4.5(a)   Real Property       Schedule 4.5(h)   Tangible Personal Property       Schedule 4.6   Title to Broadcasting Assets       Schedule 4.7(a)   Intellectual Property       Schedule 4.8(a)   Material Business Contracts       Schedule 4.8(b)   Exceptions to Material Business Contracts       Schedule 4.9   Business Licenses       Schedule 4.10   Business Employees       Schedule 4.11(a)   Benefit Plans       Schedule 4.11(b)   Exceptions to Benefit Plans       Schedule 4.11(c)   Severance Benefits       Schedule 4.12(a)   Financial Statements       Schedule 4.12(b)   Material Assets, Services or Facilities       Schedule 4.12(c)   Subsequent Events       Schedule 4.13   No Undisclosed Liabilities       Schedule 4.14   Litigation; Governmental Orders       Schedule 4.15   Compliance with Laws       Schedule 4.16   FCC Matters   i --------------------------------------------------------------------------------   Schedule 4.18(a)   Labor Dispute; Strike; Work Stoppage       Schedule 4.18(b)   Unions; Collective Bargaining Agreement       Schedule 4.19   Environmental Matters       Schedule 4.20   Cable and Satellite Matters       Schedule 4.22   Transactions with Affiliates       Schedule 4.23   Advertising       Schedule 5.3   No Violation       Schedule 5.4   Governmental Consents       Schedule 6.1   Conduct of the Business       Schedule 6.1(b)(v)   Permitted Wages and Salary Increases       Schedule 6.3(b)   Surveys       Schedule 6.13(d)   Unused and Accrued Vacation       Schedule 6.15   Digital Television Build Out       Schedule 9.1   Non-Competition; Non-Solicitation   --------------------------------------------------------------------------------   TABLE OF SCHEDULES   Exhibit A:   Form of Deposit Escrow Agreement       Exhibit B:   Form of Indemnification and Proration Escrow Agreement       Exhibit 3.2(b)(v):   Form of Opinion of Counsel to Sellers   i --------------------------------------------------------------------------------   PURCHASE AND SALE AGREEMENT   THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is made and entered into as of January 13, 2006, by and among Television Station Group Holdings, LLC, a Delaware limited liability company (“Holdings”), Television Station Group LLC, a Delaware limited liability company (the “Company”) and Television Station Group License Subsidiary, LLC, a Delaware limited liability company (“TSG License Subsidiary;” each of TSG License Subsidiary, Holdings and the Company, individually a “Seller” and, collectively, the “Sellers”), and WBNG, Inc., a Delaware corporation (“Main Purchaser”), WBNG License, Inc., a Delaware corporation (“License Purchaser” and together with Main Purchaser, the “Purchaser”), and for purposes of Section 2.5 and Section 10.2(b)(v), Granite Broadcasting Corporation, a Delaware corporation (“GBC”).   W I T N E S S E T H:   WHEREAS, the Sellers own and operate a CBS-affiliated broadcast television station WBNG-TV, Binghamton, New York and its auxiliary facilities (the “Station”), including the Broadcasting Assets (the “Business”);   WHEREAS, the Company and TSG License Subsidiary are wholly owned direct or indirect subsidiaries of Holdings;   WHEREAS, TSG License Subsidiary is the holder of the FCC Licenses;   WHEREAS, the Purchaser desires to purchase from the Sellers, and the Sellers desire to sell to the Purchaser, all of the Broadcasting Assets, upon the terms and subject to the conditions set forth herein.   WHEREAS, the prior consent of the United States Federal Communications Commission and certain other third parties is required to permit the consummation of the transactions contemplated hereby.   WHEREAS, the Sellers and the Purchaser desire to make certain representations, warranties, covenants and agreements in connection with the transactions contemplated hereby, all as more fully set forth herein.   AGREEMENT   NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants, promises and agreements hereinafter set forth, the mutual benefits to be gained by the performance of such covenants, promises and agreements, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, the parties hereto hereby agree as follows:   --------------------------------------------------------------------------------   ARTICLE 1 DEFINITIONS   1.1                                 Certain Definitions.  For all purposes of this Agreement, the following terms shall have the respective meanings set forth below:   (a)                                  “Accounts Receivable” means the rights of any Seller as of the Effective Time to payment for the sale of advertising time and other goods and services by the Business prior to the Effective Time, together with all other accounts receivable, notes receivable and other receivables of any Seller arising prior to the Effective Time.   (b)                                 “Action” means any claim, action, suit or proceeding, arbitral action, governmental inquiry, criminal prosecution or other investigation.   (c)                                  “Affiliate” means any “affiliate” as defined in Rule 144(a)(1) promulgated under the Securities Act of 1933, as amended, any successor statute thereto, and the rules and regulations promulgated thereunder.   (d)                                 “AR Shortfall Amount” means the amount equal to the difference between $750,000 and the Estimated AR Adjustment Amount.   (e)                                  “Barter Agreements” means each Contract between the Company and a third party for the sale of air time on the Station in exchange for goods and services used for the benefit of any Seller.   (f)                                    “Benefit Plans” means any employment, bonus, incentive compensation, deferred compensation, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, equity (or equity-based), leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, medical, accident, disability, workmen’s compensation or other insurance, severance, separation, termination, change of control or other benefit plan, agreement (including any collective bargaining agreement), practice, policy or arrangement, whether written or oral, and whether or not subject to ERISA (including, without limitation, any “employee benefit plan” within the meaning of Section 3(3) of ERISA), which any Seller sponsors, maintains, has any obligation to contribute to, has Liability under or to which it is otherwise a party and which covers or otherwise provides benefits to any employees or former employees of the Business (or their dependents and beneficiaries).   (g)                                 “Broadcasting Assets” means all real, personal and mixed assets, rights, benefits and privileges both tangible and intangible, of every kind, nature and description Used by the Sellers in connection with, or pertaining to, or useful in connection with the operation of the Business (other than the Excluded Assets, which are expressly excluded from the definition of Broadcasting Assets and shall be retained by the Sellers).  Except as otherwise provided in this Agreement, Broadcasting Assets shall include the following assets existing on the date of   2 --------------------------------------------------------------------------------   this Agreement and all such assets acquired between the date hereof and the Closing as permitted by and subject to the terms of this Agreement:   (i)                                     all real property, leasehold interests and estates and improvements of every kind and description, together with all buildings, structures and improvements of every nature located thereon including fixtures, auxiliary and translator facilities, transmitting towers, transmitters and antennae, Used by the Sellers in connection with the Business as of the date hereof including those set forth in Schedule 4.5(a) hereto and acquired between the date hereof and the Closing as permitted by and subject to the terms of this Agreement;   (ii)                                  all broadcasting and other equipment (including all machinery and computers), office furniture, fixtures, inventory (including all programs, records, tapes, recordings, compact discs and cassettes), office materials and supplies, spare parts, tubes, advertising and promotional materials, engineering plans, vehicles and other tangible personal property of every kind and description Used by the Sellers in connection with the Business on the date hereof, including those set forth in Schedule 4.5(g) hereto, and any additions, improvements and replacements thereto between the date hereof and the Closing as permitted by and subject to the terms of this Agreement;   (iii)                               all Contracts and commitments relating to the Business set forth on Schedules 4.5(a) (Owned and Leased Real Property of the Station), 4.5(g) (Owned and Leased Tangible Personal Property of the Station), and 4.8(a) (Other Operating Contracts of the Station), 1-A (Trade Agreements), 1-B (Barter Agreements) and all contracts, agreements and commitments not required to be disclosed on such Schedules pursuant to Section 4.8 hereto (which shall also specify those contracts the assignment of which requires third-party consent), together with all such contracts, agreements and commitments which have been entered into between the date hereof and the Closing as permitted by and subject to the terms of this Agreement (the “Assumed Contracts”);   (iv)                              all FCC Licenses Used by the Sellers in connection with the Business as of the date hereof, any additions, renewals and extensions thereto between the date hereof and the Closing as permitted by and subject to the terms of this Agreement, any deletions or modifications in the ordinary course of business as long as such deletions or modifications do not materially and adversely affect the operations of the Station as currently conducted, and all applications for modification, extension or renewal thereof, and any pending applications for new FCC Licenses, in each case to the extent transferable;   (v)                                 the books and records of the Business (including computer programs, files, logs, studies, technical information, consulting reports, correspondence and data and financial and other records pertaining to the Business);   (vi)                              all franchises, trademarks, trademark applications, patents (including continuations, continuations-in-part, reissues, reexamined patents and divisionals), patent applications, tradenames, service marks, service mark applications, all other intellectual property, all call letters, Websites (including Website URLs), domain names, databases, software (including any “off the shelf” or “shrink wrapped” computer software, programs or licenses),   3 --------------------------------------------------------------------------------   copyrights, copyright applications, licenses and similar intangible property rights (and applications therefor) if any, Used by the Sellers in connection with the Business as of the date hereof, and those acquired between the date hereof and the Closing as permitted by and subject to the terms of this Agreement, and all of the goodwill, rights, benefits, and privileges associated therewith;   (vii)                           all orders, arrangements, contracts, understandings and agreements now existing, or entered into as permitted by and subject to the terms of this Agreement between the date hereof and the Closing Date, for the sale of advertising time on the Station, except those which on the Closing Date have already been filled or have expired;   (viii)                        all programs and programming materials and elements of whatever form or nature owned by the Sellers as of the date of this Agreement and Used in connection with the Business, whether recorded on film, tape or any other medium or intended for live performance, television broadcast or other medium and whether completed or in production, and all related common law and statutory intangible rights Used in connection with the Business, set forth and identified in Schedule 4.8(a), and all program licenses and contracts not otherwise required to be listed on Schedule 4.8(a), together with all such programs, materials, elements and intangible rights acquired by the Sellers in connection with the Business as permitted by and subject to the terms of this Agreement between the date hereof and the Closing Date;   (ix)                                all prepaid rentals and other prepaid expenses and receivables and any other current assets arising in connection with the Business allocated to the Purchaser in accordance with Section 2.4 hereof;   (x)                                   all goods, assets, rights and services due to the Sellers under all Trade Agreements and Barter Agreements of the Station that have been entered into as of the date hereof or will be entered into as permitted by and subject to the terms of this Agreement between the date hereof and the Closing Date;   (xi)                                all advertising customer lists, mailing lists, processes, trade secrets, know-how and other proprietary or confidential information Used in or relating to the Business;   (xii)                             any rights, claims or causes of action of the Sellers against third parties arising in connection with or relating to the Business other than those relating to Excluded Assets or Retained Liabilities;   (xiii)                          all jingles, slogans, telephone numbers, commercials and other promotional materials Used in or relating to the Business;   (xiv)                         all rights and claims relating to any other Broadcasting Asset or any Assumed Obligation, including all guarantees, warranties, indemnities and similar rights in favor of the Sellers in respect of any Assumed Obligation;   (xv)                            all other assets not referenced above that are reflected on the Latest Balance Sheet, other than Excluded Assets and those assets disposed of or converted into cash after the Latest Balance Sheet Date in the ordinary course of the Business;   4 --------------------------------------------------------------------------------   (xvi)                         all the Sellers’ goodwill in, and going concern value of, the Station and the Business; and   (xvii)                      all other assets Used in connection with the Station.   (h)                                 “Business Contracts” means Contracts to which any Seller is a party or by which the assets or properties of any Seller are bound.   (i)                                     “Business Day” means any weekday (Monday through Friday) other than days on which commercial banks in New York, New York are obligated by Law or executive order to be closed.   (j)                                     “Business Licenses” means licenses owned or possessed by any Seller used or necessary for the conduct of the Business, other than the FCC Licenses.   (k)                                  “Communications Act” means the Communications Act of 1934, as amended, any successor statute thereto, and all rules, regulations and published policies of the FCC promulgated thereunder.   (l)                                     “Contract” means any legally binding contract, agreement, indenture, note, bond, instrument, lease, conditional sales contract, mortgage, non-governmental license, non-governmental franchise agreement, non-governmental concession agreement, insurance policy, security interest, guaranty, binding commitment or other agreement or arrangement, whether written or oral.   (m)                               “DTV Build-out” means the completed construction of digital television facilities in compliance in all material respects with (i) the FCC’s digital television build-out deadline for the Station, set by the FCC as of the date of this Agreement as July 1, 2006, as such deadline may be extended by statute, regulation, waiver, or other action or order of the FCC, (ii) the Sellers’ outstanding construction permit (FCC File Number BPCDT-19991029 AFF) to build full power digital operations and (iii) the Sellers’ FCC Form 381 pre-election maximization certification (FCC File Number BCERCT-20041105AEV).   (n)                                 “Effective Time” means 11:59 p.m. on the Closing Date.   (o)                                 “Encumbrance” means any claim, liability, security interest, pledge, mortgage, lien, pledge, charge, condition, adverse claim of ownership or use, restriction on transfer (such as a right of first refusal or other similar right), defect of title, or other encumbrance of any kind or character.   (p)                                 “Environmental Claims” means any and all administrative, regulatory or judicial actions, Orders, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any Person (including any Governmental Authority), alleging potential liability (including potential responsibility or liability for enforcement, investigatory costs, cleanup costs, response costs, removal costs, remedial costs, natural resources damages, property damages, personal injuries or penalties) arising under Environmental Laws, including but not limited to those based on or resulting from   5 --------------------------------------------------------------------------------   the Business and (a) the presence, Release or threatened Release of any Hazardous Materials; or (b) any violation or alleged violation of any Environmental Law or (c) any and all claims by any third party seeking investigation, remediation, damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from the presence, Release or threatened Release by the Sellers of any Hazardous Materials.   (q)                                 “Environmental Law” means any Law pertaining to land use, air, soil, surface water, groundwater (including the protection, cleanup, removal, remediation or damage thereof), wetlands, public or employee health or safety or any other environmental matter, including, without limitation, the following laws as in effect as of the Closing Date:  (i) Clean Air Act (42 U.S.C. § 7401, et seq.); (ii) Clean Water Act (33 U.S.C. § 1251, et seq.); (iii) Resource Conservation and Recovery Act (42 U.S.C. § 6901, et seq.); (iv) Comprehensive Environmental Resource Compensation and Liability Act (42 U.S.C. § 9601, et seq.); (v) Safe Drinking Water Act (42 U.S.C. § 300f, et seq.); (vi) Toxic Substances Control Act (15 U.S.C. § 2601, et seq.); (vii) Rivers and Harbors Act (33 U.S.C. § 401, et seq.); (viii) Endangered Species Act (16 U.S.C. § 1531, et seq.); (ix) Occupational Safety and Health Act (29 U.S.C. § 651, et seq.); (x) Hazardous Material Transportation Act (49 U.S.C. § 1801, et seq.); and (xi) any other Laws relating to Hazardous Materials or Hazardous Materials Activities.   (r)                                    “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, any successor statute thereto, and the rules and regulations promulgated thereunder.   (s)                                  “Escrow Agent” means The Bank of New York.   (t)                                    “Excluded Assets” means (a) cash or cash equivalents on hand and in bank accounts of any of the Sellers; (b) current portion of deferred taxes (c) all limited liability company membership interests owned by any Seller (d) the Sellers’ prepaid business (including, liability, business interruption and the like), group and other insurance policies, premiums and recoveries; (e) assets of the Sellers and their Affiliates not Used in the operations of the Station; (f) all rights and claims of the Sellers to the extent relating to any other Excluded Asset or any Retained Liability or any obligation of the Sellers to indemnify the Purchaser, including all guarantees, warranties, indemnities and similar rights in favor of the Sellers in respect of any other Excluded Asset or any Retained Liability or any obligation of the Sellers to indemnify the Purchaser; (g) the Accounts Receivable from SJL Broadcast Management Corporation which for identification purposes only, as of the date hereof is reflected on the Sellers’ books and records as $103,333.30; and (h) intercompany receivables from any Affiliate of the Sellers; (i) all Benefit Plans of the Sellers.   (u)                                 “FCC” means the United States Federal Communications Commission, and any successor agency thereto.   (v)                                 “FCC Consent” means the consent and other actions of the FCC (including any action duly taken by the FCC’s staff pursuant to delegated authority) granting its initial consent to the assignment of the FCC Licenses as a result of the transactions contemplated by this Agreement.   6 --------------------------------------------------------------------------------   (w)                               “FCC Licenses” means those licenses, permits and authorizations issued by the FCC to TSG License Subsidiary in connection with the Business (together with any renewals, extensions, additions, deletions, or modifications thereto as permitted by and subject to the terms of this Agreement between the date hereof and the Closing Date).   (x)                                   “Final Order” shall mean an action by the FCC (including any action duly taken by the FCC’s staff acting pursuant to delegated authority) which shall not have been reversed, stayed, enjoined, set aside, annulled or suspended, with respect to which no timely request for stay, petition for rehearing, appeal, certiorari or sua sponte action of the FCC with comparable effect shall be pending and as to which the time for filing any such petition, appeal, certiorari or for the taking of any such sua sponte action by the FCC shall have expired or otherwise terminated.   (y)                                 “GAAP” means generally accepted accounting principles in the United States.   (z)                                   “Governmental Authority” means any government, any governmental entity, department, commission, board, agency or instrumentality, and any court, tribunal, or judicial body, in each case whether federal, state, county, provincial, local or foreign.   (aa)                            “Governmental Order” means any statute, rule, regulation, order, judgment, injunction, decree, stipulation or determination issued, promulgated or entered by any Governmental Authority of competent jurisdiction.   (bb)                          “Hazardous Material” means any radioactive, toxic, hazardous, or dangerous material or substance that is prohibited or regulated by any Environmental Law or that has been designated by any Governmental Authority to be radioactive, toxic, hazardous or otherwise a danger to health, reproduction or the environment, including, but not limited to, asbestos, petroleum, radon gas, radioactive matter, PCBs, oils, hydrocarbons, photographic chemicals and products and other pollutants and contaminants.   (cc)                            “Hazardous Materials Activity” means the handling, transportation, transfer, recycling, storage, use, treatment, manufacture, investigation, removal, remediation, release, exposure of others to, sale or other distribution of any Hazardous Material or any product containing a Hazardous Material.   (dd)                          “Inactive Business Employees” means employees of the Station that as of the Closing Date are on leave of absence, disability leave, maternity leave, salary continuation and extension type of leave, military leave or worker’s compensation.   (ee)                            “Indemnification Escrow Deposit” means an amount equal to $4,050,000.   (ff)                                “Intellectual Property” means (i) any United States and foreign patents, patent applications, patent disclosures and improvements thereto, (ii) United States and foreign trademarks, copyrights, service marks, trade dress, logos, trade names, domain names, databases and corporate names, the goodwill associated therewith, and the registrations and applications for   7 --------------------------------------------------------------------------------   registration thereof, (iii) United States and foreign copyrights, and the registrations and applications for registration thereof, and (iv) any goodwill associated with any of the foregoing.   (gg)                          “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, any successor statute thereto, and the rules and regulations promulgated thereunder.   (hh)                          “IRS” means the United States Internal Revenue Service, and any successor agency thereto.   (ii)                                  “KBWB Sale Agreement” means the agreement for the sale of television station KBWB(TV) in San Francisco, California by KBWB, Inc. and KBWB License, Inc. to AM Broadcasting KBWB, Inc.   (jj)                                  “Knowledge of the Sellers”, “known to the Sellers”, “Seller’s Knowledge” and phrases of similar import means, with respect to any matter in question relating to the Business or the Sellers, if Messrs. Michael Granados, Ian Guthrie, the General Manager, local sales manager, business manager or chief engineer of the Station has actual knowledge of such matter.   (kk)                            “Law” means any federal, state, county, provincial, local or foreign statute, law, ordinance, regulation, rule, code or rule of common law.   (ll)                                  “Liability” means any direct or indirect debt, obligation or liability of any kind or nature, whether accrued or fixed, absolute or contingent, determined or determinable, matured or unmatured, and whether due or to become due, asserted or unasserted, or known or unknown.   (mm)                      “License” means any franchise, approval, permit, construction permit, order, authorization, consent, license, registration or filing, certificate, variance and any other similar right issued by, obtained from or filed with any Governmental Authority, including, without limitation, the Federal Aviation Administration, Used or necessary for the conduct of the Business and the FCC Licenses.   (nn)                          “Losses” means any and all actions, suits, claims, interest, penalties, proceedings, investigations, audits, demands, losses (direct or indirect), liabilities, damages, assessments, fines, judgments, costs and expenses (including, without limitation, reasonable attorneys’ fees).   (oo)                          “Material Adverse Effect” means any change or effect that is materially adverse to the assets, properties, operations, business, financial or other condition and/or results of operations of the Business, taken as a whole, except for any such changes or effects resulting directly or indirectly from (i) the transactions contemplated by this Agreement or the taking of any action contemplated by or required by this Agreement, (ii) the announcement or other disclosure of the transactions contemplated by this Agreement, (iii) any federal or state governmental actions, including, without limitation, proposed or enacted legislation or other regulatory changes, (iv) matters generally applicable to the television broadcasting industry, or   8 --------------------------------------------------------------------------------   changes in general economic conditions nationally (including, without limitation, financial and capital markets), or (v) actions taken by Purchaser or its Affiliates.   (pp)                          “Organizational Documents” means, with respect to any Person (other than an individual), the articles or certificate of incorporation, bylaws, certificate of limited partnership, partnership agreement, certificate of formation, limited liability company operating agreement, and all other organizational documents of such Person.   (qq)                          “Permitted Encumbrances” means (i) liens for taxes not yet due and payable; (ii) liens for property taxes not delinquent; (iii) inchoate statutory liens that were created in the ordinary course of business and which will be discharged prior to Closing or, to the extent not so discharged, the amount thereof shall be reflected in the Sellers Pro Rata Amount; (iv) restrictions imposed by Governmental Authorities under applicable Law; (v) zoning, building or similar restrictions relating to or affecting property to the extent none of the Sellers is in breach thereof; (vi) liens or encumbrances on the Owned Real Property and Leased Real Property that do not materially adversely affect the current use or operation of the property in the operation of the Business or materially impair the DTV Build-out; (vii) those matters which are deemed Permitted Encumbrances pursuant to Section 6.3 of this Agreement; (viii) those Encumbrances that secure amounts owed by the Sellers to their creditors for indebtedness for borrowed money which are to be discharged and released simultaneously with the Closing (or for which arrangements therefor have been made as of Closing) or for which the relevant creditors have agreed in writing to authorize the Sellers or the Purchaser to arrange for their release simultaneously with the Closing (or for which arrangements therefor have been made as of Closing) and (ix) those matters disclosed in Schedule 1.1 attached hereto.   (rr)                                “Person” means any individual, general, limited or limited liability partnership, firm, corporation, limited liability company, association, trust, estate, joint venture, unincorporated organization or other entity.   (ss)                            “Program License Agreements” means any Business Contract granting rights to broadcast programming on the Station.   (tt)                                “Proprietary Rights” means any (i) Intellectual Property, (ii) trade secrets and confidential business information (including, without limitation, ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, research and development information, technical information and data, software, databases, 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 and any goodwill associated with the Business or any of the foregoing), (iii) copies and tangible embodiments thereof (in whatever form or medium), and (iv) licenses granting any rights with respect to any of the foregoing.   (uu)                          “Proration Escrow Deposit” means an amount equal to 50% of the Sellers Pro Rata Amount to be held in escrow pursuant to the Indemnification Escrow Agreement until the determination of the Purchase Price in accordance with Section 2.4.   9 --------------------------------------------------------------------------------   (vv)         “Purchase Price Deposit Amount” means the Purchase Price Deposit, plus all interest and income accrued in respect thereof.   (ww)       “Release” means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or within any building, structure, facility or fixture.   (xx)          “Retained Liabilities” means all Liabilities of the Sellers that are not Assumed Obligations, including:   (i)                                     any intercompany or intracompany debts, obligations or Liabilities or any debts, obligations or Liabilities owing from any of the Sellers or any of their respective Affiliates to the Sellers or any of their respective Affiliates;   (ii)                                  any Liability of the Sellers for Taxes whether or not shown on a Tax return;   (iii)                               any Liability for Taxes arising from the transfer of the Broadcasting Assets and the consummation of the other transactions contemplated by this Agreement except to the extent that Purchaser is responsible therefor pursuant to Section 6.11;   (iv)                              any Liability of the Sellers for the unpaid taxes of any Person under Treas. Reg. § 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor, by contract, or otherwise;   (v)                                 any Liabilities arising from or related to the ownership, operation or use of the Business and/or the Broadcasting Assets prior to Closing;   (vi)                              Environmental Claims or other Liabilities of the Sellers or arising out of the operation of the Business prior to Closing or arising under or relating to violations of Environmental Laws or Releases prior to the Closing;   (vii)                           amounts payable for business (including casualty, liability, business interruption and the like) or group insurance premiums of the Sellers;   (viii)                        Liabilities under any Benefit Plan of the Sellers or any Affiliate of the Sellers, including but not limited to IBNR under any medical plan of the Sellers;   (ix)                                any Liability with respect to the period prior to the Closing Date in respect of, or that may become owed to, employees of the Business;   (x)                                   any funded indebtedness or other Liabilities relating to borrowed money or other evidence of indebtedness (and all guarantees or other contingent obligations related thereto), whether or not disclosed in this Agreement or otherwise, of the Sellers or any of their respective Affiliates;   10 --------------------------------------------------------------------------------   (xi)                                any Liability arising out of or relating to any stay bonus, severance plan or agreement, special waiting bonus or special retention plan or agreement and any Liabilities for sick or personal days or for severance owed or payable to any employee of the Sellers, regardless of whether such employee is a Transferred Employee; provided, however, that the Purchaser shall be responsible for any Liability arising out of or relating to any severance plan or agreement of the Purchaser and any Liabilities for severance under Purchaser’s standard policies or any agreement or arrangement between Purchaser and any Transferred Employee owed or payable to any Transferred Employee;   (xii)                             all Liabilities arising before and after the Closing Date with respect to any non-Transferred Employee;   (xiii)                          any Liabilities for legal, accounting or broker’s fees incurred by the Sellers either in connection with this Agreement and/or the consummation of the sale transaction contemplated hereby, or otherwise;   (xiv)                         all Liabilities relating to any of the Excluded Assets;   (xv)                            any Liabilities of the Sellers arising under this Agreement; and   (xvi)                         any Liability which is otherwise specifically retained by the Sellers pursuant hereto.   (yy)                          “Sale Agreements” means, collectively, the KBWB Sale Agreement and the WDWB Sale Agreement.   (zz)                              “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the U.S. Securities and Exchange Commission promulgated thereunder, as in effect from time to time.   (aaa)                      “Subsidiary” means (unless otherwise indicated), with respect to a Person, any other Person (i) in which such first-named Person has a direct or indirect equity or other ownership interest in excess of fifty percent (50%), or (ii) with respect to which such first-named Person, has the ability to elect or nominate a majority of the board of directors or similar governing body of such first-named Person.   (bbb)                   “Tangible Personal Property” means all machinery, equipment, tools, vehicles, furniture, office equipment, plant, inventory, spare parts and other tangible personal property owned or held by the Sellers that is used or useful solely in the conduct of the Business, together with any additions thereto between the date hereof and the Closing Date.   (ccc)                      “Tax” means any federal, state, county, provincial, local or foreign income, gross receipts, windfall profits, sales, use, license, ad valorem, employment, withholding, severance, transfer, gains, profits, capital, excise, franchise, property, production capital stock, premium, minimum and alternative minimum or other taxes, fees, levies, duties, assessments or charges of any kind or nature whatsoever, whether computed on a separate or consolidated, unitary or combined basis or in any other manner, imposed by any Governmental   11 --------------------------------------------------------------------------------   Authority (whether payable directly or by withholding), together with any interest, penalties (civil or criminal), additions to, or additional amounts (and any inherent penalties (civil or criminal), addition or additional in respect thereof), imposed by, any Governmental Authority with respect thereto, whether disputed or not, including any obligation to indemnify or otherwise assume or succeed to the Tax liability of any other Person and any expenses incurred in connection with the determination, settlement or litigation of any Liability therefor.   (ddd)                   “Tax Return” means any report, return, declaration, statement, claim for refund, estimated tax or other information or statement required to be supplied to a Governmental Authority with respect to any Tax, including any schedule or attachment thereto, and including any amendment thereof.   (eee)                      “Trade Agreements” means any Contract for the sale of advertising time on any Station in exchange for goods or services other than Program License Agreements.   (fff)                            “Transaction Documents” means this Agreement, the Deposit Escrow Agreement, the Indemnification Escrow Agreement and the other documents, agreements, certificates and other instruments to be executed, delivered and performed by the parties hereto in connection with the transactions contemplated by this Agreement.   (ggg)                   “TSG Loans” all amounts due and payable in respect of (A) the Credit Agreement dated as of December 19, 2000 among Holdings, the Guarantors party thereto, Canadian Imperial Bank of Commerce, as Syndication Agent, National City Bank, as Documentation Agent, and the Bank of New York, as Administrative Agent, and (B) the Credit Agreement dated as of December 19, 2000 among the Sellers, the Guarantors party thereto, Canadian Imperial Bank of Commerce, as Syndication Agent, and the Bank of New York, as Administrative Agent.   (hhh)                   “Used” means (i) owned, (ii) leased, (iii) licensed, (iv) held and used, (v) held for use or (vi) otherwise have a proprietary right or interest in, in each case, by any the Sellers or its Affiliates in connection with the business of the Station.   (iii)                               “WDWB Sale Agreement” means the agreement for the sale of television station WDWB(TV) in Detroit, Michigan by WXON, Inc. and WXON License, Inc. to AM Broadcasting WDWB, Inc.   1.2                                 Certain Additional Definitions.  For all purposes of and under this Agreement, the following terms shall have the respective meanings ascribed thereto in the respective sections of this Agreement set forth opposite each such term below:   Term   Section Accounting Firm   2.4(b)(iii) Actual Receivables   2.2(c)(v) Agreement   Preamble AR Statement   2.2(c)(i)   12 --------------------------------------------------------------------------------   Term   Section AR Collection Period   2.2(c)(iv) Assignment and Assumption Agreement for Assumed Obligations   3.2(a)(iii) Assignment and Assumption Agreement for Contracts   3.2(a)(ii)(D) Assignment and Assumption Agreement for FCC Licenses   3.2(a)(ii)(C) Assignment and Assumption Agreement for Leases and Leasehold Interests in Personal Property   3.2(a)(ii)(A) Assignment and Assumption Agreement for Motor Vehicles and Certain Equipment   3.2(a)(ii)(E) Assignment and Assumption Agreement for Real Property   3.2(a)(i) Assumed Contracts   1.1(g)(iii) Assumed Obligations   2.3(b) Business   Recitals Business Employee(s)   4.10 Channel Designation   4.21 Claimant   11.3(a) Closing   3.1(a) Closing Cash Payment   2.6(a) Closing Date   3.1(a) Company   Preamble Consents   4.3 Consultant   6.3(d) Deposit Escrow Agreement   2.5(a) DTV   4.21 DTV CP   4.21 DTV Facility   4.21 DTV STA   4.21 Environmental Reports   4.19 Environmental Work   6.3(e) Estimated AR Adjustment Amount   2.2(c)(ii) Event of Loss   8.1 Excluded Employees   6.13(a)   13 --------------------------------------------------------------------------------   Term   Section Exempt Representations   11.1(b)(i) Financial Statements   4.12(a) Holdings   Preamble Indemnification Cap   11.1(b)(i) Indemnification Escrow Agreement   2.6(d) Indemnifying Party   11.3(a) Interruption   8.2 Latest Balance Sheet   4.12(a) Latest Balance Sheet Date   4.12(a) Lease(s)   4.5(a) Leased Real Property   4.5(a) License Purchaser   Preamble Main Purchaser   Preamble Material Business Contract(s)   4.8(a) MVPD(s)   4.20(a) Non-Disclosure Agreement   6.10 Notice of Disagreement   2.4(b)(ii) Owned Real Property   4.5(a) Phase I Environmental Assessment   6.3(d) Preliminary Purchase Price   2.6 Proceeds   8.1 Prohibited Business   9.1 Purchase Price   2.2(a) Purchase Price Deposit   2.5(b) Purchaser   Preamble Purchaser Benefit Plans   6.13(c) Purchaser Pro Rata Amount   2.4(a) Purchaser’s AR Statement   2.2(c)(v) Receivables   2.2(c)(i) Recognized Environmental Condition   6.3(d) Repair Cap   8.1 Required Consents   7.1(g) Sale Agreement   10.1(f) Seller Cure Period   6.3(c)   14 --------------------------------------------------------------------------------   Term   Section Sellers   Preamble Sellers’ AR Statement   2.2(c)(i) Sellers Pro Rata Amount   2.4(a) Settled Claim   11.3(b) Settlement Statement   2.4(b)(ii) Short Term Agreement   4.8(a) Station   Recitals Surveys   6.3(b) Technology   4.7(d) Termination Date   10.1(d) Title & Survey Defects   6.3(c) Title Commitment   6.3(a) Title Policy   6.3(a) Transferred Employee   6.13(b) TSG License Subsidiary   Preamble WARN Act   6.13(g)   15 --------------------------------------------------------------------------------   ARTICLE 2 PURCHASE AND SALE OF BROADCASTING ASSETS   2.1                                 Purchase and Sale of Broadcasting Assets.  Subject to the terms and upon satisfaction of the conditions contained in this Agreement, at the Closing:   (a)                                  The Sellers shall sell, assign, transfer, convey and deliver to the Purchaser, and the Purchaser shall purchase from the Sellers, all of each such the Sellers’ rights, title and interests in the Broadcasting Assets (excluding the FCC Licenses) free and clear of all Encumbrances (other than Permitted Encumbrances);   (b)                                 TSG License Subsidiary shall assign and deliver to the License Purchaser, and the License Purchaser shall accept assignment from TSG License Subsidiary of, the FCC Licenses; and   (c)                                  The Sellers shall transfer and deliver to the Purchaser, and the Purchaser shall assume, the Assumed Obligations in accordance with Section 2.3 hereof.   2.2                                 Purchase Price; Allocation of Purchase Price.   (a)                                  Purchase Price.  For and in full consideration of the assignments, conveyances, transfers, and covenants described herein, at the Closing the Purchaser shall pay to the Sellers an amount equal to Forty-Five Million Dollars ($45,000,000.00), adjusted as provided in Section 2.2(c) and 2.4 below (the “Purchase Price”).   (b)                                 Allocation of Purchase Price.  The Sellers and the Purchaser shall use commercially reasonable efforts to agree on the allocation of the Purchase Price (and other amounts, including Assumed Obligations, taken into account as purchase price for tax accounting purposes) among the Broadcasting Assets in accordance with the requirements of Section 1060 of the Code, and the regulations thereunder prior to the Closing.  If Sellers and the Purchaser do not reach agreement on such allocation prior to the Closing, then (a) with respect to the Real Property included in the Broadcasting Assets (other than broadcast towers), that portion of the Purchase Price as mutually agreed upon by the parties shall be allocated to each parcel of Real Property, (b) with respect to the tangible assets included in the Broadcasting Assets (other than Real Property, but including the broadcast towers), that portion of the Purchase Price equal to the book value of such tangible assets as reflected in the accounting books and records of the Sellers as of the Closing shall be allocated to each such tangible asset, and (c) with respect to the intangible assets included in the Broadcasting Assets, the Purchaser shall prepare and deliver to the Sellers an allocation (reasonably acceptable to Sellers) among the intangible assets of that portion of the Purchase Price equal to the excess of the Purchase Price over the aggregate amount of the Purchase Price allocated to the Real Property (other than broadcast towers) and the tangible assets (other than Real Property, but including the broadcast towers) pursuant to clauses (a) and (b) above, respectively.  The parties agree to (i) jointly complete and timely file IRS Form 8594 with their Federal income tax return, and as required with respect to any other Tax Return, for the tax year in which the Closing Date occurs, (ii) file all Tax Returns in accordance with such allocation, (iii) report the transactions contemplated by this Agreement for Federal Tax   16 --------------------------------------------------------------------------------   and all other Tax purposes in a manner consistent with such allocations, (iv) provide the other promptly with any information required to complete IRS Form 8594, (v) notify and provide the other with reasonable assistance in the event of an examination, audit or other proceeding regarding any allocations of the Purchase Price (and other amounts, including Assumed Obligations, taken into account as purchase price for tax accounting purposes), and (vi) not to take any position in any Tax Return, Tax proceeding or audit that is inconsistent with such allocations unless required to do so by applicable law.   (c)                                  Accounts Receivable Adjustment.   (i)                                     On the date that is three (3) business days prior to the Closing Date, the Sellers will deliver to the Purchaser a statement (the “AR Statement”) setting forth Sellers’ good faith estimate (the “Sellers’ AR Estimate”) of the amount of Accounts Receivable of the Sellers arising out of the operation of the Station that will be outstanding as of the Effective Time (including any amounts that will be receivable by the Station with respect to advertising that has been aired on the Station prior to the Effective Time but for which no invoice has yet been produced, but excluding any amounts that are receivable that relate to advertising that has not been aired as of the Effective Time but for which an invoice has been produced) (all such Accounts Receivable of the Sellers arising out of the operation of the Station that are outstanding as of the Effective Time, the “Receivables”).  The Sellers’ AR Estimate shall include a detailed list, by debtor, of each Accounts Receivable included in such estimate reflecting the amount due under each such account and an aging schedule for each amount included in such estimate.  The Sellers’ AR Estimate shall be based on the Sellers’ Accounts Receivable ledger as of the day on which it is provided to the Purchaser.   (ii)                                  The Parties agree that the Purchase Price payable at the Closing shall be reduced on a dollar-for-dollar basis by the amount (if any) by which Seven Hundred Fifty Thousand Dollars ($750,000) exceeds the amount of the Receivables (the “Estimated AR Adjustment Amount”).   (iii)                               During the period commencing with the Closing Date and ending the 120th calendar day after the Closing Date, the Purchaser shall use commercially reasonable efforts to collect the Receivables consistent with its practices for collection of its own accounts receivable; provided, that, the Purchaser shall be under no obligation to commence or not to commence litigation or legal action to effect collection (and Sellers shall not be responsible for any costs and expenses of any such litigation or legal action commenced by Purchaser, if any) and may make any adjustment, concession or settlement which in the good faith judgment of the Purchaser is commercially reasonable; provided, further, that in no event shall the Purchaser incur any Liability for any failure to collect any Receivables except for its willful breach of this Section 2.2(c).  The Purchaser shall remit to the Sellers all amounts in excess of $750,000, if any, collected by the Purchaser with respect to the Receivables in accordance with the following schedule: (a) on or before the 20th day of the first complete calendar month after the Closing Date, remit all amounts in excess of $750,000, if any, collected up to the end of the previous calendar month; and (b) on or before the 20th day of each succeeding calendar month, remit all amounts, which together with all other amounts previously collected by the Purchaser in respect of the Receivables, if any, exceed $750,000.  Notwithstanding the foregoing, the Purchaser shall   17 --------------------------------------------------------------------------------   be entitled to retain and be under no obligation to remit to the Sellers any amounts (including any Receivables) received by the Purchaser (or its Affiliates), and the Sellers shall cause any amounts (including any Receivables) received by the Sellers (or their Affiliates) to be promptly remitted to the Purchaser, in either case that are (a) attributable to the Business after the Closing Date or (b) attributable to any business (other than the Business) of the Purchaser (or its Affiliates); provided, that, absent specific direction from the Receivable counterparty, all payments received by the Purchaser shall be first applied to the oldest non-disputed Receivable of the Sellers and the Purchaser shall not make any request of such counterparty inconsistent with such application to the oldest Receivable.   (iv)                              The Purchaser’s obligations to collect the Receivables shall expire as of midnight on the 120th day following the Closing Date (“AR Collection Period”).  Within ten (10) business days thereafter, the Purchaser shall remit to the Sellers all amounts in excess of $750,000 collected from the Closing Date until the date thereof with respect to the Receivables to the extent not previously remitted to the Sellers.  Upon expiration of the Purchaser’s collection obligation under this Section 2.2(c), the Purchaser shall assign and transfer to the Sellers (a) the Accounts Receivable which were paid to the Sellers hereunder and (b) all the Accounts Receivable which remain uncollected, including all documents and records relating thereto, and the Sellers shall assume responsibility for collection of any remaining Accounts Receivable for its own account.   (v)                                 At the end of the AR Collection Period, the Purchaser shall prepare and deliver to Sellers a statement (the “Purchaser’s AR Statement”) setting forth the actual amount of Receivables collected during the AR Collection Period (“Actual Receivables”).  The Purchaser’s AR Statement shall include a detailed list, by debtor, of each Accounts Receivable included in Receivables reflecting the amount due under each such account and shall be based on the Station’s Account Receivable ledger as of the Closing Date.  Based on the Purchaser’s AR Statement, if the Actual Receivables are less than the lesser of: (a) $750,000 and (b) the AR Shortfall Amount, then the Purchase Price shall be reduced on a dollar-for-dollar basis by the difference.  For purposes of clarification, at the end of the AR Collection Period, the Purchaser shall be entitled to have received $750,000 of Receivables, net of sales commissions and collection costs.   2.3                                 Assumption of Obligations.   (a)                                  Limitation on Assumption of Obligations.  Except as set forth in Section 2.3(b) below, the Purchaser expressly does not, and shall not, assume or be deemed to have assumed under this Agreement or by reason of any transactions contemplated hereunder any Liabilities or obligations of the Sellers of any nature whatsoever, including the Retained Liabilities.  The Sellers shall pay, perform and discharge the Retained Liabilities.   (b)                                 Assumed Obligations Relating to the Station.  At the Closing, the Purchaser shall assume and timely pay, perform and discharge the following liabilities and obligations (collectively, the “Assumed Obligations”): (i) the liabilities and obligations of the Sellers to the extent related to or arising in connection with the Business after, and related to the period after, the Closing, including, without limitation, under all Assumed Contracts, except in   18 --------------------------------------------------------------------------------   each case, to the extent such Liabilities, but for breach or default by the Sellers, would have been paid, performed or otherwise discharged prior to the Closing (unless the amount of such liabilities has been taken into account for calculating the Sellers Pro Rata Amount) or the extent such Liabilities arise out of any such breach or default; (ii) any Liabilities exclusively relating to the Business that arise with respect to events occurring after the Closing, and related to the period after the Closing, in each case, other than as a result of (x) any breach or inaccuracy of any representation, warranty, covenant or obligation of any the Sellers under this Agreement or (y) any other action taken by any the Sellers (or their Affiliates) which action is specifically prohibited by the terms of this Agreement; (iii) all Liabilities to be assumed by or the responsibility of the Purchaser as set forth in Section 6.13 hereof; and (iv) all liabilities and obligations of the Seller and the Business relating to the period prior to the Closing to the extent reflected in the Sellers Pro Rata Amount.   2.4                                 Purchase Price Adjustment.   (a)                                  General Proration.  Except as otherwise expressly specified in this Agreement, the expenses, including accrued liabilities (including, any accrued payment obligations under Assumed Contracts) and prepaid expenses, accrued personal leave, accrued vacation pay, and liabilities through the Effective Time shall be for the account of the Sellers and thereafter shall be for the account of the Purchaser.  Expenses for goods or services received or to be received after the Closing, including for real and personal property Taxes and assessments, power and utilities charges and rents and similar prepaid and deferred items shall be prorated, based on the number of days before and after the Effective Time, between the Sellers and the Purchaser, respectively.  All special assessments and similar charges or liens imposed against the Broadcasting Assets and/or the FCC Licenses in respect of any period of time through the Effective Time, whether payable in installments or otherwise, shall be the responsibility of the Sellers, and amounts with respect to such special assessments, charges or liens in respect of any period of time after the Effective Time shall be the responsibility of the Purchaser, and such charges shall be adjusted as required hereunder.   No adjustment or proration shall be made with respect to Accounts Receivable, Receivables or any revenue or income attributable to any Accounts Receivable or Receivable.  An adjustment and proration shall be made in favor of (a) the Purchaser to the extent that the amount of any advertising time remaining to be run by the Station under any Trade Agreements or Barter Agreements as of the Effective Time exceeds the fair market value of the goods or services to be received by the Station as of the Effective Time, and (b) the Sellers to the extent the fair market value of the goods or services to be received by the Station as of the Effective Time exceeds the amount of any advertising time remaining to be run by the Station under any Trade Agreements or Barter Agreements as of the Effective Time.   For purposes of the Purchase Price adjustment procedure set forth in Section 2.4(b), (i) the aggregate total of the amounts allocable to the conduct of the Business prior to the Effective Time but payable after the Closing (and not paid prior to the Closing) shall be referred to as the “Sellers Pro Rata Amount” and (ii) the aggregate total of the amounts allocable to the conduct of the Business following the Effective Time (and paid prior to the Closing) shall be referred to as the “Purchaser Pro Rata Amount.”   19 --------------------------------------------------------------------------------   Notwithstanding the foregoing, the Purchase Price shall be adjusted for (a) any overdue amounts under any Assumed Contracts including those relating to Program Rights to the extent relating to periods prior to the Closing, except to the extent reflected in the Sellers Pro Rata Amount and (b) any payments that contractually have been deferred but for which the Sellers have received the benefit of the asset to which they relate prior to Closing, and the Sellers shall be responsible for any Retained Liabilities.  Notwithstanding anything to the contrary contained herein, the Purchase Price shall be adjusted for (x) any payments under any Assumed Contracts relating to the period prior to the Closing to the extent reflected in the Sellers Pro Rata Amount and (y) any payments that contractually have been paid in advance, but for which the Purchaser shall receive the benefit to which such payments relate after Closing, and the Purchaser shall be responsible for the Assumed Obligations.   (b)                                 Procedure.   (i)                                     Not more than ten (10) business days and not less than three (3) business days prior to the Closing Date, the Sellers shall provide the Purchaser with a statement setting forth good faith estimates of the Sellers Pro Rata Amount and the Purchaser Pro Rata Amount as of the Effective Time (and all information reasonably necessary to determine the accuracy of such estimate) on the basis of then most recently available month-end financial statements of the Station.  Absent manifest error, (i) in the event that the estimated the Purchaser Pro Rata Amount exceeds the estimated the Sellers Pro Rata Amount, the Purchase Price payable by the Purchaser at the Closing shall be increased by an amount equal to such excess, and (ii) in the event that the estimated Sellers Pro Rata Amount exceeds the estimated Purchaser Pro Rata Amount, the Purchase Price payable by the Purchaser at the Closing shall be decreased by an amount equal to such excess.   (ii)                                  Within ninety (90) days after the Closing Date, the Purchaser shall prepare and deliver to the Sellers a statement setting forth the Purchaser’s calculations of the Sellers Pro Rata Amount and the Purchaser Pro Rata Amount as of the Effective Time (and all information reasonably necessary to determine the accuracy of such calculations) (the “Settlement Statement”).  During the 45-day period following the Sellers’ receipt of the Settlement Statement, the Sellers and its independent auditors shall be permitted to review and make copies reasonably required of (i) the working papers of the Purchaser relating to the Settlement Statement and (ii) any supporting schedules, analyses and other documentation relating to the Settlement Statement.  The Settlement Statement shall become final and binding upon the parties on the forty-fifth (45th) day following delivery thereof, unless the Sellers gives written notice of its disagreement with the Settlement Statement (“Notice of Disagreement”) to the Purchaser on or prior to such date setting forth in reasonable detail the nature of any disagreement so asserted.  If a Notice of Disagreement complying with the preceding sentence is received by the Purchaser in the period specified, then the Settlement Statement (as revised in accordance with clause (A) or (B) of this sentence) shall become final and binding upon the parties on the earlier of (A) the date the Purchaser and the Sellers resolve in writing any differences they have with respect to the matters specified in the Notice of Disagreement or (B) the date any disputed matters are finally resolved in writing by the Accounting Firm.   20 --------------------------------------------------------------------------------     (iii)                               During the 30-day period following the delivery of a Notice of Disagreement that complies with the preceding paragraph, the Purchaser and the Sellers shall seek in good faith to resolve in writing any differences that they may have with respect to the matters specified in the Notice of Disagreement.  During such period, the Purchaser and its independent auditors shall be permitted to review and make copies reasonably required of (i) the working papers of the Sellers relating to the Notice of Disagreement and (ii) any supporting schedules, analyses and documentation relating to the Notice of Disagreement.  If, at the end of such 30-day period, the Purchaser and the Sellers have not so resolved such differences, the Purchaser and the Sellers shall submit to an independent accounting firm (the “Accounting Firm”) for review and resolution any and all matters which remain in dispute and which were properly included in the Notice of Disagreement.  The Accounting Firm shall be a nationally recognized independent public accounting firm selected by Sellers and reasonably acceptable to the Purchaser, which Accounting Firm shall not have been the auditing firm of the Purchaser or the Sellers during the fiscal year 2004 or 2005.  The Purchaser and the Sellers shall use reasonable efforts to cause the Accounting Firm to render a decision resolving the matters in dispute within 30 days following the submission of such matters to the Accounting Firm.  The Purchaser and the Sellers agree that judgment may be entered upon the determination of the Accounting Firm in any court having jurisdiction over the party against which such determination is to be enforced.  Except as specified in the following sentence, the cost of any arbitration (including the fees and expenses of the Accounting Firm) pursuant to this Section 2.4 shall be borne by the Purchaser and the Sellers in inverse proportion to the extent one party or the other may prevail on each matter resolved by the Accounting Firm, which proportionate allocations shall also be determined by the Accounting Firm at the time the determination of the Accounting Firm is rendered on the merits of the matters submitted.  The fees and expenses (if any) of the Purchaser’s independent auditors incurred in connection with the preparation of the Settlement Statement and the review of any Notice of Disagreement shall be borne by the Purchaser, and the fees and expenses (if any) of the Sellers’ independent auditors incurred in connection with their review of the Settlement Statement and the preparation of any Notice of Disagreement shall be borne by the Sellers.   (iv)                              Within ten (10) business days after the Settlement Statement becomes final and binding upon the parties, (i)(A) in the event that the final calculations of the Sellers Pro Rata Amount and the Purchaser Pro Rata Amount result in a Purchase Price that is in excess of the Purchase Price actually paid by the Purchaser at the Closing, the Purchaser shall promptly pay the amount of such excess to the Sellers, and (B) the Purchaser and the Sellers shall execute and deliver to the Escrow Agent joint written instructions to pay, and shall cause the Escrow Agent to pay, to the Sellers the Proration Escrow Deposit, plus all interest and earnings thereon, or (ii) in the event that the final calculations of the Sellers Pro Rata Amount and the Purchaser Pro Rata Amount result in a Purchase Price that is less than the Purchase Price actually paid by the Purchaser at the Closing, the Sellers shall promptly pay the amount of such shortfall to the Purchaser.  The obligation shall first be satisfied by the Purchaser and the Sellers executing and delivering to the Escrow Agent joint written instructions to pay the excess to the Purchaser (and the balance of the Proration Escrow Deposit and all interest thereon to the Sellers) from the Proration Escrow Deposit and all interest and earnings thereon.  If such   21 --------------------------------------------------------------------------------   obligation is not fully satisfied from the Proration Escrow Deposit, then the Sellers shall promptly pay such remaining amount to the Purchaser.   2.5                                 Purchase Price Deposit and Escrow Agreement.   (a)                                  Within three (3) Business Days of the earliest of (i) the closing of the sale of television station WDWB(TV), Detroit Michigan by WXON, Inc. and WXON License, Inc. to AM Broadcasting WDWB, Inc. in accordance with the WDWB Sale Agreement, (ii) the closing of the sale of television station KBWB(TV), San Francisco, California by KBWB, Inc. and KBWB License, Inc. to AM Broadcasting KBWB, Inc. in accordance with the KBWB Sale Agreement and (iii) the expiration of the period for the Purchaser to terminate this Agreement pursuant to Section 10.1(f), the Sellers shall, and GBC shall cause the Purchaser to, execute and deliver, and use commercially reasonable efforts to cause the Escrow Agent to execute and deliver, that certain Deposit Escrow Agreement in the form of Exhibit A attached hereto (the “Deposit Escrow Agreement”).   (b)                                 Concurrently with the execution and delivery of the Deposit Escrow Agreement, GBC shall pay or shall cause the Purchaser to pay to the Escrow Agent a deposit in an amount equal to five percent (5%) of the Purchase Price (the “Purchase Price Deposit”) by federal wire transfer of immediately available funds delivered to the Escrow Agent, to be held in accordance with the terms and conditions of the Deposit Escrow Agreement.  The Purchase Price Deposit Amount shall be credited against the amount to be paid by the Purchaser to the Sellers at Closing as set forth in Section 2.6(a) hereof.   (c)                                  At the Closing, the Purchaser and the Sellers shall deliver a joint written instruction, executed on behalf of the Purchaser and the Sellers, to the Escrow Agent to cause the Escrow Agent to pay the Purchase Price Deposit Amount over to the Sellers as a credit against the amount to be paid by the Purchaser to the Sellers at the Closing as set forth in Section 2.6(a) hereof.   2.6                                 Payment of the Purchase Price.  At the Closing, the Purchase Price, as adjusted pursuant to Section 2.2(c) and Section 2.4(a) (the “Preliminary Purchase Price”), shall be paid as follows:   (a)                                  The Purchaser shall pay or cause to be paid to the Sellers an amount in cash equal to the difference of (i) the Preliminary Purchase Price, minus (ii) the Purchase Price Deposit Amount, minus (iii) the Indemnification Escrow Deposit, and minus (iv) the Proration Deposit (such difference, the “Closing Cash Payment”).   (b)                                 The Purchaser and the Sellers shall execute and deliver to the Escrow Agent joint written instructions to pay, and shall cause the Escrow Agent to pay to the Sellers as a credit against the Preliminary Purchase Price an amount equal to the Purchase Price Deposit Amount.   (c)                                  The Purchaser shall pay to the Escrow Agent the Indemnification Escrow Deposit and the Proration Escrow Deposit, each to be held in accordance with the terms and   22 --------------------------------------------------------------------------------   conditions of that certain Indemnification and Proration Escrow Agreement in the form of Exhibit B attached hereto (the “Indemnification Escrow Agreement”).   (d)                                 Each of the foregoing amounts shall be paid by federal wire transfer of immediately available funds to the account or accounts specified by the party entitled to such payment pursuant to wire transfer instructions, which instructions shall be delivered in writing by the receiving party or parties, as applicable, to the party or parties, as applicable, making payment pursuant hereto prior to the date of any applicable payment or payments, as applicable.   ARTICLE 3 THE CLOSING   3.1                                 The Closing.   (a)                                  Subject to the satisfaction of the conditions to Closing set forth in Article 7 or waiver, to the extent permissible under applicable Law, of any such condition by the Person entitled to the benefit thereof, the consummation of the transactions contemplated hereby (the “Closing”) shall take place at 10:00 a.m., Washington, D.C. time, on a date to be designated by the Sellers, which date shall not be earlier than the fifth (5th) Business Day or later than the fifteenth (15th) Business Day, after satisfaction and fulfillment of the conditions set forth in Sections 7.1(f), 7.1(g), 7.1(h), 7.1(i) and 7.2(e) (the “Closing Date”), at the offices of Dow, Lohnes & Albertson, PLLC, 1200 New Hampshire Avenue, N.W., Washington, D.C.  20036, unless another time, date or place is mutually agreed upon in writing by the Sellers and the Purchaser.   (b)                                 Notwithstanding the foregoing, if on the date otherwise scheduled for the Closing pursuant to the preceding paragraph, the conditions set forth in Section 7.1(d) and Section 7.2(c) hereof have not been satisfied, the Sellers, on the one hand, or the Purchaser, on the other hand, may, by written notice given to all other parties hereto, on the date otherwise scheduled for the Closing, elect to postpone the Closing, and the Closing shall thereafter take place on a date specified by prior written notice from the Person or Persons, as applicable, electing to postpone the Closing, which date shall be not earlier than the fifth (5th) Business Day or later than the fifteenth (15th) Business Day, after satisfaction and fulfillment of the conditions set forth in Section 7.1(d) and Section 7.2(c), but in any event no later than the Termination Date.   3.2                                 Closing Deliveries of the Sellers.  At the Closing, the Sellers shall deliver, or cause to be delivered, to the Purchaser the following instruments, certificates and other documents, dated as of the Closing Date and executed on behalf of the Sellers by a duly authorized officer thereof, in order to effect the transfer of the Broadcasting Assets to the Purchaser pursuant to Section 2.1 hereof:   23 --------------------------------------------------------------------------------   (a)                                  Instruments of Transfer and Assignment.   (i)                                     Instruments of Conveyance and Transfer of Real Property.  At the Closing, to assign all of the real property Leases from the applicable Seller to the Purchaser, the applicable Seller shall deliver to the Purchaser, in form and substance reasonably satisfactory to, an assignment and assumption agreement assigning to the Purchaser all right, title and interest of the applicable Seller in and under all real property Leases in which the Purchaser assumes all obligations under each such real property Lease from and after the Closing in accordance with Section 2.3 (the “Assignment and Assumption Agreement for Real Property”).  A limited warranty deed with respect to each of the parcels of Owned Real Property subject solely to the Permitted Encumbrances which shall not provide for any representations and warranties with respect to the Owned Real Property in addition to the representations and warranties set forth herein, duly executed by the applicable Seller and in form and substance reasonably satisfactory to the Purchaser.   (ii)                                  Instruments of Conveyance and Transfer of Personal Property.  At the Closing, to effect the transfers, conveyances and assignments from the applicable Seller to the Purchaser, the applicable Seller shall deliver to the Purchaser the following bills of sale, certificates, assignments and other instruments of transfer assigning, transferring and conveying to the Purchaser title to all of the personal property included in the Broadcasting Assets, free and clear of all Encumbrances of any kind other than Permitted Encumbrances, all in form reasonably satisfactory to counsel for the Purchaser, and dated the Closing Date:   (A)                              Assignment of Leases.  Assignment and assumption of all leases and leasehold interests in personal property included in the Broadcasting Assets, including all rights under the lease agreements referred to in Schedule 4.5(g) hereto (the “Assignment and Assumption Agreement for Leases and Leasehold Interests in Personal Property”);   (B)                                Bills of Sale.  Bills of sale for all Tangible Personal Property included in the Broadcasting Assets;   (C)                                Assignments of Licenses.  Assignment and assumption of the FCC Licenses (the “Assignment and Assumption Agreement for FCC Licenses”);   (D)                               Assignments of Contracts; Other Assignments.  Assignment and assumption of all contracts and other intangible assets included in the Broadcasting Assets and any other forms of assignment and/or assumption reasonably requested by the Purchaser (the “Assignment and Assumption Agreement for Contracts”); and   (E)                                 Assignments of Motor Vehicles and Certain Equipment.  Certificates of title or origin (or like documents) with respect to any vehicles or other equipment included in the Broadcasting Assets for which a certificate of title or origin evidences title, together with properly completed assignments of such vehicles or other equipment to the Purchaser, duly executed by the applicable Seller (the “Assignment and Assumption Agreement for Motor Vehicles and Certain Equipment”).   (iii)                               Instruments of Conveyance and Assumed Obligations.  At the Closing, to effect the transfers, conveyances and assignments from the Sellers to the Purchaser,   24 --------------------------------------------------------------------------------   the Sellers shall deliver to the Purchaser an assignment and assumption of Assumed Obligations in which the Purchaser agrees to assume, pay, perform and discharge all of the Assumed Obligations, in form reasonably satisfactory to counsel for the Purchaser, and dated the Closing Date (the “Assignment and Assumption Agreement for Assumed Obligations”).   (b)                                 Closing Certificates and Other Documents.   (i)                                     An Officer’s certificates certifying to the fulfillment of the conditions set forth in Sections 7.1(a) and 7.1(b) hereof;   (ii)                                  A Secretary’s Certificate certifying that the consents in writing of the Board of Representatives of Holdings and of the member of each of the Company and TSG License Subsidiary in the forms attached to such certificate authorizing and approving the execution of this Agreement and the consummation of the transactions contemplated hereby were duly authorized, and that such consents in writing remain in full force and effect;   (iii)                               A certificate of the Sellers certifying as to its non-foreign status and which complies with the requirements of Section 1445 of the Internal Revenue Code;   (iv)                              Good standing certificates for the Sellers issued by the appropriate Governmental Authority of the State of Delaware, dated as of a date no earlier than ten (10) days prior to the Closing Date;   (v)                                 An opinion of counsel to Sellers substantially in the form of Exhibit 3.2(b)(v) attached hereto; and   (vi)                              A copy of any instrument evidencing any Required Consent received.   3.3                                 Closing Deliveries of the Purchaser.  At the Closing, the Purchaser shall deliver, or cause to be delivered, to the Sellers the following instruments, certificates and other documents, dated as of the Closing Date and executed or acknowledged (as applicable) on behalf of the Purchaser by a duly authorized officer thereof, in order to pay for the Broadcasting Assets:   (a)                                  Closing Cash Payment.  To the Sellers, the amount to be paid to the Sellers pursuant to Section 2.6, and to the Escrow Agent, the Indemnification Escrow Deposit and the Proration Escrow Deposit.   (b)                                 Closing Certificates and Other Documents.   (i)                                     An Officer’s certificates certifying to the fulfillment of the conditions set forth in Sections 7.2(a) and 7.2(b) hereof;   (ii)                                  A Secretary’s Certificate certifying that the resolutions authorizing and approving the execution of this Agreement and the consummation of the transactions contemplated hereby were duly authorized, and that such resolutions remain in full force and effect; and   25 --------------------------------------------------------------------------------   (iii)                               A good standing certificate for each Purchaser issued by the appropriate Governmental Authority of the State of Delaware.   (iv)                              All necessary assignment and assumption agreements relating to the Broadcasting Assets, including the following:   (A)                              Assignment and Assumption Agreement for Real Property;   (B)                                Assignment and Assumption Agreement for Leases and Leasehold Interests in Personal Property;   (C)                                Assignment and Assumption Agreement for FCC Licenses;   (D)                               Assignment and Assumption Agreement for Contracts; and   (E)                                 Assignment and Assumption Agreement for Motor Vehicles and Certain Equipment.   (F)                                 Assignment and Assumption Agreement for the Assumed Obligations.   ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE SELLERS   The Sellers hereby, jointly and severally, represent and warrant to the Purchaser as follows:   4.1                                 Organization.  Each of the Sellers is a limited liability company, duly formed, validly existing and in good standing under the laws of the State of Delaware, and has all requisite limited liability company power and authority to own, operate or lease the assets and properties currently owned, operated or leased by it, and to conduct its business and operations as currently conducted.  Each Seller is duly authorized, qualified or licensed to do business as a foreign limited liability company, and is in good standing, under the laws of each jurisdiction in which the character of its properties owned, operated or leased, or the nature of its activities, makes such qualification necessary, except in those jurisdictions where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.   4.2                                 Authority.  Each Seller has all requisite limited liability company power and authority to enter into this Agreement and the other Transaction Documents to which it is a party, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby.  The execution and delivery by each of the Sellers of this Agreement and the other Transaction Documents to which it is a party, the performance by each of the Sellers of its obligations hereunder and thereunder, and the consummation by each of the Sellers of the transactions contemplated hereby and thereby, have been duly authorized by all necessary limited liability company action on the part of each Seller.  This Agreement has been   26 --------------------------------------------------------------------------------   duly executed and delivered by each Seller and, assuming the due authorization, execution and delivery of this Agreement by the Purchaser and the Sellers, this Agreement constitutes a legal, valid and binding obligation of each Seller, enforceable against each Seller in accordance with its terms, except as such enforceability may be limited by principles of public policy, and subject to (i) the effect of any applicable Laws of general application relating to bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting creditors’ rights and relief of debtors generally, and (ii) the effect of rules of law and general principles of equity, including, without limitation, rules of law and general principles of equity governing specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law).  Upon the execution and delivery of the other Transaction Documents to which it is a party by each Seller at the Closing and, assuming the due authorization, execution and delivery of the other Transaction Documents by the Purchaser (to the extent it is a party thereto), each of the other Transaction Documents will constitute a legal, valid and binding obligation of the Sellers, enforceable against the Sellers in accordance with its respective terms, except as such enforceability may be limited by principles of public policy, and subject to (i) the effect of any applicable Laws of general application relating to bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting creditors’ rights and relief of debtors generally, and (ii) the effect of rules of law and general principles of equity, including, without limitation, rules of law and general principles of equity governing specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law).   4.3                                 No Violation; Third Party Consents.  Assuming that all filings, consents, waivers, permits, approvals, orders, notices and authorizations set forth on Schedule 4.3 hereto (the “Consents”) have been obtained and all registrations, qualifications, designations, declarations or filings with any Governmental Authorities set forth on Schedule 4.4 hereto have been made, and except as set forth on Schedule 4.3 hereto, the execution and delivery by each Seller of this Agreement and the other Transaction Documents to which it is a party, the performance by each Seller of its obligations hereunder and thereunder, and the consummation by each Seller of the transactions contemplated hereby and thereby, will not conflict with or violate in any material respect, constitute a material default (or event which with the giving of notice or lapse of time, or both, would become a material default) under, give rise to any right of termination, amendment, modification, acceleration or cancellation of any material obligation or loss of any material benefit under, result in the creation of any Encumbrance other than a Permitted Encumbrance on any of the assets or properties of any Seller, pursuant to, or require the Sellers to obtain any Consent as a result of, or under, the terms or provisions of (i) the Organizational Documents of the Sellers (ii) any Material Business Contract or Business License, or (iii) any Law applicable to the Sellers, or any of the Sellers’ assets, or any Governmental Order issued by a Governmental Authority by which the Sellers or any of the Sellers’ assets is in any way bound or obligated, except, in the case of clauses (ii) and (iii) of this Section 4.3, as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.   4.4                                 Governmental Consents.  No material consent, of, or registration, qualification, designation, declaration or filing with, any Governmental Authority is required on the part of the Sellers in connection with the execution and delivery by the Sellers of this Agreement and the other Transaction Documents to which it is a party, the performance by the Sellers of its   27 --------------------------------------------------------------------------------   obligations hereunder and thereunder, and the consummation by the Sellers of the transactions contemplated hereby and thereby except as set forth on Schedule 4.4 hereto.   4.5                                 Real and Personal Property.   (a)                                  Schedule 4.5(a) hereto contains a true, correct and complete list of the following to the extent owned, used or held for use by the Sellers to conduct the Business: (i) real property owned by the Sellers (the “Owned Real Property”), and (ii) each real property lease pursuant to which the Sellers are a landlord (such leases are referred to herein collectively as the “Leases” and, each, individually as a “Lease”; the property demised pursuant to such Leases is referred to herein as the “Leased Real Property”), and all amendments thereof.  Each Seller represents and warrants to the Purchaser that such Seller is not a tenant under any lease, sublease or occupancy agreement concerning real property Used in or necessary to conduct the Business.   (b)                                 The applicable Seller has full legal power and authority to assign its rights, title and interest in, to and under each Real Property Lease to the Purchaser in accordance with this Agreement on terms and conditions no less favorable to the Purchaser than those in effect on the date hereof, and such assignment will not affect the validity, enforceability and continuity of any such lease.  Each Real Property Lease (a) constitutes a legal, valid and binding obligation of the applicable Seller, (b) to the Sellers’ Knowledge is in full force and effect, and (c) and neither the applicable Seller nor, to the Seller’s Knowledge, any other party thereto has violated any provision of, or committed or failed to perform any act which, with notice, lapse of time or both, would constitute any continuing monetary default or other material default under the provisions of such, Real Property Lease.  Except as expressly set forth in the Leases, no tenant under any of the Leases is presently entitled to any rebate, free rent or other concession, deduction or offset.  No tenant has paid any rent, additional rent or other charge of any nature for a period of more than one (1) month in advance.  As of the Closing, no brokerage or leasing commissions or other compensation will be due and payable to any Person with respect to or on account of any of the Leases.  Other than the Sellers and except under the Leases, there are no parties in possession or parties who have a right to possess the Owned Real Property or any portion thereof.   (c)                                  No Owned Real Property or, to the Knowledge of the Sellers, Leased Real Property, has been condemned or otherwise taken by any public authority and no condemnation or taking of such properties is, to the Sellers’ Knowledge, threatened or contemplated.   (d)                                 No Seller has granted any outstanding options or entered into any outstanding contracts with others for the sale, lease or transfer of any Owned Real Property, and no Person has any right or option to acquire, or right of first refusal with respect to, any Owned Real Property or any portion thereof.   (e)                                  The buildings and other improvements used at or in connection with the Owned Real Property do not encroach onto land adjoining any Owned Real Property or onto any easements to such an extent as would materially impair the value of the Owned Real Property and such improvements or the continued use and operation of the Owned Real Property and such improvements for the same uses and operations as those conducted at the present time, and the   28 --------------------------------------------------------------------------------   improvements on land adjoining the Owned Real Property do not encroach onto any part of the Owned Real Property to such an extent as would materially impair the continued use and operation of the Owned Real Property for the same uses and operations as those conducted at the present time.  All guy wires, guy anchors, satellite dishes, associated transmission equipment, transmitter buildings, towers, signs, main studio buildings, associated parking lots, and other buildings and other improvements related to the Owned Real Property or the Leased Real Property are all located entirely on, and within the boundaries of, the Owned Real Property or Leased Real Property, as applicable, except for such failures to be so located, which would not, materially impair such improvements or the continued use and operation of the Owned Real Property or the Leased Real Property, as applicable, and such improvements for the same uses and operations as those conducted at the present time.   (f)                                    Each parcel of Owned Real Property is contiguous to publicly dedicated streets, roads or highways, or, if not so contiguous, access to and from such parcel of Owned Real Property and publicly dedicated streets, roads or highways is available through private lands pursuant to valid, unsubordinated, perpetual, enforceable and recorded public or private easements or rights-of-way.   (g)                                 Schedule 4.5(g) hereto contains a true, correct and complete list, as of the date hereof, of all items of Tangible Personal Property included in the Broadcasting Assets that have a fair market value as of the date hereof in excess of $25,000.  Except as set forth in Schedule 4.5(g), all material items of the Tangible Personal Property are in operating condition (given the age of such property and the use to which such property is put and ordinary wear and tear excepted) and have been maintained in compliance with good engineering practice, are performing satisfactorily, have been properly maintained, in all material respects, in accordance with industry practices, and have been maintained so as to permit the Station to operate in all material respects in accordance with the FCC Licenses and the Communications Act.   (h)                                 As of Closing, no brokerage or leasing commission or other compensation will be due and payable to any Person with respect to or on account of any of the Leases.   4.6                                 Title to Broadcasting Assets.   On the Closing Date, each Seller will have and will convey to the Purchaser good and marketable title to the Broadcasting Assets that are owned by such Seller and valid and existing leasehold or license interests in all Broadcasting Assets that are leased or licensed by such Seller, in each case free and clear of all Encumbrances, except for and subject only to Permitted Encumbrances.   4.7                                 Intellectual Property and Proprietary Rights.   (a)                                  Schedule 4.7 hereto contains a true, correct and complete list of all Intellectual Property used by the Sellers, to the extent such Intellectual Property is related solely to the Business.   29 --------------------------------------------------------------------------------   (b)                                 Each Seller owns, has a valid license or a valid right to use all Proprietary Rights used in or necessary to conduct the Business as currently conducted by such Seller, except as would not, individually or in the aggregate reasonably be expected to have a Material Adverse Effect.  To the Knowledge of the Sellers, no Person is infringing upon the rights of any Seller in or to any of the Intellectual Property set forth in Schedule 4.7 hereto.   (c)                                  Except as set forth in Schedule 4.7, all Intellectual Property material to the Business, including the call letters necessary for or Used by the Station or the Business, has been duly applied for or registered in, filed in or issued by, as applicable the appropriate Governmental Authority where such registration, filing or issuance is necessary for the Business.  All Intellectual Property owned by the Company Used or necessary to conduct the Business that has been registered in, filed in or issued by a Governmental Authority is so indicated on Schedule 4.7 hereto.  All Intellectual Property registrations identified in Schedule 4.7 are valid and in good standing and all applications identified in Schedule 4.7 are pending without challenge (other than office actions that may be pending before the Patent and Trademark Office or its foreign equivalents).   (d)                                 Schedule 4.7 contains a list and description (showing in each case any owner, licensor or licensee) of all software Used by the Sellers in respect of the Business, except software licensed to the Sellers that is available in consumer retail stores or similar retail outlets and subject to “shrink-wrap” or similar consumer license agreements.  To the Knowledge of the Sellers, no proprietary Technology currently Used in connection with the Station has been Used, divulged or appropriated for the benefit of any Person other than the Sellers.  None of the Sellers has sold, licensed or otherwise disposed of any of the Intellectual Property Used or necessary to conduct the Business or trade secrets, inventions, know-how, formulae, processes, procedures or computer software Used or necessary to conduct the Business (collectively, “Technology”) to any Person.   (e)                                  Subject to the receipt of the Consents set forth on Schedule 4.3 hereto, the consummation of the transactions contemplated hereby does not and will not conflict with, alter or impair any of the Station’s rights with respect to the Intellectual Property Used or necessary to conduct the Business and Technology.  Subject to the receipt of the Consents set forth on Schedule 4.3 hereto, each license relating to Intellectual Property Used or necessary to conduct the Business or Technology will continue to be valid, binding, and enforceable, and in full force and effect on substantially similar terms immediately following the consummation of the transactions contemplated hereby.   4.8                                 Business Contracts.   (a)                                  Schedule 4.8(a) hereto contains a true, correct and complete list of each Business Contract (whether written or oral and including all amendments thereto) to which any Seller is a party or by which any Seller’s assets are bound and which, in any such case, is material to the Business (each, a “Material Business Contract” and, collectively, the “Material Business Contracts”), excluding (i) Business Contracts with advertisers for production or the sale of advertising time on the Station for cash that may be cancelled by the Sellers on ninety (90) days or less notice without premium or penalty, (ii) Trade Agreements and Barter Agreements   30 --------------------------------------------------------------------------------   entered into in the ordinary course of business, consistent with past practice, (iii) employment Contracts terminable at will, (iv) miscellaneous service Contracts terminable upon thirty (30) days or less notice without premium or penalty and (v) other Contracts entered into in the ordinary course of business with not more than 12 months remaining on their terms, not involving Liabilities exceeding Ten Thousand Dollars ($10,000) per year per contract and One Hundred Thousand Dollars ($100,000) per year in the aggregate for all such contracts, but including, as of the date hereof the following: (i) all leases relating to all Leased Real Property; (ii) all capital or operating leases or conditional sales agreements relating to any of Sellers’ assets (other than Short Term Agreements), in each case involving monthly payments in excess of Ten Thousand Dollars ($10,000) per year per contract and One Hundred Thousand Dollars ($100,000) per year in the aggregate; (iii) all employment, consulting, separation, collective bargaining or other labor agreements; (iv) all Trade Agreements and Barter Agreements involving air time with a value in excess of Ten Thousand Dollars ($10,000) based upon standard rates published on the Station’s rate card as of the date hereof; and (v) all program and network affiliation agreements; provided, however, that except for Trade Agreements and Barter Agreements involving air time with a value in excess of Ten Thousand Dollars ($10,000) based upon standard rates published on the Station’s rate card as of the date hereof, any Contract for the sale of time on the Station at standard rates published on the Station’s rate card as of the date hereof shall be deemed not to be a Material Business Contract for purposes of this Section 4.8(a).  For purposes of this Agreement, the term “Short Term Agreement” shall mean an agreement entered into in the ordinary course of business that is terminable by the Seller that is a party thereto upon ninety (90) days or less notice without premium or penalty.   (b)                                 The Sellers has made available to the Purchaser a true, correct and complete copy of each written Material Business Contract and a written summary of the material terms of each oral Material Business Contract.  Except as set forth in Schedule 4.8(b) hereto, (i) each Material Business Contract is in full force and effect and constitutes a valid, binding and enforceable obligation of the Sellers that is a party thereto in accordance with the respective terms thereof, except as such enforceability may be limited by principles of public policy, and subject to (A) the effect of any applicable Laws of general application relating to bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting creditors’ rights and relief of debtors generally, and (B) the effect of rules of law and general principles of equity, including, without limitation, rules of Law and general principles of equity governing specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law) and, to the Knowledge of the Sellers, represents a valid, binding and enforceable obligation of each of the other parties thereto, except as such enforceability may be limited by principles of public policy, and subject to (X) the effect of any applicable Laws of general application relating to bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting creditors’ rights and relief of debtors generally, and (Y) the effect of rules of law and general principles of equity, including, without limitation, rules of Law and general principles of equity governing specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law); and (ii) there exists no breach or default (or event that with notice or the lapse of time, or both, would constitute a breach or default) on the part of the Seller which is a party thereto or, to the Knowledge of the Sellers, on the part of any other party thereto, in any case   31 --------------------------------------------------------------------------------   which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  The Sellers have not received any written notice of the intention of any party to terminate, or substantially reduce the volume of its purchases, sales, products or advertisements under any such Material Business Contract.  Except as set forth on Schedule 4.8(b), the Sellers are not, as of the date hereof, in written communications regarding any amendment, modification, extension or termination of, and are not currently renegotiating in writing, any such Material Business Contracts.   4.9                                 Business Licenses.  Schedule 4.9 hereto contains a true, correct and complete list of each Business License.  All Business Licenses which are necessary to conduct the Business as conducted as of the date hereof have been issued to the Sellers.  No loss or expiration of any License is pending or, to the Knowledge of the Sellers, threatened.  The Sellers are in compliance with the Business Licenses in all material respects.  The Business Licenses are valid and in full force and effect.  No Seller is in default under and, to Seller’s Knowledge, no condition exists that, with notice or lapse of time or both, would constitute a default under any material Business License.  Subject to the receipt of the Consents set forth on Schedule 4.3, no material Governmental Permit shall be terminated or impaired or become terminable, in whole or in part, as a result of the transactions contemplated hereby.   4.10                           Business Employees.  Schedule 4.10 hereto contains a true, correct and complete list of all employees of the Sellers who have employment duties solely related to the Business, including (and designating as such) any such employee who is an inactive employee on paid or unpaid leave of absence, and indicating the date of employment, current title and annual or hourly compensation of each such employee.  Each employee set forth in Schedule 4.10 hereto who is employed by the Sellers immediately prior to the Closing (whether actively or inactively), and each additional employee who is hired to work in the Business following the date hereof (to the extent permitted by Section 6.1 hereof) who is employed by the Sellers immediately prior to the Closing (whether actively or inactively), shall be referred to herein individually as a “Business Employee” and, collectively, as the “Business Employees.”  Notwithstanding the foregoing, neither Michael Granados nor Ian Guthrie shall be considered a “Business Employee” and any employment contracts that Michael Granados and Ian Guthrie have entered into with Holdings prior to the Closing shall neither be assigned to nor inure to the benefit of the Purchaser.  Schedule 4.10 contains a list of all accrued and unpaid vacation for each Business Employee as of the date hereof.   4.11                           Employee Benefit Plans.   (a)                                  Schedule 4.11(a) hereto contains a true, correct and complete list of all Benefit Plans.   (b)                                 Except as set forth in Schedule 4.11(b) hereto:   (i)                                     each of such Benefit Plans has been administered in compliance with its own terms and in compliance in all material respects with all applicable Laws.  There are no material undisclosed Liabilities in respect of the Benefit Plans with respect to which the Purchaser could be liable;   32 --------------------------------------------------------------------------------   (ii)                                  each of such Benefit Plans which is intended to be tax-qualified under Section 401(a) of the Internal Revenue Code has been determined by the IRS to be so qualified and, to the Knowledge of the Sellers, no circumstances have occurred that would adversely affect the tax-qualified status of any such Benefit Plan;   (iii)                               neither the Sellers, nor any Person required to be aggregated with the Sellers or any of its Subsidiaries (as defined under Section 414(b) or 414(c) of the Internal Revenue Code or Section 4001 of ERISA) has incurred any withdrawal liability that has not been satisfied with respect to any “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA).   (iv)                              neither Sellers nor any person required to be aggregated with Sellers has ever maintained or made any contribution to an employee pension benefit plan as defined in Section 3(2) of ERISA.   (c)                                  Except as set forth in Schedule 4.11(c) hereto, no Benefit Plan provides severance benefits to current or former Business Employees.   (d)                                 Except as set forth in Schedule 4.11(d) hereto, the consummation of the transactions contemplated hereby, either alone or in combination with another event, will not (i) entitle any employee or former employee of the Sellers or any group of such employees to any payment, (ii) increase the amount of compensation due to any such employee, (iii) accelerate the time of vesting of any compensation, stock incentive or other benefit or (iv) result in any “parachute payment” under Section 280G of the Code whether or not such payment is considered to be reasonable compensation for services rendered.   (e)                                  Except as set forth in Schedule 4.11(e) hereto, no Seller has any liability with respect to an obligation to provide benefits, including death or medical benefits (whether or not insured) with respect to any Person beyond their retirement or other termination of service other than (i) coverage mandated by Part 6 of Title I of ERISA or Section 4980B of the Code or state Law, or (ii) disability benefits under any employee welfare plan that have been fully provided for by insurance or otherwise.  There has been no communication to any employee of the Sellers that would reasonably be expected to promise or guarantee any such employee retiree health or life insurance or other retiree death benefits on a permanent basis.   4.12                           Financial Information.   (a)                                  Attached to Schedule 4.12(a) hereto is a true, correct and complete copy of the following financial statements of the Station (collectively, the “Financial Statements”): the audited balance sheet, statement of income and statement of cash flows as of, and for the fiscal year ended, December 31, 2004 and the balance sheet and statement of income as of, and for the eleven month period ended, November 30, 2005 (the “Latest Balance Sheet Date” and the unaudited balance sheet of the Station as of November 30, 2005, the “Latest Balance Sheet”).  Except as set forth in Schedule 4.12(a) or as noted in the Financial Statements, the Financial Statements have been prepared in accordance with GAAP, consistently applied (except, in the case of unaudited financial statements, for normal year end adjustments and the absence of notes), and fairly present, in all material respects, the financial condition and results of   33 --------------------------------------------------------------------------------   operations of the Station, as of the respective dates thereof and for the respective periods identified therein.   (b)                                 Except as set forth on Schedule 4.12(b) hereto, neither Holdings nor any Affiliates of Holdings (other than the Company and its Subsidiary) provides or causes to be provided any assets, services or facilities to the Station which are material to the conduct of the Business.   (c)                                  Except for the execution and delivery of this Agreement, the transactions contemplated hereby and as set forth on Schedule 4.12(c) hereto, since the Latest Balance Sheet Date to the date hereof, the Sellers have not, with respect to the operation of the Business:   (i)                                     had a Material Adverse Effect;   (ii)                                  suffered any material damage, destruction, loss or claim (whether or not covered by insurance) or condemnation or other taking relating to or otherwise affecting the Broadcasting Assets;   (iii)                               had an adverse change in employee relations relating to or otherwise affecting the Business;   (iv)                              amended or terminated any Material Business Contract or Business License except in the ordinary course of business, consistent with past practice;   (v)                                 entered into any Contract or other transaction, other than in the ordinary course of business, consistent with past practice;   (vi)                              paid any bonus to any Business Employee or granted to any Business Employee any increase in compensation, except in the ordinary course of business, consistent with past practice; or   (vii)                           operated the Business other than in the ordinary course of business, consistent with past practice.   4.13                           No Undisclosed Liabilities.  The Sellers have no Liabilities that are attributable to the Business other than (i) the Liabilities reflected on the Latest Balance Sheet, (ii) Liabilities incurred in the ordinary course of business after the Latest Balance Sheet Date, and (iii) Liabilities set forth in Schedule 4.13 hereto.   4.14                           Litigation; Governmental Orders.  Except as set forth in Schedule 4.14 hereto, there are no pending Actions or, to the Knowledge of the Sellers, threatened Actions for which written notice thereof has been received by the Sellers, by any Person or Governmental Authority against the Sellers with respect to the Business or, to the Knowledge of the Sellers, any current employees (in their capacity as such) of the Sellers.  Except as set forth in Schedule 4.14 hereto, the Sellers are not bound by any Governmental Orders that specifically name it.   34 --------------------------------------------------------------------------------   4.15                           Compliance with Laws.  Except as set forth in Schedule 4.15 hereto, the Sellers are in compliance in all material respects with, and the Sellers have never received any written claim or notice that they are not in compliance in all material respects with, each Law or Governmental Order applicable to the Business   4.16                           FCC Matters.  Schedule 4.16 hereto sets forth a complete and accurate list of the FCC Licenses.  The authorized holder and the expiration date of the term of each of the FCC Licenses is shown on Schedule 4.16 hereto.  Except as may be set forth in Schedule 4.16, the FCC Licenses, without material exception, (i) are in full force and effect in accordance with the Communications Act and their respective terms and not subject to any conditions other than those applicable to broadcast licenses generally or as otherwise disclosed on the face of the FCC Licenses in Schedule 4.16 hereto and (ii) include all of the licenses, permits and authorizations used in or required for the operation of the Station under the Communications Act.  The Sellers know of no fact or circumstance that would, under the Communications Act, disqualify, preclude or materially delay the FCC’s approval of the assignment of the FCC Licenses to the Purchaser, assuming the Purchaser is fully qualified as the assignee of the FCC Licenses.  There are no actions, proceedings, complaints, orders to show cause, notices of apparent liability, notices of forfeiture, claims, or investigations pending or, to the Sellers’ Knowledge, threatened, against the Sellers, or any officer, director, or member thereof that would impair the ability of the Sellers to assign the FCC Licenses to the Purchaser or which would impede in any material respect the Sellers’ ability to prosecute the application for the FCC Consent or seek the grant of the FCC Consent with respect to the Station.  Except as may be noted in Schedule 4.16 hereto, (i) each Station is licensed by the FCC to operate, and is operating in all material respects, with the facilities authorized by its FCC Licenses; and (ii) there is not, pending, or to the Knowledge of the Sellers threatened, any action or proceeding by or before the FCC to revoke, suspend, terminate, cancel, rescind or modify (including a reduction in coverage area) any of the FCC Licenses (other than rulemaking proceedings affecting the broadcast industry generally) or refuse to renew the FCC Licenses, and there is not now issued or outstanding, or to the Knowledge of the Sellers pending or threatened, by or before the FCC, any investigation, order to show cause, notice of violation, notice of apparent liability, or notice of forfeiture or complaint against the Sellers with respect to the Station, other than regularly scheduled license renewal proceedings; and (iii) there are no unsatisfied or otherwise outstanding citations issued by the FCC with respect to the Station.  The Station is operating in compliance with the FCC Licenses and, in all material respects, the Communications Act and in a manner that will not adversely affect the FCC Licenses in any material respect.  The Sellers are in compliance in all material respects with all requirements of Federal Aviation Administration with respect to the construction and/or alteration of the Station’s antenna structures, and, where required, “no hazard” determinations for each antenna structure have been obtained, and where required, each antenna structure has been registered with the FCC   4.17                           Taxes.  Each Seller has filed with the appropriate taxing authorities all material Tax Returns required to be filed through the date hereof and all such Tax Returns were correct and complete in all material respects and were prepared in compliance in all material respects with all applicable Laws and regulations.  Each Seller has paid all Taxes required to be paid, other than Taxes not yet due and Taxes being contested in good faith by appropriate proceedings.  The unpaid Taxes of the Sellers did not, as of the Latest Balance Sheet Date, exceed the reserve   35 --------------------------------------------------------------------------------   for Taxes (excluding any amounts reserved for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Latest Balance Sheet, and will not exceed that reserve as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice of the Sellers in filing their Tax Returns.  All monies required to be withheld by any Seller in connection with any amounts paid or owing to any employee, independent contractor, creditor, equity holder or other third party for Taxes have been collected or withheld and either paid to the respective Governmental Authority or set aside in accounts for such purpose.  There are no disputes pending with or claims raised, or to the Knowledge of the Sellers, threatened by any Tax authorities with respect to Taxes.  There are no Encumbrances on any of the Broadcasting Assets that arose in connection with any failure (or alleged failure) to pay any Tax.   4.18                           Labor Matters.   (a)                                  Except as set forth on Schedule 4.18(a) hereto, there is not pending or, to the Knowledge of the Sellers, threatened against the Sellers, any labor dispute, strike or work stoppage that affects or interferes with the operation of the Station, and to the Knowledge of the Sellers there is no organizational effort currently being made or threatened by or on behalf of any labor union with respect to employees of the Station.  The Station has not experienced any strike, work stoppage or other similar significant labor difficulties within the twelve (12) months preceding the date of this Agreement.   (b)                                 Except as set forth on Schedule 4.18(b) hereto, (i) no Seller is a signatory or a party to, or otherwise bound by, any collective bargaining agreement which covers employees or former employees of the Station, (ii) no Seller has agreed to recognize any union or other collective bargaining unit with respect to any employees of the Station, and (iii) no union or other collective bargaining unit has been certified as representing any employees of the Station.   4.19                           Environmental Matters.  The Sellers have provided the Purchaser with true, correct and complete copies of the environmental report referred to in Schedule 4.19 hereto (the “Environmental Reports”).  Except as set forth in the Environmental Reports, the Sellers, with respect to the Station and the Business, are in material compliance with all Environmental Laws.  No Seller has received any written communication from any Person (including any Governmental Authority) that alleges that any Seller is not in such compliance.  The Sellers have obtained all material Environmental Permits necessary for the Sellers to conduct the Business as currently conducted.  The Sellers are in material compliance with all terms and conditions of such Environmental Permits.  No Seller has been advised by any Governmental Authority of any potential material change in the terms and conditions of any such Environmental Permit, either prior to or upon its renewal.  There are no Environmental Claims: (a) pending or, to the Knowledge of the Sellers, threatened, against any Seller; or (b) to the Knowledge of the Sellers, (i) pending or threatened against any Person whose liability for any Environmental Claim any Seller has or may have retained or assumed, either contractually, by operation of law or otherwise, (ii) arising out of or related to any property currently leased or operated by any Seller or any of its Affiliates or (iii) arising out of or related to any property formerly owned, leased or operated by any Seller or any of its Affiliates.  With respect to the period of Sellers’ ownership   36 --------------------------------------------------------------------------------   of the Business, there have been no Releases, treatment, storage, or disposal (except in material compliance with Environmental Laws) or, to the Knowledge of the Sellers, threatened Releases, of any Hazardous Materials that would be reasonably likely to form the basis of any Environmental Claim against or liability of any of the Sellers and, to the Knowledge of Sellers, with respect to the period prior to Sellers’ ownership of the Business, there have been no Releases, treatment, storage, or disposal (except in material compliance with Environmental Laws) of any Hazardous Materials that would be reasonably likely to form the basis of any Environmental Claim against or liability of any of the Sellers.  The Sellers have not operated, installed, or used, and, to the Knowledge of Sellers, the Owned Real Property does not contain, any of the following:  (a) underground improvements, including but not limited to treatment or storage tanks, or underground piping associated with such tanks, used currently or in the past for the management of Hazardous Materials, (b) a dump or landfill; (c) PCBs; or (d) asbestos-containing materials. Notwithstanding any other provision of this Agreement, the Purchaser acknowledges and agrees that the representations and warranties contained in this Section 4.19 are the only representations and warranties given by the Sellers with respect to environmental matters or with respect to Environmental Laws, and no other provision of this Agreement shall be interpreted as containing any representation or warranty with respect thereto.   4.20                           Cable and Satellite Matters.  Schedule 4.20 sets forth, as of the date hereof,:   (a)                                  all multichannel video programming distributors (collectively, “MVPDs” and each individually, a “MVPD”) that carry the Station’s analog and/or digital signal, and the channel on which the Station’s analog and/or digital signal is carried;   (b)                                 (1) all MVPDs in the Station’s designated market area as defined by Nielsen (“Market”) to which Holdings or its Subsidiary has provided a must-carry notice or retransmission consent notice in accordance with the provisions of the Communications Act for the cable and DBS must-carry/retransmission consent carriage cycle commencing January 1, 2006, including a summary description of the disposition and current status of each such must-carry or retransmission consent notice; (2) all MVPDs in the Station’s Market to which Holdings or its Subsidiary have not provided any such must-carry or retransmission consent notice for the cable and DBS must-carry/retransmission consent carriage cycle commencing January 1, 2006;   (c)                                  all retransmission consent, channel positioning and/or copyright indemnification contracts entered into with respect to the Station with any MVPD, and the expiration date for each such contract;   (d)                                 notifications from MVPDs of their intent to construct a cable television system of local-into-local service received by the Station since February 1, 2002;   (e)                                  a list of each notice, if any, received by the Sellers or by the Station from any cable system in the Station’s Market alleging that the Station does not deliver an adequate quality signal, as defined in Section 76.55(c)(3) of the FCC regulations, to such cable system’s principal headend, and all further material correspondence between the Sellers or the Station and any such cable system relating to such notice;   37 --------------------------------------------------------------------------------   (f)                                    a list of all pending petitions for special relief to modify the area in which the Station is entitled to demand must-carry pursuant to Sections 76.55(c) and (e) of the FCC regulations;   (g)                                 a list of must-carry complaints, if any, filed on behalf of the Station; and   (h)                                 all notifications to the Station from a DBS provider indicating such DBS system’s intent to import “significantly viewed” television stations into such Station’s Market.   No MVPD has advised any of the Sellers of any signal quality or copyright indemnity or other material obstacle to carriage of the Station’s analog signal that is still outstanding, and no MVPD has declined or threatened to decline such carriage or failed to respond to a request for carriage or sought any form of relief from carriage from the FCC.   The Sellers have delivered or made available to the Purchaser true and correct copies of all material notices, agreements, correspondence, petitions and other items described in clauses (b) and (e) through (h) of this Section 4.20.  The Sellers have made available to the Purchaser true and correct copies of the list of subscribers residing in the Station’s Market receiving from a DBS provider a distant network signal from a television station affiliated with the same network as the Station, whether pursuant to a waiver or otherwise.   4.21                           Digital Television.  The Station has elected channel 7 as its tentative channel designation for the provision of digital television service (“DTV”).  On June 23, 2005, the FCC tentatively designated the election of channel 7 for the Station’s permanent DTV operations (“Channel Designation”).  The Channel Designation has not been vacated, reversed, stayed, set aside, annulled or suspended, nor is it the subject of any pending appeal, request for stay, petition for rehearing, reconsideration or review by any Person or by the FCC on its own motion.  The FCC Licenses listed in Schedule 4.16 include a construction permit (the “DTV CP”) to operate the Station with “maximization” facilities (the “DTV Facility”) and special temporary authority (the “DTV STA”) to commence operation of the DTV Facility at reduced power.  The DTV Facility commenced operation on October 31, 2002 and is operating pursuant to the DTV STA initially granted March 6, 2003, the current term of which has been extended through June 1, 2006.  The DTV CP and the DTV STA are in full force and effect, the FCC has not taken any adverse action with respect thereto, and all necessary requests to extend the DTV CP and DTV STA have been timely filed.   4.22                           Transactions with Affiliates.  Schedule 4.22 lists all services currently being provided to the Business by Affiliates of the Sellers and the annual costs incurred by Sellers in connection with such services for the calendar year ended December 31, 2004 and the eleven months ended November 30, 2005.  Except as set forth on Schedule 4.22, there are no agreements or arrangements (other than employment agreements and employee benefit plans otherwise disclosed under this Agreement) between any current or former employee, director or Affiliate of the Sellers, on the one hand, and any Seller, on the other hand, in connection with, relating to or otherwise affecting the Business or which are included in the Broadcasting Assets.   38 --------------------------------------------------------------------------------   4.23                           Advertising.  Schedule 4.23 sets forth (i) the name of each of the top twenty (20) advertisers of the Business as determined by revenue for the eleven month period ended November 30, 2005 and as determined by revenue for the twelve month period ended December 31, 2004 and (ii) the total amounts billed to each such advertiser for such advertisements in each such period.  Except as set forth on Schedule 4.23, since January 1, 2005, (i), through the date hereof, no more than $165,000 of advertising for the Station has been sold on a “barter,” “trade out” or exchange of goods and/or services basis and (ii) none of the top twenty (20) advertisers for the Business as determined by revenue for the eleven month period ended November 30, 2005 has terminated or given written notice that it intends to materially and adversely modify its relations with, or materially reduce its advertising purchased from, the Business.   4.24                           Limitations on Representations and Warranties.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE SELLERS MAKE NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE FUTURE FINANCIAL PERFORMANCE OR RESULTS OF THE OPERATIONS OF THE BUSINESS.   ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER   The Purchaser hereby represents and warrants to the Sellers as follows:   5.1                                 Organization.  Each Purchaser is a corporation, duly formed, validly existing and in good standing under the laws of the State of Delaware.  The Purchaser is duly authorized, qualified or licensed to do business as a foreign corporation, and is in good standing, under the Laws of each state or other jurisdiction in which the character of its properties owned, operated or leased, or the nature of its activities, makes such qualification necessary, except in those states and jurisdictions where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Purchaser to perform its obligations under this Agreement or the other Transaction Documents to which it is a party or to consummate the transactions contemplated hereby or thereby.   5.2                                 Authority.  The Purchaser has all requisite corporate power and authority to enter into this Agreement and the other Transaction Documents to which it is a party, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Purchaser of this Agreement and the other Transaction Documents to which it is a party, the performance by the Purchaser of its obligations hereunder and thereunder, and the consummation by the Purchaser of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action on the part of the Purchaser.  This Agreement has been duly executed and delivered by the Purchaser and, assuming the due authorization, execution and delivery of this Agreement by the Sellers, this Agreement constitutes a legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, except as such enforceability may be limited by principles of public policy, and subject to (A) the effect of any applicable Laws of general application relating to bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting creditors’ rights and relief of debtors generally, and (B) the effect of rules of law   39 --------------------------------------------------------------------------------   and general principles of equity, including, without limitation, rules of law and general principles of equity governing specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law). Upon the execution and delivery of the other Transaction Documents to which it is a party by the Purchaser at the Closing and, assuming the due authorization, execution and delivery of the other Transaction Documents by the Sellers (to the extent they are party thereto), each of the other Transaction Documents will constitute a legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its respective terms, except as such enforceability may be limited by principles of public policy, and subject to (X) the effect of any applicable Laws of general application relating to bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting creditors’ rights and relief of debtors generally, and (Y) the effect of rules of law and general principles of equity, including, without limitation, rules of law and general principles of equity governing specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law).   5.3                                 No Violation.  Assuming that all Consents set forth on Schedule 5.3 hereto have been obtained and all registrations, qualifications, designations, declarations or filings with any Governmental Authorities set forth on Schedule 5.4 hereto have been made, and except as set forth on Schedule 5.3 hereto, the execution and delivery by the Purchaser of this Agreement and the other Transaction Documents to which it is a party, the performance by the Purchaser of its obligations hereunder and thereunder, and the consummation by the Purchaser of the transactions contemplated hereby and thereby, will not conflict with or violate in any material respect, constitute a material default (or event which with the giving of notice or lapse of time, or both, would become a material default) under, give rise to any right of termination, amendment, modification, acceleration or cancellation of any material obligation or loss of any material benefit under, result in the creation of any Encumbrance other than a Permitted Encumbrance on any of the assets or properties of the Purchaser pursuant to, or require the Purchaser to obtain any Consent as a result of, or under, the terms or provisions of (i) the Organizational Documents of the Purchaser, (ii) any Contract to which the Purchaser is a party or is bound or by which any of its assets is bound, or (iii) any Law applicable to the Purchaser or any of its assets, or any Governmental Order issued by a Governmental Authority by which the Purchaser or any of its assets is in any way bound or obligated, except, in the case of clauses (ii) and (iii) of this Section 5.3, as would not, individually, or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Purchaser to perform its obligations under this Agreement or the other Transaction Documents or to consummate the transactions contemplated hereby or thereby.   5.4                                 Governmental Consents.  No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any Governmental Authority is required on the part of the Purchaser in connection with the execution and delivery by the Purchaser of this Agreement or the other Transaction Documents to which it is a party, the performance by the Purchaser of its obligations hereunder and thereunder, and the consummation by the Purchaser of the transactions contemplated hereby and thereby except as set forth on Schedule 5.4 hereto.   40 --------------------------------------------------------------------------------   5.5                                 FCC Matters.  The Purchaser is legally, financially and otherwise qualified to be the licensee of the FCC Licenses and to acquire, own and operate the Station under the Communications Act.  The Purchaser knows of no fact that would, under the Communications Act (a) disqualify the Purchaser as an assignee of the FCC Licenses or as the owner and operator of the Station or (b) cause the FCC to fail to approve in a timely fashion the application for the FCC Consent.  No waiver of any FCC rule or policy is necessary to be obtained for the grant of the applications for the assignment of the FCC Licenses to the Purchaser, nor will processing pursuant to any exception to any FCC rule or policy of general applicability be requested or required in connection with the consummation of the transactions contemplated by this Agreement.   5.6                                 Availability of Funds.  The Purchaser has the financial capability to consummate the transactions contemplated by this Agreement, and the Purchaser understands that under the terms of this Agreement the Purchaser’s consummation of those transactions is not in any way contingent upon or otherwise subject to (i) the Purchaser’s consummation of any financing arrangements or the Purchaser’s obtaining of any financing or (ii) the availability, grant, provision or extension of any financing to the Purchaser.  The Purchaser has and, on the Closing Date, will have available sufficient unrestricted funds to enable it to consummate the transactions contemplated hereby. Purchaser acknowledges and agrees that it shall be Purchaser’s obligation to have funds on hand at the Closing sufficient to enable Purchaser to pay the Closing Cash Payment, the Indemnification Escrow Deposit, and the Proration Escrow Deposit.   ARTICLE 6 COVENANTS AND AGREEMENTS   6.1                                 Conduct of Business.   (a)                                  At all times during the period commencing upon the execution and delivery of this Agreement by each of the parties hereto and terminating upon the earlier to occur of the Closing or the termination of this Agreement pursuant to and in accordance with the terms of Section 10.1 hereof, unless the Purchaser shall otherwise consent in writing (which consent shall not be unreasonably withheld or delayed), and except as otherwise required to comply with its express obligations hereunder or as set forth on Schedule 6.1 hereto, the Sellers shall, (i) use commercially reasonable efforts to conduct the operations of the Business in the ordinary course of business, consistent with past practice, (ii) use commercially reasonable efforts to preserve and maintain the goodwill of the Business and the current relationships of the Sellers with officers, employees, customers, suppliers and others with significant and recurring business dealings with the Business, (iii) use commercially reasonable efforts to maintain all Business Licenses and FCC Licenses that are necessary for the Sellers to carry on the Business in the manner conducted by the Sellers as of the date hereof, including filing with the FCC applications to renew any FCC Licenses that may expire prior to the Closing Date, (iv) use commercially reasonable efforts to operate the Station in the ordinary course of business, consistent with past practices (subject to, and except as modified by, compliance with other covenants in this Agreement and applicable laws and regulations, including without limitation, the Communications Act), (v) maintain the books of account and records of the Sellers in the usual,   41 --------------------------------------------------------------------------------   regular and ordinary manner, consistent with past practices, (vi) use commercially reasonable efforts to maintain the Tangible Personal Property in (A) operating condition (given the age of such property and the use to which such property is put and ordinary wear and tear excepted), (B) in compliance with good engineering practices and (C) in all material respects in accordance with industry practice and so as to permit the Station to operate in all material respects in accordance with the FCC Licenses and the Communications Act, and (vii) utilize the Program License Agreements of the Station only in the ordinary course of business, and not sell or otherwise dispose of any such Program License Agreements.   (b)                                 Without limiting the foregoing, at all times during the period commencing upon the execution and delivery of this Agreement by each of the parties hereto and terminating upon the earlier to occur of the Closing or the termination of this Agreement pursuant to and in accordance with the terms of Section 10.1 hereof, unless the Purchaser shall otherwise consent in writing (which consent shall not be unreasonably withheld or delayed), and except as otherwise required to comply with its express obligations hereunder or as set forth on Schedule 6.1 hereto, the Sellers shall use commercially reasonable efforts not to take, or cause to be taken, any of the following actions to the extent such actions relate primarily to the Business:   (i)                                     change or agree to rearrange the character of the Business or enter into, amend or terminate (other than at the expiration of their respective terms) any Business Contract, other than (x) Business Contracts not involving Liabilities exceeding (A) Twenty-Five Thousand Dollars ($25,000) individually or One Hundred Fifty Thousand Dollars ($150,000) in the aggregate for all such Business Contracts and (y) Business Contracts relating to the purchase, installation, tuning and testing of the DTV Equipment set forth in and in accordance with Schedule 6.15 and Annex A thereto attached hereto;   (ii)                                  adopt, enter into or amend any arrangement which is, or would be, a Benefit Plan unless otherwise required by applicable Law, an existing Benefit Plan or this Agreement, in which case notice thereof shall be provided to the Purchaser within a reasonable time thereafter;   (iii)                               make any change in its accounting methods or practices, or make any changes in depreciation or amortization policies or rates, made or adopted by it, except for any changes in the accounting methods or practices of the Sellers or any changes in depreciation or amortization policies or rates, made or adopted by the Sellers in order to conform with GAAP or applicable law;   (iv)                              employ or commit to employ any person other than to fill any vacancy or opening or in connection with any offer of employment in effect as of the date of this Agreement or as may be reasonably necessary to replace any employee who terminates employment for any reason on or after the date of this Agreement;   (v)                                 increase any wage, salary, bonus or other direct or indirect compensation payable or to become payable to any of the Business Employees, or make any accrual for or commitment or agreement to make or pay the same, other than increases in wages, salary, bonuses or other direct or indirect compensation made in the ordinary course of business   42 --------------------------------------------------------------------------------   as subject to the limitations set forth in Schedule 6.1(b)(v) hereto, consistent with past practice, and those required by any existing Contract or Law;   (vi)                              make any payment or commitment to pay any severance or termination pay to any Business Employee or any independent contractor, consultant, agent or other representative of the Sellers, other than payments or commitments to pay such Business Employees, independent contractors, consultants, agents or other representatives of the Sellers in the ordinary course of business, consistent with past practice;   (vii)                           (A) sell, abandon or make any other disposition of any of the material assets or properties of the Sellers, other than obsolete assets that are not in use in the operation of the Station, and assets (other than the Broadcasting Assets) sold in connection with the sale of WTAJ-TV, Johnstown/Altoona, Pennsylvania; (B) grant or incur any Encumbrance on any of the Broadcasting Assets, other than Permitted Encumbrances; and (C) sell, lease, transfer, option, amend or enter into any agreements or commitments to do any of the foregoing with respect to the Owned Real Property and Leased Real Property;   (viii)                        except in the ordinary course of business, consistent with past practice, incur or assume any debt, obligation or Liability;   (ix)                                amend, delete, modify or terminate or permit to expire without renewal any material Business License;   (x)                                   acquire or purchase any other business, the assets and liabilities of which would become part of the Broadcasting Assets and the Assumed Obligations;   (xi)                                suffer to exist an event of default under any agreement for any indebtedness of the Sellers for borrowed money if the lender under such credit agreement does not agree, no later than 20 Business Days after the occurrence of such event of default, to release any assets securing such indebtedness that constitute Broadcasting Assets from all Encumbrances arising pursuant to such indebtedness if such indebtedness is paid in full at Closing; or   (xii)                             enter into any binding agreement with respect to any of the foregoing.   Notwithstanding anything to the contrary contained herein, at all times during the period commencing upon the execution and delivery of this Agreement by each of the parties hereto and terminating upon the earlier to occur of the Closing or the termination of this Agreement pursuant to and in accordance with the terms of Section 10.1 hereof, (1) Sellers shall be entitled to make cash distributions in respect of the membership interests to the holders thereof and (2) Holdings and the other Sellers shall be entitled to repay and prepay such amounts in respect of their respective indebtedness for borrowed money (including, without limitation, the TSG Loans) as they shall elect in their sole discretion.   6.2                                 Access and Information.  At all times during the period commencing on the date hereof and terminating upon the earlier to occur of the Closing or the termination of this   43 --------------------------------------------------------------------------------   Agreement pursuant to, and in accordance with, the terms of Section10.1 hereof, the Sellers shall permit the Purchaser and its authorized agents and representatives to have reasonable access, upon reasonable notice and during normal business hours, to the Sellers and all relevant books, records and documents of or relating to the Business; provided, that the foregoing do not unreasonably disrupt the business of the Sellers.  The Purchaser and its authorized agents and representatives shall be given reasonable access, upon reasonable notice and during normal business hours, to the employees of the Station with the prior written consent of the Sellers and with an agent or representative of the Sellers present at all such meetings.  Except as expressly provided herein, neither the Purchaser nor any of its agents or representatives shall contact in any manner whatsoever any of the Sellers’ or the Station’s employees, customers, suppliers or others having business dealings with the Sellers or the Station, without the express prior written consent of the Sellers.   6.3                                 Title Insurance; Survey and Lien Search.   (a)                                  With respect to the Real Property, the Sellers shall reasonably cooperate with the Purchaser, at Purchaser’s sole cost and expense, to enable the Purchaser to obtain, at Purchaser’s sole cost and expense, within sixty (60) days after the date of this Agreement (the “Real Property Inspection Period”): (i) preliminary reports on title covering a date subsequent to the date hereof, issued by the Title Company, which preliminary reports shall contain a commitment (the “Title Commitment”) of the Title Company to issue one or more (as appropriate) owner’s title insurance policy on ALTA Owners Policy (and corresponding mortgagee’s) policies (each, a “Title Policy”) insuring the fee simple interest of the Purchaser in such parcels of Real Property; and (ii) copies of all documents, filings and information disclosed in the Title Commitment.  At Closing, each Seller which holds title to one or more tracts of the Owned Real Property shall deliver an Owner’s Affidavit and Gap Indemnity with respect to matters arising by, through or under Sellers to the Title Company.  The procedures outlined in the first sentence of this Section 6.3(a) shall in no event delay the Closing beyond the date on which the Closing would occur but for such procedures.   (b)                                 The Sellers have provided the Purchaser with all Title Policies in Sellers’ possession and the Surveys described on Schedule 6.3(b), which constitute all surveys relating to the Owned Real Property in their possession.  On or prior to the expiration of the Real Property Inspection Period, Purchaser shall have the right, at Purchaser’s sole cost and expense, to obtain one or more surveys of the Owned Real Property (the “Surveys”).  If the Title Company would remove the survey exception solely on the basis of a certificate of no change, Sellers agree to execute such Affidavit, provided it does not expand the representations and warranties contained in this Agreement.   (c)                                  If the Commitment or Surveys disclose either title exceptions or survey matters that materially, adversely affect the Owned Real Property or interfere with the use of such real property in the business and operations of the Station other than the Permitted Encumbrances (hereinafter “Title & Survey Defects”), Purchaser shall have until the expiration of the Real Property Inspection Period to provide Sellers with written notice of its objection to any such Title & Survey Defects.  In the event that Sellers have not cured such Title & Survey Defects within fifteen (15) days following receipt of Purchaser’s notice of the Title & Survey   44 --------------------------------------------------------------------------------   Defects (the “Seller Cure Period”), then Purchaser shall have the right to terminate this Agreement exercisable within five (5) days of the expiration of such Seller Cure Period by Purchaser’s delivery of written notice thereof to Sellers.  Notwithstanding the foregoing, in the event that Purchaser shall fail to object to any Title & Survey Defect prior to the expiration of the Real Property Inspection Period, or to terminate this Agreement pursuant to the immediately preceding sentence within eighty (80) days of the date of this Agreement, then all such Title & Survey Defects shall be deemed to be Permitted Encumbrances for all purposes hereunder and Purchaser shall be deemed to have waived all objections thereto.  Notwithstanding anything to the contrary contained in this Section 6.3(c), all monetary liens, judgments and encumbrances (other than for taxes not yet due and payable) shall be automatically deemed objected to by Purchaser and shall be removed by Sellers, at Sellers sole expense, prior to Closing.   (d)                                 On or prior to the expiration of the Real Property Inspection Period, Purchaser shall have the right to obtain, at Purchaser’s sole cost and expense, a current Phase I Environmental Assessment pursuant to ASTM standard E-1527 (a “Phase I Environmental Assessment”), relating to the Owned Real Property.  In the event that such Phase I Environmental Assessment details a Recognized Environmental Condition (as such term is defined in the American Society of Testing and Materials Standard for Phase I Environmental Assessments) (a “Recognized Environmental Condition”) in connection with the Owned Real Property or the environmental engineering firm that performed the Phase I Environmental Assessment (the “Consultant”) otherwise reasonably recommends further investigatory action with respect to such Recognized Environmental Condition, then Purchaser shall have the right to object to such Recognized Environmental Condition or request Sellers’ approval of such investigation by delivery of written notice thereof to Sellers within five (5) days of Purchaser’s receipt of the Phase I Environmental Assessment.  If Sellers deny approval for such investigation, or if Sellers shall fail to provide Purchaser with reasonably satisfactory evidence that such Recognized Environmental Condition or other circumstance requiring investigation is not present on the Owned Real Property or has been effectively remediated no later than twenty (20) days (or if such matter is not capable of cure within twenty (20) days, then within a reasonable period of time) after the later of the date of delivery of the related Phase I Environmental Assessment or any subsequent investigation (the “Cure Period”), then Purchaser shall have the right to terminate this Agreement upon delivery of written notice thereof to Sellers within ten (10) Business Days after the expiration of the Cure Period.  Notwithstanding the foregoing, no failure by the Purchaser to terminate this Agreement pursuant to this Section 6.3(d) shall be deemed to be a waiver of any breach of any representation or warranty set forth in Section 4.19 or of Purchaser’s indemnification rights set forth in Section 11.1 or any other rights Purchaser may have at law.   (e)                                  If applicable, the Consultant shall estimate the cost and expense of clean up, removal, remedial, corrective or responsive action necessary to address such Recognized Environmental Condition (the “Environmental Work”), which estimate shall set forth in reasonable detail the basis for those estimates; provided, however, the Environmental Work shall be designed to meet the least stringent standards or requirements so as not to be a violation under applicable Environmental Law (taking into account the zoning of the applicable Real Property and the current uses of resources thereon).  Notwithstanding any term or provision of this Agreement to the contrary, immediately upon the completion of the Surveys and the Phase I   45 --------------------------------------------------------------------------------   Environmental Assessment, Purchaser shall restore the Owned Real Property to its condition immediately preceding the performance of any Surveys or the Phase I Environmental Assessment, and shall indemnify, defend and hold Sellers harmless from any claims, damages, liabilities, costs and expenses arising therefrom.   (f)                                    The parties understand and agree that the procedures outlined in this clause (c) shall in no event delay the Closing beyond the date on which the Closing would occur but for such procedures.   (g)                                 The expenses incurred to obtain the Title Commitments, the Surveys and the Phase I Environmental Assessment shall be paid by the Purchaser.   6.4                                 Further Actions.   (a)                                  Upon the terms and subject to the conditions set forth in this Agreement, the Sellers and the Purchaser shall each use their respective commercially reasonable efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, and to assist and cooperate with the other parties hereto in doing, all things necessary, proper or advisable under applicable Laws to consummate the transactions contemplated hereby, including, without limitation:  (i) subject to Section 6.4(b) and Section 6.5 hereto, obtaining all necessary Licenses, Consents and Governmental Orders from third parties to the extent required by any Law, Material Business Contract or Business License (other than the FCC License) required in connection with the transactions contemplated hereby, (ii) defending any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby, including, without limitation, seeking to have vacated or reversed any stay or temporary restraining order entered by any Governmental Authority prohibiting or otherwise restraining the consummation of the transactions contemplated hereby, (iii) responding to any request of a Governmental Authority for information, (iv) contesting and resisting any action, including any legislative, administrative or judicial action, and have vacated, lifted, reversed or overturned, any Governmental Order (whether temporary, preliminary or permanent) that restricts, prevents or prohibits the consummation of the transactions contemplated hereby, including, without limitation, by using all legal efforts to vigorously pursue all available avenues of administrative and judicial appeal and all available legislative action, (v) in the event that any permanent or preliminary injunction or other order is entered or becomes reasonably foreseeable to be entered in any proceeding that would make consummation of the transactions contemplated hereby in accordance with the terms of this Agreement unlawful or that would prohibit, prevent, delay or otherwise restrain the consummation of the transactions contemplated hereby, causing the relevant Governmental Authorities to vacate, modify or suspend such injunction or order so as to permit the consummation of the transactions contemplated hereby prior to the Termination Date and (vi) executing and delivering any additional instruments, certificates and other documents reasonably necessary or reasonably advisable to consummate the transactions contemplated hereby and to fully carry out the purposes of this Agreement, including any documentation related to the Notification of Sale, Transfer, or Assignment in Bulk to be filed with the New York State Department of Taxation and Finance.  The parties further understand and agree that none of the parties shall knowingly take any action that is inconsistent with the foregoing or   46 --------------------------------------------------------------------------------   would have the effect of delaying or hindering the consummation of the transactions contemplated hereby.  The Sellers shall use commercially reasonable efforts to obtain all Consents without any change in the terms of any Business Contract or Business License (other than the FCC Licenses) to which such Consent relates prior to the Closing Date, provided, however, that the Purchaser shall be required to accept any changes in the terms of any such Business Contracts or Business Licenses which are not material thereto.  Notwithstanding anything to the contrary contained herein, none of the Sellers shall be required to pay or incur any cost or expense to obtain any third party Consent that it is not otherwise required to pay or incur pursuant to the terms of the related Business Contract or Business License.   (b)                                 The Sellers and the Purchaser shall use commercially reasonable efforts to prepare and, within seven (7) calendar days after the date of this Agreement, file with the FCC appropriate applications for the FCC Consent.  The parties shall thereafter cooperate to prosecute each application with commercially reasonable diligence and otherwise use their commercially reasonable efforts to obtain the FCC Consent as expeditiously as practicable.  Each party will promptly provide to the other parties a copy of any pleading, order or other document served on it relating to such applications (but no party shall have any obligation to take any steps to satisfy complainants, if any, which steps would substantially impair or diminish rights under the FCC Licenses or otherwise impose an unreasonable burden on a party).  The Purchaser is and will be legally, financially and otherwise qualified to be the licensee of, acquire, own and operate the Station under the Communications Act.  Each party shall use commercially reasonable efforts to take or cause to be taken all actions necessary or appropriate to be taken by such party (and its Affiliates or Subsidiaries) to permit the FCC to approve in a timely fashion the assignment to the Purchaser of the FCC Licenses for the Station.  Each party agrees to comply with any condition imposed on it (or its Affiliates) by the FCC Consent, provided that any such conditions are similar to those routinely placed upon similarly situated broadcast licensees.  The Purchaser and the Sellers shall oppose any petitions to deny or other objections filed with respect to the applications for any FCC Consent and any requests for reconsideration or review of the FCC Consent, provided, however, that no party shall have any obligation to participate in an evidentiary hearing on the applications.   (c)                                  If the Closing shall not have occurred for any reason within the original time period for consummating the assignment of the FCC Licenses pursuant to the FCC Consent, and no party shall have terminated this Agreement under Article 10, the parties shall jointly request, and use commercially reasonable efforts, subject to the limitations in Section 6.4(b), to obtain, an extension of the time period for consummating the assignment of the FCC Licenses pursuant to FCC Consent.  No extension of the time period for consummating the assignment of the FCC Licenses pursuant to the FCC Consent shall limit the exercise by either party of its right to terminate the Agreement under Article 10.   6.5                                 Consents.  The Sellers, at their sole expense, will use their commercially reasonable efforts to obtain all Consents required from third Persons whose Consent is required pursuant to any Business Contract and the Consents set forth on Schedule 4.3 prior to the Closing Date.  The Sellers shall advise the Purchaser of any difficulties experienced in obtaining any Consents and of any conditions requested for any of such Consents.  To the extent that any Contract may not be assigned without the Consent of any third party, and such Consent is not   47 --------------------------------------------------------------------------------   obtained prior to Closing, this Agreement and any assignment executed pursuant hereto shall not constitute an assignment thereof, but to the extent permitted by law shall constitute an equitable assignment and assumption of rights and obligations under the applicable Contract, with the Sellers making available to the Purchaser the benefits thereof and the Purchaser performing the obligations (including, but not limited to, payment obligations) thereunder on the Sellers’ behalf.  The Purchaser and the Sellers shall cooperate to use commercially reasonable efforts after Closing to obtain Consents to assign such Contracts.  Notwithstanding the foregoing, it is understood and agreed that the foregoing shall not affect the conditions to Closing set forth in Section 7.1(h).   6.6                                 Updating of Information.  Between the date of this Agreement and the Closing Date, the Sellers will deliver to the Purchaser (a) copies of all Business Contracts that are entered into by the Sellers between the date hereof and the Closing in accordance with and subject to the terms of this Agreement that would have been required to be set forth on Schedule 4.8(a) if they had been entered into immediately prior to the date of this Agreement and (b) a written summary setting forth any changes to Schedule 1-A, Schedule 1-B, Schedule 4.5(a), Schedule 4.5(g), Schedule 4.7 and Schedule 4.10 between the date hereof and the Closing.  Notwithstanding anything to the contrary herein, upon such delivery, if any, Schedules 4.8(a) and 4.10, respectively, shall be treated as amended for all purposes to the extent that copies of Business Contracts and information are delivered to the Purchaser pursuant to the first sentence of this Section 6.6 to the extent the Sellers have entered into all such Business Contracts in accordance with Section 6.1 hereof and any changes to Schedule 1-A, Schedule 1-B, Schedule 4.5(a), Schedule 4.5(g), Schedule 4.7 and Schedule 4.10 are specifically permitted pursuant to Section 6.1 hereof, respectively.   6.7                                 Conveyance Free and Clear of Encumbrances.  Except for Permitted Encumbrances, at or prior to the Closing, the Sellers shall obtain the release of all Encumbrances on the Broadcasting Assets and shall duly file, or cause to be filed, releases of all such Encumbrances in each governmental agency or office in which any such Encumbrances or evidence thereof shall have been previously filed and the Sellers shall transfer and convey, or cause to be transferred and conveyed, to the Purchaser at Closing good and marketable title to all of the Broadcasting Assets free and clear of all Encumbrances, except for Permitted Encumbrances.   6.8                                 Fulfillment of Conditions by the Sellers.  The Sellers shall not knowingly take or cause to be taken, or fail to use commercially reasonable efforts to take or cause to be taken, any action that would cause the conditions to the obligations of the Sellers or the Purchaser to consummate the transactions contemplated hereby to fail to be satisfied or fulfilled at or prior to the Closing, including, without limitation, by taking or causing to be taken, or failing to use commercially reasonable efforts to take or cause to be taken, any action that would cause the condition set forth in Section 7.1(a) not to be satisfied.  The Sellers shall take, or cause to be taken, all commercially reasonable actions to cause to be satisfied or fulfilled, at or prior to the Closing, the conditions precedent to the Sellers’ obligations to consummate the transactions contemplated hereby as set forth in Section 7.2 hereof.   48 --------------------------------------------------------------------------------     6.9                                 Fulfillment of Conditions by the Purchaser.  The Purchaser shall not knowingly take or cause to be taken, or fail to use commercially reasonable efforts to take or cause to be taken, any action that would cause the conditions to the obligations of the Sellers or the Purchaser to consummate the transactions contemplated hereby to fail to be satisfied or fulfilled, including, without limitation, by taking or causing to be taken, or failing to use commercially reasonable efforts to take or cause to be taken, any action that would cause the condition set forth in Section 7.2(a) not to be satisfied.  The Purchaser shall take, or cause to be taken, all commercially reasonable actions to cause to be satisfied or fulfilled, at or prior to the Closing, the conditions precedent to the obligations of the Purchaser to consummate the transactions contemplated hereby as set forth in Section 7.1 hereof.  Notwithstanding anything to the contrary contained herein, the Purchaser’s obligations hereunder shall not be conditioned upon the availability of financing at the time of Closing, and the unavailability of financing shall not excuse the Purchaser’s obligations to close hereunder.   6.10                           Confidentiality; Publicity.  The Purchaser acknowledges and agrees that it is party to a Non-Disclosure Agreement with the Sellers dated October 18, 2005 (the “Non-Disclosure Agreement”), with respect to Confidential Information (as defined in the Non-Disclosure Agreement) provided by the Sellers to the Purchaser, and that such Non-Disclosure Agreement shall continue in full force and effect in accordance with its terms, including, without limitation, with respect to any Confidential Information (as defined in the Non-Disclosure Agreement) provided by the Sellers to the Purchaser pursuant to Section 6.2 of this Agreement or otherwise.   6.11                           Transaction Costs.  Except as otherwise provided in this Agreement, the Purchaser shall pay all transaction costs and expenses (including legal, accounting and other professional fees and expenses) that it incurs in connection with the negotiation, execution and performance of this Agreement and the consummation of the transactions contemplated hereby, and the Sellers shall pay all transaction costs and expenses (including legal, accounting and other professional fees and expenses) that the Sellers incur in connection with the negotiation, execution and performance of this Agreement and the consummation of the transactions contemplated hereby.  All fees and costs for any stamp, transfer or similar tax associated with the transfer of the Broadcasting Assets from the Sellers to the Purchaser pursuant to this Agreement shall be paid 50% by the Purchaser and 50% by the Sellers.  All FCC filing fees and all other charges levied by any Governmental Authority in connection with the transactions contemplated by this Agreement shall be paid 50% by the Purchaser and 50% by the Sellers.  To the extent that any of the foregoing costs, expenses and taxes that are to be paid by the Sellers are not paid by the Sellers and are payable by the Purchaser after the Closing, they shall be deducted from the Purchase Price.  The Sellers and the Purchaser shall cooperate in the preparation, execution and filing of all Tax Returns regarding any transfer Taxes which become payable as a result of the transfer of the Broadcasting Assets from the Sellers to the Purchaser pursuant to this Agreement.   6.12                           Retention and Delivery of the Sellers Records.  From and after the Closing, the Purchaser shall preserve, for a period of six years, all books and records of the Sellers relating to the period prior to the Closing.  As soon as practicable following the Closing, the Purchaser shall, upon request, and at the Sellers’ expense, deliver a copy of all books and records of the Sellers relating to the Business and acquired by the Purchaser pursuant hereto to the Sellers in sufficient detail to enable the Sellers to operate the Business, prepare financial statements and all   49 --------------------------------------------------------------------------------   Tax Returns relating to periods ending on or prior to the Closing Date.  In addition to the foregoing, from and after the Closing, the Purchaser and the Sellers shall afford to each other, and their respective counsel, accountants and other authorized agents and representatives, during normal business hours reasonable access to the employees, books, records and other data relating to the Sellers in its possession with respect to periods prior to the Closing, and the right to make copies and extracts therefrom, to the extent that such access may be reasonably required by the requesting party (a) to facilitate the investigation, litigation and final disposition of any claims which may have been or may be made against any such party or Person or its Affiliates, and (b) for the preparation of Tax Returns and audits.  The Purchaser shall not dispose of, alter or destroy any such materials without giving 45 days’ prior written notice to the Sellers so that the Sellers may, at their expense, examine, make copies or take possession of such materials.   6.13                           Employees and Employee Benefit Matters.   (a)                                  On or prior to the Closing Date, the Purchaser shall offer employment to all of the Business Employees, other than Michael Granados and Ian Guthrie (collectively, “Excluded Employees”).  None of the Business Employees,  Michael Granados or Ian Guthrie are under an obligation to perform or, as the case may be, continue to provide services to the Station on or after the Closing Date.   (b)                                 The Purchaser shall offer employment to each Inactive Business Employee effective as of the date on which such employee presents himself for active employment to the Purchaser, provided that such employee presents himself for active employment on or prior to the one-year anniversary of the Closing Date.  The Sellers shall not interfere with any such offers and shall not offer continued employment to any such employees except as otherwise provided in any written agreement entered into by the parties contemporaneously with this Agreement.  Any such offer made by the Purchaser with respect to any Business Employee or any Inactive Business Employee shall be for employment at will by the Purchaser as new employees of the Purchaser (subject to any applicable probation period not prohibited by law) to occupy positions designated by the Purchaser and with a base salary at least equal to the base salary payable to such Business Employees as in effect as of the Closing Date, pursuant to such other terms and conditions determined by the Purchaser in its sole discretion (subject to the provisions of any employment agreement entered into or assumed by the Purchaser).  Notwithstanding the foregoing, Business Employees who have binding employment agreements with Sellers, other than Excluded Employees, shall be offered employment in accordance with the terms of their respective employment agreements, which, to the extent possible, shall be assumed by the Purchaser at the Closing and, from and after the Closing, shall be Assumed Obligations.  Nothing in this Agreement will be deemed to prevent or restrict in any way the right of the Purchaser to terminate, reassign, promote or demote any of the Transferred Employees (as defined below) after the Closing or to change adversely or favorably the title, powers, duties, responsibilities, functions, locations, salaries, other compensation or terms or conditions of employment of such employees, except as set forth in any employment agreements assumed by the Purchaser.  Each Seller agrees to make available to the Purchaser, to the fullest extent permitted by law, all relevant information and materials requested by the Purchaser from the personnel files of each employee who shall have elected to accept employment with the   50 --------------------------------------------------------------------------------   Purchaser.  Any employee who accepts the Purchaser’s offer of employment following the Closing shall be a “Transferred Employee” following the Closing Date.   (c)                                  The Purchaser shall cause all Transferred Employees as of the Closing Date to be eligible to participate in its “employee benefit plans” (as defined in Section 3(3) of ERISA) and any other employee benefit plan, policy or arrangement of the Purchaser (collectively, “Purchaser Benefit Plans”) in which similarly situated employees of the Purchaser and it Affiliates, as applicable, are eligible to participate in accordance with the terms and conditions of such Purchaser Benefit Plans.  The Purchaser shall provide each Transferred Employee credit for years of service prior to the Closing with Sellers or any prior owner of the Station for (i) the purpose of eligibility and vesting under the Purchaser’s health, vacation, severance and other employee benefit plans (including, without limitation, the Purchaser 401(k) Plan), provided, however, nothing herein shall restrict the Purchaser’s ability to change or terminate the benefits or benefit plans provided to the Purchaser’s employees (including Transferred Employees) and (ii) shall waive any and all pre-existing condition limitations and eligibility waiting periods under group health plans of the Purchaser (to the extent covered under the applicable Benefit Plans), and shall cause to be credited to any deductible or out-of-pocket expenses under any health plans of the Purchaser any deductibles or out-of-pocket expenses incurred by Transferred Employees and their beneficiaries and dependents during the portion of the calendar year prior to their participation in the health plans of the Purchaser, provided that Transferred Employees provide a certificate of creditable coverage verifying such years of service and the most recent explanation of benefits from their insurer to confirm the amount of such deductibles incurred since the beginning of the current calendar year.   (d)                                 Except as specifically provided in this Section 6.13, the Purchaser has and assumes no obligation to continue or assume any Benefit Plans or compensation arrangement or any liabilities of Sellers or any of their current or former ERISA Affiliates of any nature relating thereto (including, without limitation, any salary, bonuses, severance, vacation, sick leave, fringe benefits, insurance plans, or pension or retirement benefits under any compensation or retirement plan or policy maintained by any Seller (or any of their respective current or former ERISA Affiliates) other than with respect to unused or accrued vacation time of Transferred Employees) to any Business Employee or former employee of the Station.  Sellers shall retain the responsibility for payment of all medical, dental, health and disability claims incurred by any Business Employee or former employee of the Station prior to the Closing Date, including any Liabilities for claims under the Sellers’ medical plan and all IBNR claims for medical benefits (regardless of whether or not the claims are made prior to Closing) and the Purchaser shall not assume any liability with respect to such claims.  Sellers shall also retain responsibility for payment of all severance payments payable to any Business Employee terminated on or prior to the Closing and for all accrued sick leave and, except for Transferred Employees, shall be responsible for all unused and accrued vacation time of all Business Employees, and the Purchaser shall not assume any liability with respect to such claims.  The Purchaser shall assume responsibility for payment of all medical, dental, health and disability claims incurred by Transferred Employees in its employ on or after the Closing Date, which are covered under Purchaser benefit plans and in which the Transferred Employees are participants.  The Purchaser shall be responsible for and shall assume as Assumed Obligations any unused and accrued vacation of the Transferred Employees, to the extent prorated pursuant to Section 2.4, as set forth   51 --------------------------------------------------------------------------------   in Schedule 6.13(d), which shall be updated by Sellers to reflect the unused and accrued vacation of the Transferred Employees as of the Closing Date.  Sellers agree to retain responsibility for payments and benefits that are due to all Inactive Business Employees until such time, if ever, that such persons become employees of the Purchaser.  Sellers agree to remain responsible for payment of all accrued benefits in accordance with the terms of the Benefit Plans.  Except as otherwise provided herein, the Purchaser shall not at any time assume any liability under any Benefit Plan to any active or any terminated, vested or retired participants in any such Benefit Plans.  Any employee or qualified beneficiary who is covered, or who is eligible to elect to continue his or her coverage, as of, on or following the Closing Date, under a Benefit Plan that constitutes a “group health plan” pursuant to the provisions of Part 6 of Title I, Subpart B of ERISA or Section 4980B of the Code shall be eligible to continue such coverage under the relevant Seller’s group health plan for the remainder of the applicable continuation coverage period.  Each Seller agrees to indemnify and hold harmless the Purchaser from all losses incurred by the Purchaser or the Purchaser’s “group health plan” resulting from any claim for COBRA continuation coverage made by or on behalf of any employee or qualified beneficiary under any plan maintained by the Purchaser or its Affiliates except to the extent that such employee is hired by the Purchaser and is eligible to participate in the Purchaser’s “group health plan,” as applicable.   (e)                                  Following the Closing Date, the Purchaser will be responsible only for severance pay, if any, of any Transferred Employees under the Purchaser’s applicable severance plans as they may exist from time to time.  The Purchaser shall have no obligation to assume any severance plan or liability of the Sellers with respect to any Business Employees (whether or not such employees become Transferred Employees), other than in connection with employment agreements to be assumed by the Purchaser hereunder.   (f)                                    The Purchaser shall be solely responsible for any and all liabilities, penalties, fines or other sanctions that may be assessed or otherwise due under the Worker Adjustment and Retraining and Notifications Act and similar laws and regulations (collectively, the “WARN Act”) arising out of the transactions contemplated herein, or otherwise at anytime after the Closing Date.   (g)                                 Nothing contained herein preclude Sellers from paying stay bonuses to any Business Employees in Sellers’ sole discretion.  Any Liability arising out of or relating to any such stay bonuses shall constitute Retained Liabilities.   This Section 6.13 shall operate exclusively for the benefit of the parties to this Agreement and not for the benefit of any other Person, including, without limitation, any current, former or retired Business Employee or spouse or dependents of such Persons.  Nothing contained herein, whether express or implied, is intended to confer upon any Business Employee or their legal representatives, any additional rights or remedies, including, without limitation, any right of employment for any period of any nature or kind whatsoever under or by reason of this Agreement.   6.14                           Control of the Station.  Prior to Closing, the Purchaser shall not, directly or indirectly, control, supervise or direct, or attempt to control, supervise or direct, the operations of   52 --------------------------------------------------------------------------------   the Station; those operations, including complete control and supervision of all of the Station’s programs, employees and policies, shall be the sole responsibility of the Sellers.   6.15                           Digital Television Build Out.  The Sellers agree to use their commercially reasonable efforts to complete the DTV Build-out as set forth on Schedule 6.15 hereto.   6.16                           Further Assurances of Sellers.  The Sellers shall, at any time, and from time to time, after the Closing Date, use their reasonable best efforts to: (a) take, or cause to be taken, all appropriate action, and to do, all things necessary, proper or advisable to consummate the transactions contemplated by this Agreement, including, without limitation, executing and delivering any additional instruments, certificates or other documents and (b) have the present and future officers, directors, shareholders, employees and agents of the Sellers cooperate with the Purchaser in furnishing information, evidence, testimony and other assistance in connection with any Tax Return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters relating to the Station for all periods prior to the Closing Date.   6.17                           Further Assurances of the Purchaser.  The Purchaser shall, at any time, and from time to time, after the Closing Date, use its reasonable best efforts to: (a) take, or cause to be taken, all appropriate action, and to do, all things necessary, proper or advisable to consummate the transactions contemplated by this Agreement, including, without limitation, executing and delivering any additional instruments, certificates or other documents and (b) have the present and future officers, directors, members, managers, employees and agents of the Purchaser cooperate with the Sellers in furnishing information, evidence, testimony and other assistance in connection with any Tax Return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters relating to the Station for all periods prior to the Closing Date.   6.18                           Bulk Transfer.  The Purchaser and Sellers hereby waive compliance with the bulk transfer provisions of the Uniform Commercial Code and all similar laws.  Except for the Assumed Obligations, Sellers shall promptly pay and discharge when and as due all liabilities and obligations arising out of or relating to Sellers’ ownership, operation and sale of the Station.  Except for the Assumed Obligations, Sellers hereby agree to indemnify, defend and hold the Purchaser harmless from and against any and all liabilities, losses, costs, damages or causes of action (including, without limitation, reasonable attorneys’ fees and other legal costs and expenses) arising out of or relating to claims asserted against the Purchaser pursuant to the bulk transfer provisions of (a) the Uniform Commercial Code, (b) the New York State Sales and Use Tax Law or (c) any similar law.   6.19                           No Shop.  No Seller will (a) solicit, initiate, or encourage the submission of any proposal or offer from any Person relating to the acquisition of (i) any equity interests of Holdings, or in the case of the Company or TSG License Subsidiary, any equity interests of the Company or TSG License Subsidiary which would materially impair or delay the consummation of the transactions contemplated by this Agreement or (ii) any substantial portion of the assets of the Station (including any acquisition structured as a merger, consolidation, or share exchange) or (b) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any   53 --------------------------------------------------------------------------------   Person to do or seek any of the foregoing.  The Sellers will notify the Purchaser immediately if any Person makes any written proposal, offer, inquiry, or contact with respect to any of the foregoing and the terms of any such proposal, offer, inquiry, or contact.  Notwithstanding anything to the contrary contained in this Agreement, no Seller shall be prohibited from soliciting, initiating or encouraging the submission of any proposal or offer from any Person, or participating in any discussions or negotiations, furnishing any information, assisting or participating or facilitating in any other manner any effort or attempt by any Person, with respect to, a transaction for the disposition, sale, transfer, assignment or conveyance of the assets (and related liabilities) of television station WTAJ-TV, Johnstown/Altoona, Pennsylvania (or the equity interests in any newly-formed, wholly-owned direct or indirect subsidiaries of Holdings which hold such assets (and liabilities)), but excluding the Broadcasting Assets, whether by asset sale, sale of equity securities, merger or otherwise, to any Person, including, without limitation, an Affiliate of the Sellers; provided that there shall be no sale of the equity interests of Holdings in connection with such transaction and no equity interests of the Company or TSG License Subsidiary may be sold in connection with such transaction if such sale would materially impair or delay the consummation of the transactions contemplated by this Agreement.  Furthermore, notwithstanding anything to the contrary contained in this Agreement, no Seller shall be prohibited from selling, transferring, assigning or conveying all or any of the assets Used by the Sellers in connection with the business or operations of television station WTAJ-TV, Johnstown/Altoona, Pennsylvania (and related liabilities) (or the equity interests in any newly-formed, wholly-owned direct or indirect subsidiaries of Holdings which hold such assets (and liabilities)), but excluding the Broadcasting Assets, whether by asset sale, sale of equity securities, merger or otherwise, to any Person, including, without limitation, an Affiliate of any of the Sellers; provided, however, that no equity interests of Holdings may be sold in connection with such transaction and no equity interests of the Company or TSG License Subsidiary may be sold in connection with such transaction if such sale would materially impair or delay the consummation of the transactions contemplated by this Agreement.   6.20                           Make Obligations Current.  As of the Closing, the Sellers shall not be past due on any of their respective payment obligations under Program License Agreements.   ARTICLE 7 CLOSING CONDITIONS   7.1                                 Conditions to Obligations of the Purchaser.  The obligations of the Purchaser to consummate the transactions at the Closing contemplated by this Agreement are subject to the satisfaction or fulfillment at or prior to the Closing of the following conditions, any of which may be waived in whole or in part by the Purchaser in writing:   (a)                                  All representations and warranties of the Sellers contained in this Agreement (disregarding any qualifications regarding materiality or Material Adverse Effect) shall be true and correct at and as of the Closing with the same effect as though such representations and warranties were made at and as of the Closing (other than any representation or warranty that is expressly made as of a specified date, which shall be true and correct as of such date only) except for changes which are permitted or contemplated pursuant to this   54 --------------------------------------------------------------------------------   Agreement or specifically consented to by the Purchaser in writing or to the extent that the failure of the representations and warranties of the Sellers contained in this Agreement to be true and correct at and as of the Closing (or in respect of any representation or warranty that is expressly made as of a specified date, as of such date only) has not had and would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.   (b)                                 The Sellers shall have performed and complied in all material respects with all the covenants and agreements required by this Agreement to be performed or complied with by them at or prior to the Closing.   (c)                                  Since the date of this Agreement, no event, circumstance or condition has occurred which has had or is reasonably expected to have a Material Adverse Effect.   (d)                                 There shall be in effect no Law or Governmental Order issued by a Governmental Authority of competent jurisdiction making illegal or otherwise prohibiting or restraining the consummation of the transactions contemplated by this Agreement.   (e)                                  The Sellers shall have delivered to the Purchaser all of the certificates, instruments and other documents required to be delivered by the Sellers at or prior to the Closing pursuant to Section 3.2 hereof.   (f)                                    The FCC shall have granted the FCC Consent without the imposition on the Purchaser or its Affiliates of any conditions that need not be complied with by the Purchaser or its Affiliates under Section 6.4(b) hereof and the FCC’s action granting the FCC Consent shall have become a Final Order.   (g)                                 As of the Closing, there shall not be any Liens on the Broadcasting Assets, other than Permitted Encumbrances and Encumbrances released at Closing.   (h)                                 All Required Consents shall have been obtained and delivered to the Purchaser.  For purposes of this Agreement, “Required Consents” shall mean those Consents marked with an asterisk on Schedule 4.3 hereto.   (i)                                     The Sellers shall have completed the DTV Build-out.   7.2                                 Conditions to Obligations of the Sellers.  The obligations of the Sellers to consummate the transactions at the Closing contemplated by this Agreement are subject to the satisfaction or fulfillment at or prior to the Closing of the following conditions, any of which may be waived in whole or in part by the Sellers in writing:   (a)                                  All representations and warranties of the Purchaser contained in this Agreement shall be true and correct in all material respects at and as of the Closing with the same effect as though such representations and warranties were made at and as of the Closing (other than any representation or warranty that is expressly made as of a specified date, which shall be true and correct in all material respects as of such specified date only); provided, however, that if the Purchaser consummates or is ready, willing and able to consummate but for Sellers invoking the provisions of this Section 7.2(a), the transactions contemplated by this   55 --------------------------------------------------------------------------------   Agreement, including, without limitation, satisfaction of the conditions set forth in Section 7.2(d), then the conditions set forth in this Section 7.2(a) shall be deemed to be satisfied, unless the failure of the representations and warranties of the Purchaser contained in this Agreement to be true and correct to the extent stated herein has had, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the Sellers.   (b)                                 The Purchaser shall have performed and complied in all material respects with the covenants and agreements required by this Agreement to be performed or complied with by it at or prior to the Closing.   (c)                                  There shall be in effect no Law or Governmental Order issued by a Governmental Authority of competent jurisdiction making illegal or otherwise prohibiting or restraining the consummation of the transactions contemplated by this Agreement.   (d)                                 The Purchaser shall have delivered to the Sellers, or as directed by the Sellers, the Closing Cash Payment and all of the certificates, instruments and other documents required to be delivered by the Purchaser at or prior to the Closing pursuant to Section 3.3 hereof, and the Purchaser shall have delivered to the Escrow Agent the Indemnification Escrow Deposit and the Proration Escrow Deposit.   (e)                                  The FCC shall have granted the FCC Consent without the imposition on the Purchaser or its Affiliates of any conditions that need not be complied with by the Purchaser or its Affiliates under Section 6.4(b) hereof and the FCC’s action granting the FCC Consent shall have become a Final Order.   (f)                                    All Required Consents shall have been obtained.   ARTICLE 8 RISK OF LOSS; FAILURE OF BROADCAST TRANSMISSION   8.1                                 Risk of Loss.  The risk of any loss, damage or impairment, confiscation or condemnation (each an “Event of Loss”) of the Broadcasting Assets or any part thereof from fire or any other casualty or cause shall be borne by the Sellers at all times prior to the Closing and thereafter shall be borne by the Purchaser.  Upon the occurrence of an Event of Loss, (a) the proceeds of or any claim for any loss payable prior to Closing under any insurance policy, claim, judgment or award with respect thereto (collectively, the “Proceeds”) shall be paid to the Sellers and (b) the Sellers shall use commercially reasonable efforts to repair, replace or restore any such Broadcasting Assets to their prior condition prior to the Event of Loss.  Notwithstanding the foregoing, in no case shall the Sellers be obligated to expend in the aggregate in excess of the amount of any insurance proceeds received by Sellers (plus any deductible) in respect of the Event of Loss (such amount the “Repair Cap”), to effect such repair, replacement or restoration.  If the Sellers reasonably concludes that such repair, replacement and restoration cannot be accomplished by the scheduled Closing Date through the use of Sellers’ commercially reasonable efforts, but can be accomplished within 60 days after such date, the Closing Date shall be postponed for that 60-day period in order for the Sellers to use commercially reasonable   56 --------------------------------------------------------------------------------   efforts to undertake such repair, replacement and restoration; if, however, the repair, replacement or restoration cannot be accomplished within that 60-day period or the aggregate cost of such remedial actions(s) is in excess of the Repair Cap, the Sellers may elect not to take such remedial action.  In such an event, the Purchaser shall have the option to (i) terminate this Agreement within twenty (20) days after notification by Sellers that no repair, replacement or restoration shall be undertaken without any continuing obligation either from the Purchaser or any the Sellers to the other parties, other than as set forth in Section 10.2, or (ii) accept the assets “as is,” in lieu of such repair, replacement or restoration, in which event the Sellers shall assign to the Purchaser at the Closing all of their rights under any insurance policies (including business interruption and “extra expense” insurance proceeds) and all Proceeds actually received by the Sellers, in each case in respect of such Event of Loss, and the deductible shall be deducted from the Purchase Price and Sellers shall have no additional liability under this Agreement for a breach of representation, warranty or covenant or otherwise in respect of such Event of Loss, except as set forth in the following sentence.  In the event that the Closing takes place and any insurance proceeds received after the Closing are paid to the Purchaser in the manner contemplated by the preceding sentence, the Sellers thereafter shall be relieved of any further liability in respect of the Event of Loss in question (whether pursuant to this Agreement or otherwise).  Notwithstanding the foregoing, only the assets damaged pursuant to such Event of Loss shall be accepted “as is” (and then only to the extent of the Event of Loss) and the other representations or warranties set forth herein shall apply with respect to the other assets included in the Broadcasting Assets and/or the Business.  If the Sellers do not exercise their right to postpone the Closing Date pursuant to this Section 8.1, nothing contained herein shall effect the parties right to terminate this Agreement pursuant to Section 10.1(d).   8.2                                 Interruption of Broadcast Transmission.  The Sellers shall give prompt written notice to the Purchaser if the regular broadcast transmissions of the Station in the normal and usual manner are interrupted or discontinued, including the operation of the Station at a power level of less than 80% of its maximum authorized facilities (an “Interruption”).  If any Interruption persists for more than seventy-two (72) hours (or, in the event of force majeure or utility failure affecting generally the market served by the Station, ninety-six (96) hours), whether or not consecutive, during any period of thirty (30) consecutive days, then the Purchaser may, at its option terminate this Agreement without liability by written notice given to the Sellers not more than ten (10) days after the expiration of such thirty (30) day period.  Notwithstanding anything herein to the contrary, if on the day otherwise scheduled for Closing, the Station is off the air but there has not been an Interruption, then Closing shall be postponed until the date five business days after the Station returns to the air at full power.   8.3                                 No Limitation.  Except as specifically provided in this Article 8, nothing in this Article 8 shall be deemed to limit or modify in any respect the Purchaser’s rights under Section 7.1 or Article 10.   57 --------------------------------------------------------------------------------   ARTICLE 9 NON-COMPETITION; NON-SOLICITATION; AND CONFIDENTIALITY   9.1                                 Non-Competition; Non-Solicitation.  Except as set-forth on Schedule 9.1 attached hereto, the Sellers hereby agree that no Seller shall, directly or indirectly, including through any Affiliate controlled by any Seller, (a) for a period of five (5) years from and after the Closing, in any manner engage in, own, participate in, control, operate, perform services for, or otherwise carry on, the television station business (“Prohibited Business”) within the Binghamton, New York Designated Market Area as measured by Nielsen Media Research Company as of the Closing Date, except on behalf of the Purchaser or (b) for a period of two (2) years from and after the Closing, solicit, induce or attempt to persuade any employee, agent, customer, supplier or other Person having a business relationship with the Station to terminate his, her or its relationship with the Purchaser or any of its Affiliates.   9.2                                 Confidentiality.  From and after the date of execution and delivery of this Agreement until the earlier of (a) the termination of this Agreement in accordance with its terms and (b) the third (3rd) anniversary of the Closing Date, the Sellers shall not, and shall cause their respective Affiliates not to, directly or indirectly, disclose, reveal, divulge or communicate to any Person other than Purchaser and its Affiliates and their respective officers, directors, employees, accountants, attorneys, financial advisors and representatives or, subject to the proviso set forth herein, use or otherwise exploit for their own benefit or for the benefit of any Person other than Purchaser and its Affiliates and their respective officers, directors, employees, accountants, attorneys, financial advisors and other representatives, any Confidential Information (as defined below).  The Sellers shall not have any obligation to keep confidential (or cause their respective Affiliates to keep confidential) any Confidential Information if and to the extent disclosure thereof is specifically required by Law; provided, however, that in the event disclosure is required by applicable Law, the Sellers, shall, to the extent reasonably possible, provide Purchaser with prompt notice of such requirement prior to making any disclosure so that Purchaser may seek an appropriate protective order.  For purposes of this Agreement, “Confidential Information” shall be limited to confidential and proprietary information with respect to the Business, but shall not include information that (A) is generally available to the public on the date of this Agreement, or (B) becomes generally available to the public other than as a result of a disclosure by the Sellers not otherwise permissible hereunder.  Notwithstanding anything to the contrary contained herein, this Section 9.2 shall not apply to the use of any information, including, without limitation, Confidential Information, by the Sellers and their respective Affiliates in the conduct and operation of the Business or to the disclosure or communication by Sellers to their Affiliates (which, without limiting anything set forth herein, shall include any equity owners of any of the Sellers) and any of their respective partners, directors, officers, shareholders, members, employees, agents of any financial information regarding the Business, including, but not limited to, financial statements.  The Purchaser acknowledges that the Sellers and their respective Affiliates are in businesses that may, now or in the future, subject to Section 9.1 hereof, be in competition with the Purchaser, and the Purchaser agrees that this Agreement in no way limits or restricts the Sellers’ and their Affiliates right or ability to conduct any business.   9.3                                 Equitable Relief.  Notwithstanding any other provision of this Agreement, it is understood and agreed that the remedy of indemnity payments pursuant to Article 11 and other remedies at law would be inadequate in the case of any breach of the covenants contained in Sections 9.1 and 9.2, the Purchaser and its subsidiaries shall be entitled to equitable relief,   58 --------------------------------------------------------------------------------   including the remedy of specific performance, with respect to any breach or attempted breach of such covenants.  In the event that any provision of this Article 9 is deemed to be unenforceable, the remainder of this Article 9 shall not be affected thereby and each provision hereof shall be valid and enforced to the fullest extent permitted by law.   ARTICLE 10 TERMINATION   10.1                           Termination.  This Agreement and the transactions contemplated hereby may be terminated and abandoned:   (a)                                  by written agreement of the Sellers and the Purchaser at any time prior to the Closing;   (b)                                 by the Sellers, if the Sellers are not then in default or breach in any material respect of their obligations under this Agreement, if all the conditions in Section 7.2 have not been satisfied or waived by the date scheduled for the Closing pursuant to Section 3.1 (as such date may be postponed pursuant to Section 3.1(b));   (c)                                  by the Purchaser, if the Purchaser is not then in default or breach in any material respect of its obligations under this Agreement, if all the conditions set forth in Section 7.1 have not been satisfied or waived by the date scheduled for the Closing pursuant to Section 3.1 (as such date may be postponed pursuant to Section 3.1(b));   (d)                                 by either the Sellers, on the one hand, or the Purchaser, on the other hand, if the Sellers are not then in default or breach in any material respect of its obligations under this Agreement in the case of termination by the Sellers, or if the Purchaser is not then in default or breach in any material respect of its obligations under this Agreement in the case of a termination by the Purchaser, if the Closing has not occurred on or prior to 5:00 p.m. (New York time) on the date which is nine (9) months after the date hereof; provided, however, that if the Closing shall have not been consummated and the conditions set forth in Section 7.1(i) shall not have been satisfied by such date which is nine (9) months after the date hereof, if the Sellers are continuing to comply with Section 6.15 hereof and are using commercially reasonable efforts to obtain, or have obtained, an extension of the digital television build-out deadline for the Station to a date that is no earlier than nine (9) months after the date hereof, then twelve (12) months after the date hereof (such nine (9) month or twelve (12) month date, as applicable, the “Termination Date”);   (e)                                  by either the Sellers or the Purchaser, if neither the Purchaser nor the Sellers have given notice to postpone the Closing pursuant to Section 3.1(b), if any Governmental Authority with jurisdiction over such matters shall have issued a final and nonappealable Governmental Order permanently restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement; provided, however, that neither the Sellers nor the Purchaser may terminate this Agreement pursuant to this Section 10.1(e) unless the party seeking to so terminate this Agreement has used all   59 --------------------------------------------------------------------------------   commercially reasonable efforts to oppose any such Governmental Order or to have such Governmental Order vacated or made inapplicable to the transactions contemplated by this Agreement;   (f)                                    by the Purchaser, if the Purchaser is not then in default or breach in any material respect of its obligations under the Agreement, if either (i) the closing of the sale of television station WDWB(TV), Detroit, Michigan by WXON, Inc. and WXON License, Inc. to AM Broadcasting WDWB, Inc. in accordance with the WDWB Sale Agreement or (ii) the closing of the sale of television station KBWB(TV), San Francisco, California by KBWB, Inc. and KBWB License, Inc. to AM Broadcasting KBWB, Inc. in accordance with the KBWB Sale Agreement, has not been consummated by January 18, 2006 or if either Sale Agreement is terminated prior to January 18, 2006, in any case, by written notice given by the Purchaser to the Sellers no later than five (5) Business Days after the earlier of (i) the termination of any Sale Agreement or (ii) January 18, 2006;   (g)                                 by either the Sellers or the Purchaser as provided in Section 6.3(c), Section 6.3(d), Section 8.1 or Section 8.2; or   (h)                                 by the Sellers if the Purchaser has not executed and delivered the Deposit Escrow Agreement or GBC or the Purchaser has not paid the Purchase Price Deposit in accordance with Section 2.5(a) and Section 2.5(b), respectively, and the Purchaser has not previously terminated this Agreement pursuant to Section 10.1(f).   Notwithstanding anything in this Section 10.1 to the contrary, if on the Termination Date, the Closing has not occurred solely because any required notice period for Closing has not lapsed, such the Termination Date shall be extended until one (1) Business Day after the lapse of such period.   10.2                           Effect of Termination.   (a)                                  In the event of termination of this Agreement by either or both of the Purchaser and/or the Sellers pursuant to Section 10.1 hereof, prompt written notice thereof shall forthwith be given to the other parties and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned without further action by any of the parties hereto, but subject to, and without limiting any of the rights of the parties specified herein in the event a party is in default or breach in any material respect of its obligations under this Agreement.  If this Agreement is terminated as provided herein:   (i)                                     None of the parties hereto nor any of their respective partners, directors, officers, shareholders, members, employees, agents, or Affiliates shall have any liability or further obligation to the other parties or any of their partners, directors, officers, shareholders, members, employees, agents or Affiliates pursuant to this Agreement with respect to which termination has occurred, except for the Sellers and/or the Purchaser, as the case may be (but not including the Sellers’ or the Purchaser’s partners, directors, officers, shareholders, members, employees, agents, or Affiliates).   60 --------------------------------------------------------------------------------   (ii)                                  All filings, applications and other submissions relating to the transactions contemplated hereby as to which termination has occurred shall, to the extent practicable, be withdrawn from the Person to which made.   (b)                                 (i)                                     If this Agreement is terminated pursuant to Sections 10.1 (other than pursuant to Section 10.1(a)) and the Purchaser is not then in breach or default in a material respect of any of its representations, warranties, covenants, agreements or obligations set forth in this Agreement, then and in that event, the Purchase Price Deposit Amount shall be returned to the Purchaser (and the Sellers shall, upon the request of the Purchaser, execute and deliver to the Escrow Agent, a joint written instruction to so deliver the Purchase Price Deposit Amount to the Purchaser) and the Purchaser shall be entitled to pursue any remedies it has available at law.   (ii)                                  If this Agreement is terminated by Sellers pursuant to Section 10.1(b) or Section 10.1(d) and the Purchaser shall then be in breach or default in a material respect of its representations, warranties, covenants, agreements or obligations set forth in this Agreement, and the Sellers are not then in breach, then and in that event, the Sellers shall have the right to receive the Purchase Price Deposit Amount as liquidated damages and as the exclusive remedy of the Sellers as a consequence of the Purchaser’s breach or default (which aggregate amount the parties agree is a reasonable estimate of the damages that will be suffered by the Sellers as a result of the breach or default by the Purchaser and does not constitute a penalty, the parties hereby acknowledging the inconvenience and nonfeasibility of otherwise obtaining an adequate remedy) and the Purchaser shall, upon the request of the Sellers, execute and deliver to the Escrow Agent a joint written instruction to so deliver the Purchase Price Deposit Amount to the Sellers.   (iii)                               If this Agreement is terminated by the Purchaser or the Sellers and both of the Purchaser, on the one hand, and the Sellers, on the other hand, shall then be in breach in a material respect of its or their representatives, warranties, covenants, agreements or obligations set forth in this Agreement, then and in that event, the Purchase Price Deposit Amount shall be returned to the Purchaser (and the Sellers shall, upon the request of the Purchaser, execute and deliver to the Escrow Agent, a joint written instruction to deliver the Purchase Price Deposit Amount to the Purchaser) and neither the Sellers nor the Purchaser shall have any liability or obligation under this Agreement, including, without limitation, for any such breach or default.   (iv)                              If this Agreement is terminated by the Purchaser pursuant to Section 10.1(f), neither Sellers nor the Purchaser shall have any liability or obligation under this Agreement, including, without limitation, for any breach or default in respect of any representations, warranties, covenants, agreements or obligations set forth in this Agreement.   (v)                                 If this Agreement is terminated pursuant to Section 10.1(g), then and in that event, the Purchase Price Deposit Amount shall be returned to the Purchaser (and the Sellers shall, upon the request of the Purchaser, execute and deliver to the Escrow Agent, a joint written instruction to deliver the Purchase Price Deposit Amount to the Purchaser) and neither the Sellers nor the Purchaser shall have any liability or obligation under this Agreement, including, without limitation, for any such breach or default   61 --------------------------------------------------------------------------------   (vi)                              If this Agreement is terminated by Sellers pursuant to Section 10.1(h), the Sellers shall be entitled to damages in an amount equal to the Purchase Price Deposit Amount as liquidated damages and as the exclusive remedy of the Sellers as a consequence of Purchaser’s and GBC’s failure to pay the Purchase Price Deposit in accordance with Section 2.5(a) and Section 2.5(b) (which aggregate amount the parties agree is a reasonable estimate of the damages that will be suffered the Sellers as a result of Purchaser’s and GBC’s breach or default hereunder and does not constitute a penalty, the parties hereby acknowledge the inconvenience and infeasibility of otherwise obtaining an adequate remedy).   (c)                                  Without limiting the generality of the foregoing, or any applicable Law, neither the Purchaser, on the one hand, nor the Sellers, on the other hand, may rely on the failure of any condition precedent set forth in Article 7 to be satisfied as a ground for termination of this Agreement by such party if such failure was caused by such party’s failure to act in good faith, or a breach of or failure to perform its or their (as applicable) representations, warranties, covenants or other obligations in accordance with the terms hereof.   ARTICLE 11 INDEMNIFICATION   11.1                           Indemnification by the Sellers.   (a)                                  After the Closing, the Sellers hereby agrees to indemnify and hold the Purchaser harmless against and with respect to, and shall reimburse the Purchaser for any and all Losses resulting from:   (i)                                     any breach of any representation or warranty made by the Sellers pursuant to this Agreement, any of the other Transaction Documents or any certificate delivered by the Sellers to the Purchaser hereunder or thereunder;   (ii)                                  any failure by the Sellers to perform any covenant of the Sellers set forth in, this Agreement, any of the other Transaction Documents or any certificate, document or instrument delivered by the Sellers to the Purchaser hereunder or thereunder;   (iii)                               any Retained Liabilities or Excluded Assets; and   (iv)                              any and all reasonable out-of-pocket costs and expenses, including reasonable legal fees and expenses, incident to any action, suit, proceeding, claim, demand, assessment or judgment incident to the foregoing or reasonably incurred in investigating or attempting to avoid the same or to oppose the imposition thereof, or in enforcing this indemnity.   (b)                                 The Sellers’ obligation to indemnify the Purchaser pursuant to Section 11.1(a) shall be subject to all of the following limitations:   (i)                                     No indemnification shall be required to be made by the Sellers as the Indemnifying Party under Section 11.1(a)(i) until the aggregate amount of all Losses of the Purchaser as Claimant under Section 11.1(a)(i) exceeds Three Hundred Fifty Thousand Dollars   62 --------------------------------------------------------------------------------   ($350,000), at which time indemnification shall be made by the Sellers as the Indemnifying Party under Section 11.1(a)(i) for all Losses of the Purchaser as Claimant to the extent they exceed Three Hundred Fifty Thousand Dollars ($350,000); provided, however, that the foregoing limitation shall not apply with respect to any claim for a breach of the representations and warranties set forth in Sections 4.1, 4.2, and, 4.6 (such representations and warranties, the “Exempt Representations”).  In no event shall the Sellers be obligated for indemnification or to hold harmless the Purchaser under Section 11.1(a)(i) hereof to the extent the aggregate amount of all Losses of the Purchaser as Claimant under Section 11.1(a)(i) exceeds $4,050,000 (the “Indemnification Cap”); provided, however, that the foregoing limitation shall not apply with respect to any claims for breaches of the Exempt Representations or any claims for any failure by the Sellers to perform any covenant of the Sellers set forth in this Agreement, any of the other Transaction Documents or any certificate, document or instrument delivered by the Sellers to the Purchaser hereunder or any claims pursuant to Section 11.1(a)(iii).  The aggregate amount of all Losses of the Purchaser as Claimant for (i) breaches of the Exempt Representations under Section 11.1(a)(i), (ii) any failure by the Sellers to perform any covenant of the Sellers set forth in this Agreement, any of the other Transaction Documents or any certificate, document or instrument delivered by the Sellers to the Purchaser hereunder, which covenant was to be performed in full prior to Closing under Section 11.1(a)(ii) and (iii) the aggregate amount of all Losses subject to the Indemnification Cap, shall not exceed an amount equal to the Purchase Price.   (ii)                                  The Purchaser shall be entitled to indemnification only for those Losses arising with respect to any claim as to which the Purchaser has given the Sellers written notice within the appropriate time period set forth in Section 12.1 hereof for such claim; provided, however, that the obligation to provide indemnification pursuant to this Section 11.1 shall survive with respect to any such claim until resolution thereof.   (iii)                               All of the Purchaser’s damages sought to be recovered under Section 11.1(a) hereof shall be net of any insurance proceeds actually received by the Purchaser as Claimant, with respect to the events giving rise to such damages.   (iv)                              Following the Closing, the sole and exclusive remedy for the Purchaser for any claim (whether such claim is framed in tort, contract or otherwise) arising out of a breach of any representation, warranty, covenant or agreement contained herein or in any of the other Transaction Documents or otherwise arising out of or in connection with the transactions contemplated by this Agreement or the operation of the Business shall be a claim for indemnification pursuant to this Section 11.1 or relief pursuant to Section 9.3; provided, however, that nothing herein shall be deemed to limit any rights or remedies that the Purchaser may have for the Sellers’ fraud or willful or intentional misconduct.   (v)                                 Anything in this Agreement to the contrary notwithstanding, except as otherwise provided in applicable Law: (x) it is understood and agreed by the Purchaser that, other than with respect to the Sellers (but not including any member, representative, director, officer, employee, agent or Affiliate of the Sellers) as expressly provided for in Section 11.1(b), no member, representative, partner, director, officer, employee, agent or Affiliate of the Sellers shall have (i) any personal liability to the Purchaser as a result of the breach of any   63 --------------------------------------------------------------------------------   representation, warranty, covenant or agreement of the Sellers contained herein, in any other Transaction Document or otherwise arising out of or in connection with the transactions contemplated hereby or thereby or the operations of the Business or (ii) any personal obligation to indemnify the Purchaser for any of the Purchaser’s claims pursuant to Section 11.1(a); and (y) the Purchaser waives and releases, and shall have no recourse against any of, such parties described in this Section 11.1(b)(v) as a result of the breach of any representation, warranty, covenant or agreement of the Sellers contained herein or otherwise arising out of or in connection with the transactions contemplated hereby or thereby or the operations of the Business; provided, however, that nothing herein shall be deemed to limit any rights or remedies that the Purchaser may have for the Sellers’ fraud or willful or intentional misconduct.   (vi)                              The Indemnification Escrow Deposit and all interest and earnings thereon shall be the sole source of recovery, other than the offset right set forth in Section 11.3(f), for any claims pursuant to this Section 11.1 which are subject to the Indemnification Cap; provided, however, that to the extent claims pursuant to this Section 11.1 which are not subject to the Indemnification Cap exceeds the Indemnification Escrow Deposit and all interest and earnings thereon, Sellers shall be liable therefor.   11.2                           Indemnification by the Purchaser.   (a)                                  After the Closing, the Purchaser hereby agrees to indemnify and hold the Sellers harmless against and with respect to, and shall reimburse the Sellers for any and all Losses resulting from:   (i)                                     any breach of any representation or warranty made by the Purchaser pursuant to, or any failure by the Purchaser to perform any covenant of the Purchaser set forth, in this Agreement, any of the other Transaction Documents or in any certificate, document or instrument delivered to the Sellers hereunder or thereunder;   (ii)                                  any Assumed Obligations; and   (iii)                               any and all reasonable out-of-pocket costs and expenses, including reasonable legal fees and expenses, incident to any action, suit, proceeding, claim, demand, assessment or judgment incident to the foregoing or reasonably incurred in investigating or attempting to avoid the same or to oppose the imposition thereof, or in enforcing this indemnity.   (b)                                 The Purchaser’s obligation to indemnify the Sellers pursuant to Section 11.2(a) shall be subject to all of the following limitations:   (i)                                     The Sellers shall be entitled to indemnification only for those damages arising with respect to any claim as to which the Sellers has given the Purchaser written notice within the appropriate time period set forth in Section 12.1 hereof for such claim; provided, however, that the obligation to provide indemnification under this Section 11.2 shall survive with respect to any such claim until resolution thereof.   64 --------------------------------------------------------------------------------   (ii)                                  All of the Sellers’ damages sought to be recovered under Section 11.2(a) hereof shall be net of any insurance proceeds received by the Sellers as Claimant, with respect to the events giving rise to such damages.   (iii)                               Anything in this Agreement or any applicable Law to the contrary notwithstanding, it is understood and agreed by the Sellers that, other than with respect to the Purchaser (but not including any shareholder, member, representative, director, officer, employee, agent or Affiliate of the Purchaser) as expressly provided for in Section 11.2(b) and with respect to GBC pursuant to Section 2.5 and Section 10.2(b)(v), no shareholder, member, representative, director, officer, employee, agent or Affiliate of the Purchaser shall have (i) any personal liability to the Sellers as a result of the breach of any representation, warranty, covenant or agreement of the Purchaser contained herein, in any other Transaction Document or otherwise or (ii) any personal obligation to indemnify the Sellers for any of the Sellers’ claims pursuant to Section 11.2(a) and the Sellers waives and releases, and shall have no recourse against any of, such parties described in this Section 11.2(b)(iii) as a result of the breach of any representation, warranty, covenant or agreement of the Purchaser contained herein or otherwise arising out of or in connection with the transactions contemplated hereby or thereby or the operations of the Business; provided, however, that nothing herein shall be deemed to limit any rights or remedies that the Sellers may have for the Purchaser’s fraud or willful or intentional misconduct.   11.3                           Procedure for Indemnification.  The procedure for indemnification shall be as follows:   (a)                                  The party claiming indemnification (the “Claimant”) shall promptly give notice to the party from which indemnification is claimed (the “Indemnifying Party”) of any claim, whether between the parties or brought by a third party, specifying in reasonable detail the factual basis for the claim, the amount thereof, estimated in good faith, and the method of computation of such claim, all with reasonable particularity and containing a reference to the provisions of this Agreement in respect of which such indemnification claim shall have occurred; provided, that, failure to give prompt notice shall not jeopardize the right of any Claimant to indemnification except to the extent such failure shall have actually and materially prejudiced the ability of the Indemnifying Party to defend such claim.  If the claim relates to an action, suit, or proceeding filed by a third party against Claimant, such notice shall be given by Claimant within five (5) Business Days after written notice of such action, suit, or proceeding was given to Claimant.   (b)                                 With respect to claims solely between the parties, following receipt of notice from the Claimant of a claim, the Indemnifying Party shall have thirty (30) days to make such investigation of the claim as the Indemnifying Party deems necessary or desirable.  For the purposes of such investigation, the Claimant agrees to make available to the Indemnifying Party and its authorized representatives the information relied upon by the Claimant to substantiate the claim.  If the Claimant and the Indemnifying Party agree at or prior to the expiration of such thirty-day period (or any mutually agreed upon extension thereof) to the validity and amount of such claim, the Indemnifying Party shall immediately pay to the Claimant the full amount of the claim, subject to the terms hereof (including Sections 11.1(b) and 11.2(b)).  If the Claimant and the Indemnifying Party do not agree within such thirty-day period (or any mutually agreed upon   65 --------------------------------------------------------------------------------   extension thereof), the Claimant may seek appropriate remedies at law or equity, as applicable, subject to the limitations of Sections 11.1(b) and 11.2(b).  Any claim for indemnity pursuant to this Article 10 with respect to which (i) the Claimant and the Indemnifying Party agree as to its validity and amount, or (ii) a final judgment, order or award of a court of competent jurisdiction deciding such claim has been rendered, as evidenced by a certified copy of such judgment, provided that such judgment is not appealable or the time for taking an appeal has expired is referred to as a “Settled Claim.”  With respect to any Settled Claim for which Purchaser is the Claimant, the Sellers and the Purchaser shall execute and deliver to the Escrow Agent joint written instructions to pay, and shall cause the Escrow Agent to pay, to the Purchaser the amount of such Settled Claim from the Indemnification Escrow Deposit and all interest and earnings thereon to the extent of the Indemnification Escrow Deposit and all interest and earnings thereon then held by the Escrow Agent pursuant to the Indemnification Escrow Agreement.   (c)                                  With respect to any claim by a third party as to which the Claimant is entitled to indemnification under this Agreement, the Indemnifying Party shall have the right at its own expense, to participate in or assume control of the defense of such claim, and the Claimant shall cooperate fully with the Indemnifying Party, subject to reimbursement for actual out-of-pocket expenses incurred by the Claimant as the result of a request by the Indemnifying Party.  If the Indemnifying Party elects to assume control of the defense of any third-party claim, the Claimant shall have the right to participate in the defense of such claim at its own expense.  If the Indemnifying Party does not elect to assume control or otherwise participate in the defense of any third-party claim, then the Claimant may defend through counsel of its own choosing.  No party shall compromise or settle any third party claim, action or suit without the prior written consent of the other party; provided, however, if such compromise relates only to monetary amounts and provides for the unconditional and full release of the Claimant from all liability in connection with such claim, then the Indemnifying Party may settle such claim without the Claimant’s consent as long as the Indemnifying Party is responsible for the full amount of such claim and the settlement of such claim does not: (w) affect the Business, (x) relate to Taxes, (y) involve criminal allegations, and (z) contain an admission of wrongdoing on the part of the Claimant.   (d)                                 If a claim, whether between the parties or by a third party, requires immediate action, the parties will make every effort to reach a decision with respect thereto as expeditiously as practicable.   (e)                                  Subject to the limitations set forth herein and without expanding the total liability of the Purchaser or the Sellers hereunder, the indemnification rights provided in Section 11.1 and Section 11.2 shall extend to the members, partners, shareholders, officers, directors, employees, agents and Affiliates of any Claimant, although for the purpose of the procedures set forth in this Section 11.4, any indemnification claims by such parties shall be made by and through the Claimant.   (f)                                    Without limiting Section 11.1(b)(i), the Purchaser shall have the right to set off all or any part of any Losses the Purchaser suffers against Losses of the Sellers by notifying the Sellers that the Purchaser is reducing any amounts owed by the Purchaser to the Sellers by the amount of such Losses.   66 --------------------------------------------------------------------------------   11.4                           Tax Treatment of Indemnification Payments.  Any indemnification payments made pursuant to this Section 11 shall be treated by the Purchaser and the Sellers as an adjustment to the Purchase Price for tax purposes unless otherwise required by applicable law.   ARTICLE 12   MISCELLANEOUS   12.1                           Survival.  The representations and warranties of the Sellers and the Purchaser contained in this Agreement shall survive the execution and delivery of this Agreement until the first (1st) anniversary of the Closing Date provided, however, that the representations and warranties set forth in Sections 4.1, 4.2, and 4.6, 5.1 and 5.2 shall survive without any time limitation.  The several covenants and agreements of the parties contained in this Agreement (or in any Transaction Document or certificate delivered in connection herewith) shall remain operative and in full force until the performance by the applicable party hereto of such covenant and agreement (with it being understood and agreed that any such covenant or agreement to be performed prior to the Closing shall survive until the expiration of one year after the Closing Date).  No claim may be made against any party hereto, and no party hereto shall have any liability to any other party hereto, arising out of, or resulting from a representation, warranty, covenant or agreement contained in this Agreement after the survival period specified above shall have expired, except that if a claim shall have been made by a party hereto against another party hereto prior to the expiration of the applicable survival period specified above, then, in each case, such survival period shall be extended as it relates to such claim until such claim becomes a Settled Claim and is paid in full.   12.2                           Notices.  All notices that are required or may be given pursuant to this Agreement must be in writing and delivered personally, by a recognized courier service, by a recognized overnight delivery service, by telecopy or by registered or certified mail, postage prepaid, to the parties at the following addresses (or to the attention of such other person or such other address as any party may provide to the other parties by notice in accordance with this Section 12.2):   67 --------------------------------------------------------------------------------   if to the Sellers, to: and with copies to (which shall not constitute notice):       Television Station Group Holdings, LLC c/o Ian Guthrie 1215 Cole Street St. Louis, Missouri 63106 Attention: Mr. Ian Guthrie Facsimile: (314) 259-5532   Dow, Lohnes & Albertson, PLLC 1200 New Hampshire Avenue, NW Suite 800 Washington, DC 20036 Attention: John T. Byrnes, Esq. Facsimile: (202) 776-2222       with copies to (which shall not constitute notice):           Boston Ventures Limited Partnership VI c/o Boston Ventures Management, Inc. One Federal Street 23rd Floor Boston, Massachusetts 02110 Attention: Mr. Andrew Davis Facsimile: (617) 350-1509           and           Alta Communications, Inc. 200 Clarendon St., 51st floor Boston, MA 02116 Attention: Mr. Pat Brubaker Facsimile: (617) 262-9779           if to either Purchaser, to: with copies to (which shall not constitute notice):       c/o Granite Broadcasting Corporation 767 Third Avenue 34th Floor New York, NY 10017 Attention: President Facsimile: (212) 826-2538   Akin, Gump, Strauss, Hauer & Feld LLP 1333 New Hampshire Avenue NW Washington, DC 20036 Attention: Russell W. Parks, Jr. Facsimile: (202) 887-4288   Any such notice or other communication will be deemed to have been given and received (whether actually received or not) on the day it is personally delivered or delivered by courier or overnight delivery service or sent by telecopy (receipt confirmed) or, if mailed, when actually received.   12.3                           Assignment.  Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned or delegated by the Sellers or the Purchaser without the prior written   68 --------------------------------------------------------------------------------   consent of the other party, and any purported assignment or delegation in violation hereof shall be null and void.   12.4                           Specific Performance.  The Sellers acknowledge that the Broadcasting Assets to be sold and delivered to the Purchaser pursuant to this Agreement are unique and that the Purchaser has no adequate remedy at law if the Sellers shall fail to perform any of their obligations hereunder, and the Sellers therefore confirm and agree that the Purchaser’s right to specific performance is essential to protect the rights and interests of the Purchaser.  Accordingly, in addition to any other remedies which the Purchaser may have hereunder or at law or in equity or otherwise, the Sellers hereby agree that the Purchaser shall have the right to have all obligations undertakings, agreements and other provisions of this Agreement specifically performed by the Sellers and that the Purchaser shall have the right to obtain an order or decree of such specific performance in any of the courts of the United States or of any state or other political subdivision thereof.   12.5                           Amendments and Waiver.  This Agreement may not be modified or amended, except in writing signed by the party or parties against whom enforcement is sought.  The terms of this Agreement may be waived only by a written instrument signed by the party waiving compliance.  No waiver of any provision 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 unless otherwise provided.  No delay on the part of any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.  Unless otherwise provided, the rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that the parties hereto may otherwise have at law or in equity.  Whenever this Agreement requires or permits consent by or on behalf of a party, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 12.5.   12.6                           Entire Agreement.  This Agreement, the Non-Disclosure Agreement and the related documents contained as Exhibits and Schedules hereto or thereto expressly contemplated hereby or thereby (including the other Transaction Documents) contain the entire understanding of the parties relating to the subject matter hereof and supersede all prior written or oral and all contemporaneous oral agreements and understandings relating to the subject matter hereof.  The Exhibits and Schedules to this Agreement are hereby incorporated by reference into and made a part of this Agreement for all purposes.   12.7                           Representations and Warranties Complete.  The representations, warranties, covenants and agreements set forth in this Agreement constitute all the representations, warranties, covenants and agreements of the parties hereto and their direct and indirect respective shareholders, members, directors, managers, officers, employees, affiliates, advisors (including financial, legal and accounting), agents and representatives, and the Sellers, on the one hand, and the Purchaser, on the other hand, each acknowledge and agree that they have not relied upon, and the other party shall not be liable for, any express or implied, oral or written, information, promise, representation, warranty, covenant, agreement, statement, inducement, presentation or   69 --------------------------------------------------------------------------------   opinion of any nature whatsoever, whether by or on behalf of the parties hereto or otherwise, pertaining to the transactions contemplated herein, the Station, the Business, the Broadcasting Assets or any part of the foregoing, except as is expressly set forth in this Agreement.   12.8                           Third Party Beneficiaries.  This Agreement is made for sole for the benefit of the parties hereto and nothing contained herein, express or implied, is intended to or shall confer upon any other Person any third party beneficiary right or any other legal or equitable rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement.   12.9                           Governing Law.  This Agreement will be governed by, and construed and interpreted in accordance with, the substantive laws of the State of New York, without giving effect to any conflicts of law rule or principle that might require the application of the laws of another jurisdiction.   12.10                     Neutral Construction.  The parties to this Agreement agree that this Agreement was negotiated fairly between them at arms’ length and that the final terms of this Agreement are the product of the parties’ negotiations.  Each party represents and warrants that it has sought and received legal counsel of its own choosing with regard to the contents of this Agreement and the rights and obligations affected hereby.  The parties agree that this Agreement shall be deemed to have been jointly and equally drafted by them, and that the provisions of this Agreement therefore should not be construed against a party or parties on the grounds that the party or parties drafted or was more responsible for drafting the provision(s).   12.11                     Severability.  In the event that any one or more of the provisions or parts of a provision contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement or any other jurisdiction, but this Agreement shall be reformed and construed in any such jurisdiction as if such invalid or illegal or unenforceable provision or part of a provision had never been contained herein and such provision or part shall be reformed so that it would be valid, legal and enforceable to the maximum extent permitted in such jurisdiction.  Upon such determination that any term or other provision is invalid, illegal or unenforceable, 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 to the end that the transactions contemplated hereby are fulfilled to the greatest extent possible.   12.12                     Headings; Interpretation; Schedules and Exhibits.  The descriptive headings of the several Articles and Sections of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.  References to Sections or Articles, unless otherwise indicated, are references to Sections and Articles of this Agreement.  The word “including” means including without limitation.  Words (including defined terms) in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires.  The terms “hereof,” “herein”, “herewith” and “hereunder” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules and Exhibits hereto) and not to any particular provision of this Agreement unless otherwise specified.  It is understood and agreed   70 --------------------------------------------------------------------------------   that neither the specifications of any dollar amount in this Agreement nor the inclusion of any specific item in the Schedules or Exhibits is intended to imply that such amounts or higher or lower amounts, or the items so included or other items, are or are not material, and neither party shall use the fact of setting of such amounts or the fact of the inclusion of such item in the Schedules or Exhibits in any dispute or controversy between the parties as to whether any obligation, item or matter is or is not material for purposes hereof.   12.13                     Counterparts.  This Agreement may be executed in one or more counterparts for the convenience of the parties hereto, each of which shall be deemed an original and all of which together will constitute one and the same instrument.   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOWS]   71 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by a duly authorized officer as of the date first above written.     TELEVISION STATION GROUP HOLDINGS, LLC         By: /s/ Roy F. Coppedge III       Name: Roy F. Coppedge III       Title: Vice President                 TELEVISION STATION GROUP, LLC         By: /s/ Roy F. Coppedge III       Name: Roy F. Coppedge III       Title: Vice President                 TELEVISION STATION GROUP LICENSE SUBSIDIARY, LLC         By: Television Station Group, LLC, its sole member           By: /s/ Roy F. Coppedge III         Name: Roy F. Coppedge III         Title: Vice President                     WBNG, INC.         By: /s/ Lawrence I. Wills       Name: Lawrence I. Wills       Title: Vice President                   WBNG LICENSE, INC.         By: /s/ Lawrence I. Wills       Name: Lawrence I. Wills       Title: Vice President                   GRANITE BROADCASTING CORPORATION         By: /s/ Lawrence I. Wills       Name: Lawrence I. Wills       Title: Senior Vice President-Chief Financial Officer     1 --------------------------------------------------------------------------------

       Pursuant to 17 CFR 240.24b-2, confidential information (indicated by [*]) has been omitted and has been filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission. Exhibit 10.3 PRODUCT ACQUISITION AND LICENSE AGREEMENT (Adderall®) BY AND AMONG SHIRE LLC, SHIRE PLC AND DURAMED PHARMACEUTICALS, INC. DATED AS OF AUGUST 14, 2006 --------------------------------------------------------------------------------                 ARTICLE 1   DEFINITION     1                 ARTICLE 2   SALE OF ASSETS, LICENSES AND CLOSING     6                 2.1   Sale of Assets     6                 2.2   Licenses and Other Rights     8                 2.3   [*]     8                 2.4   Assumed Liabilities     8                 2.5   Purchase Price     9                 2.6   Independence of Purchase Price Obligation     9                 2.7   Closing     9                 2.8   Allocation of Purchase Price     9                 2.9   Delivery of Purchased Assets     10                 ARTICLE 3   REGULATORY MATTERS     10                 3.1   Filings with Regulatory Authorities Regarding Transfer of Registrations     10                 3.2   Responsibility for the Product     10                 3.3   Marketing Activities     11                 3.4   Right of Reference     11                 ARTICLE 4   REPRESENTATIONS AND WARRANTIES     11                 4.1   Representations and Warranties of Shire     11                 4.2   Disclaimer of Warranties     14                 4.3   Representations and Warranties of Duramed     14                 4.4   Survival of Representations/Warranties     15                 4.5   Brokers     15                 ARTICLE 5   CONDITIONS TO CLOSING     16                 5.1   Conditions to Obligations of Duramed     16                 5.2   Conditions to Obligations of Shire     16                 ARTICLE 6   COVENANTS     17                 6.1   HSR Filing     17                 6.2   Conduct of the Business Until Closing     18                 6.3   Post-Closing Orders and Payments     18                 6.4   Right to Investigate     18                 6.5   Retention of Records     19                 6.6   Non-Solicitation     19                 6.7   Managed Markets     19   i --------------------------------------------------------------------------------                 6.8   Returns     20                 6.9   Certain Sales     21                 ARTICLE 7   INDEMNIFICATION     21                 7.1   Indemnification by Shire     21                 7.2   Indemnification by Duramed     21                 7.3   Limitation of Liability     22                 7.4   No Consequential Damages     22                 7.5   Procedures for Indemnification for Third Party Claims     23                 7.6   Losses That Are Not Third Party Claims     24                 7.7   Termination of Indemnification Obligations     24                 7.8   Other Matters     24                 7.9   Other Limitations     25                 7.10   Exclusive Remedy     25                 7.11   Net Losses and Subrogation     26                 ARTICLE 8   TERMINATION     26                               8.1   Termination Prior to Closing     26                 8.2   Effect of Termination Prior to Closing     27                 ARTICLE 9   PATENT PROSECUTION, MAINTENANCE AND ENFORCEMENT     27                 9.1   Discretionary Duty to Maintain     27                 9.2   Abandonment of Maintenance by Shire     27                 9.3   Patent Marking     27                 9.4   Suits for Infringement of the Licensed Patents     27                 ARTICLE 10   DISPUTE RESOLUTION     28                 10.1   Disputes     28                 10.2   Litigation     28                 10.3   Injunctive Relief     28                 ARTICLE 11   GENERAL PROVISIONS     28                 11.1   Payment of Transaction Expenses     28                 11.2   Access to Information Post-Closing     28                 11.3   Notices     29                 11.4   Entire Agreement; Amendment     30                 11.5   Assignment     30   ii --------------------------------------------------------------------------------                               11.6   Headings     30                 11.7   Independent Parties     30                 11.8   No Waiver     30                 11.9   Severability     30                 11.10   Counterparts     31                 11.11   No Third Party Beneficiaries     31                 11.12   Further Actions     31                 11.13   No Strict Construction     31                 11.14   Public Disclosure     31                 11.15   Bulk Sales Laws     31   iii --------------------------------------------------------------------------------   PRODUCT ACQUISITION AND LICENSE AGREEMENT      THIS PRODUCT ACQUISITION AND LICENSE AGREEMENT is dated as of August 14, 2006, by and among Shire LLC, a Kentucky limited liability company (together with its Affiliates, “Shire”), Shire plc a British public limited company, and Duramed Pharmaceuticals, Inc., a corporation organized and existing under the laws of Delaware (“Duramed”). Shire and Duramed are sometimes referred to herein individually as a “Party” and together as the “Parties”. RECITALS      WHEREAS, Shire is in the business of formulating, manufacturing, marketing and distributing the pharmaceutical product known as Adderall IR®;      WHEREAS, Shire owns the pharmaceutical product known as Adderall IR® and all the assets relating to the Adderall Business; and      WHEREAS, Shire desires to sell, transfer, convey and license to Duramed, and Duramed desires to purchase, acquire and license from Shire, certain rights to the Adderall IR® product and certain assets relating to the Adderall Business, and Duramed wishes to assume certain liabilities relating to such product, all on the terms set forth herein;      NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows: ARTICLE 1 DEFINITIONS      The following terms shall have the following meanings as used in this Agreement:      1.1 “Act” means the United States Federal Food, Drug and Cosmetic Act, as amended.      1.2 “Adderall Business” means the business of formulating, manufacturing, and distributing the pharmaceutical product known as Adderall IR®; provided, however, that the Adderall Business shall not include any Adderall product other than the Product, including Adderall XR or [SPD465].      1.3 “Adderall XR” means the extended release mixed amphetamine pharmaceutical product currently sold under NDA#21-303.      1.4 “Affiliate” means a Person that, directly or indirectly, through one or more intermediates, controls, is controlled by, or is under common control with, the Person specified. For the purposes of this definition, control shall mean the direct or indirect ownership of (a) in the case of corporate entities, securities authorized to cast more than fifty percent (50%) of the votes in any election for directors, (b) in the case of non-corporate entities, more than fifty --------------------------------------------------------------------------------   percent (50%) ownership interest with the power to direct the management and policies of such non-corporate entity, or (c) such lesser percentage as may be the maximum percentage allowed to be owned by a foreign corporation under the applicable laws or regulations of a particular jurisdiction of the equity having the power to vote in the election of directors or to direct the management and policies of such Person.      1.5 “Agreement” means this Agreement and all exhibits and schedules attached hereto.      1.6 “Books and Records” means all books, records, manuals and other materials (in any form or medium) relating primarily to the Purchased Assets or the Adderall Business, including all records and materials maintained at the headquarters of Shire, advertising matter, catalogues, price lists (including any pricing for the Product made available to any Federal, State or local authorities), correspondence, mailing lists, lists of customers, distribution lists, photographs, production data, sales and promotional materials and records, purchasing materials and records, manufacturing and quality control records and procedures, blueprints, research and development files, records, data and laboratory books, accounting records, and sales order files.      1.7 “Business Day” means any day except a Saturday, Sunday or a day on which a commercial bank in New York, New York is authorized to close.      1.8 “Duramed Labeled Product” means Product sold or distributed after the Closing by or on behalf of Duramed bearing the NDC number of Duramed or any of its Affiliates.      1.9 “Duramed Material Adverse Effect” means any adverse change, circumstance or effect that, individually or in the aggregate with all other adverse changes, circumstances and effects, has or is reasonably likely to have, a material adverse effect on the ability of Duramed to consummate the transactions contemplated by this Agreement, including the ability to pay the Purchase Price when due.      1.10 “Contract” means any agreement, contract, commitment or other instrument or arrangements (whether written or oral) (x) by which any of the Purchased Assets are bound or affected or (y) to which Shire is bound relating to the Purchased Assets, in each case as amended, supplemented, waived or otherwise modified.      1.11 “Excluded Intellectual Property” means the (a) Shire Trademark, (b) Product Trademark, (c) Licensed Patents, (d) Product Trade Dress, and (e) Intellectual Property that does not primarily relate to the Product.      1.12 “FDA” means the United States Food and Drug Administration, and any successor agency thereto.      1.13 “Finished Goods” means a manufactured Product packaged and ready for sale to the ultimate customer in the Territory.      1.14 “Governmental Authority” means any federal, state, local or other government or any court of competent jurisdiction, legislature, governmental agency, administrative agency - 2 - --------------------------------------------------------------------------------   or commission or other governmental authority or instrumentality having jurisdiction in the Territory.      1.15 “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.      1.16 “Intellectual Property” means all (a) Patents, (b) mask works and copyrights in works of authorship of any type, including computer software and industrial designs, registrations and applications for registration thereof, (c) trademark registrations and applications for registration thereof, (d) trade secrets, know-how and other confidential or proprietary technical, business and other information, and all rights in any jurisdiction to limit the use or disclosure thereof, and (e) rights to sue and recover damages or obtain injunctive relief for past and future infringement, dilution, misappropriation, violation or breach thereof; in each case, solely to the extent the foregoing relates to the Territory.      1.17 “Liabilities” means any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, or determined or determinable, including those arising under any laws, action or governmental order and those arising under any contract, agreement, arrangement, commitment or undertaking, or otherwise.      1.18 “Licensed Patents” mean the Patent(s) listed in Schedule 1.18.      1.19 “Lien” means any mortgage, pledge, hypothecation, right of others, claim, security interest, encumbrance, lease, sublease, license, occupancy agreement, adverse claim or interest, easement, covenant, encroachment, burden, title defect, title retention agreement, voting trust agreement, interest, equity, option, lien, , whether arising by Contract or otherwise.      1.20 “Losses” means any and all Liabilities, damages, fines, penalties, deficiencies, losses and expenses (including interest, court costs, amounts paid in settlement, reasonable fees of attorneys, accountants and other experts or other reasonable expenses of litigation or other proceedings or of any claim, default or assessment); provided, however, that the term “Losses” shall not include any special, consequential, indirect, punitive or similar damages, except to the extent actually paid by a Party pursuant to any Third Party Claim.      1.21 “NDA” means a New Drug Application pursuant to Section 505 of the Act (21 U.S.C. Section 355) submitted to the FDA or any successor application or procedure.      1.22 “Patents” means all patents, patent applications and statutory invention registrations, including reissues, divisions, continuations, continuations-in-part, supplementary protection certificates, extensions and reexaminations thereof, all inventions disclosed therein, all rights therein provided by international treaties and conventions, and all rights to obtain patents and registrations thereto.      1.23 “Permitted Liens” means (i) Liens for Taxes not yet due and payable or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on Shire’s books or (ii) Liens that, individually and in the aggregate, do not restrict, hinder, or otherwise encumber or impair the ownership of or right to use the Purchased Assets or sell of Product. - 3 - --------------------------------------------------------------------------------        1.24 “Person” means any individual, firm, corporation, partnership, limited liability company, trust, unincorporated organization or other entity or a government agency or political subdivision thereto, and shall include any successor (by merger or otherwise) of such Person.      1.25 “Pharmacovigilance Agreement” means the Pharmacovigilance Agreement to be executed at Closing by Shire and Duramed substantially in the form attached hereto as Exhibit A.      1.26 “Product” means the pharmaceutical product in all dosage forms identified in [*].      1.27 “Product Domain Name” means the domain name “adderall.com” and all other domain names that include “Adderall” in any manner or form and that are owned or registered by Shire.      1.28 “Product Material Adverse Effect” means any adverse event, circumstance, fact, condition or effect that is materially adverse to the operations or results of operation, properties or prospects of the Adderall Business, the Purchased Assets, the Licenses, or the Product Trademark, other than any event, change, circumstance or effect relating to (a) the economy of the United States in general, (b) in general to the industries in which the Product is sold and not specifically relating to the Product, or (c) changes, circumstances and effects relating to the announcement of the transactions contemplated by this Agreement.      1.29 “Product NDA” means NDA#11-522, and any and all supplements or amendments filed pursuant to FDA requirements.      1.30 “Product Trade Dress” means the tablet logo, including the lettering of the Product name and, specifically, the letters “AD”, the size, shape and color of the tablet, together with all other features that are intrinsic to the tablet as currently marketed and sold, provided that Product Trade Dress does not include any packaging associated with the sale, marketing or distribution of the Product.      1.31 “Product Trademark” means the trademark, trade names, brand names, including all registrations and applications for registration thereof and all renewals, modifications and extensions thereof, listed on Schedule 1.31, used by Shire or its Affiliates in connection with the manufacture, marketing, sale and distribution of the Product, and any rights existing under common law relating thereto.      1.32 “Regulatory Approval” means the technical, medical and scientific licenses, registrations, authorizations, approvals, permits, consents (including approvals of NDAs, supplements and amendments, pre- and post- approvals, pricing and third party reimbursement approvals, and labeling approvals) of any Regulatory Authority necessary for the development (including the conduct of clinical trials), distribution, marketing, promotion, offer for sale, use, import, export or sale of Product in the Territory.      1.33 “Regulatory Authority” means any national (e.g., the FDA), regional, state or local regulatory agency, department, bureau, commission, council, court or other Governmental Authority in the Territory. - 4 - --------------------------------------------------------------------------------        1.34 “Settlement Agreement” means that certain Settlement Agreement, dated as of August 14, 2006, by and between the Parties.      1.35 “Shire Labeled Product” means Product bearing the NDC number of Shire or any of its Affiliates.      1.36 “Shire Trademark” means the “Shire” name or any variation thereof and, other than the Product Trade Dress, the Product Trademark and the Product Domain Name, all trademarks, trade names, brand names, trade dress, logo types, symbols, domain names (including registrations and applications for registration thereof and all renewals, modifications and extensions thereof) used by Shire or its Affiliates in connection with the manufacture, marketing, sale and distribution of their products.      1.37 “Supply Agreement” means the Supply Agreement to be executed at Closing by Shire or its Affiliate and Duramed for the supply of Product, in substantially the form attached hereto as Exhibit C.      1.38 “Survival Period” means the period of survival of representations and warranties as set forth in Section 4.4.      1.39 “Taxes” (and with correlative meaning, “Tax,” “Taxes,” and “Taxable”) shall mean all taxes of any kind imposed by a federal, state, local or foreign Governmental Authority, including those on, or measured by or referred to as, income, gross receipts, financial operation, sales, use, ad valorem, value added, franchise, profits, license, excise, stamp, premium, property, transfer or windfall profits taxes, customs, duties or similar fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by such Governmental Authority with respect to such amounts.      1.40 “Technical Data” means all technical, scientific, chemical, biological, pharmacological, and toxicological data generated primarily for the Product.      1.41 “Territory” means the United States and the states, territories, possessions and protectorates thereof, the District of Columbia and the Commonwealth of Puerto Rico.      1.42 “Trademark License Agreement” means the Trademark License Agreement to be executed at Closing by Shire or its Affiliate and Duramed relating to the use of the Product Trademark, in substantially the form attached hereto as Exhibit B. Interpretation. Unless the context of this Agreement otherwise requires, (a) words of one gender include the other gender; (b) words using the singular or plural number also include the plural or singular number, respectively; (c) the terms “hereof,” “herein,” “hereby,” and other similar words refer to this entire Agreement; (d) “including” shall be deemed followed by “without limitation”, “but not limited to” or words of similar meaning; and (e) the terms “Article” and “Section” refer to the specified Article and Section of this Agreement. Whenever this Agreement refers to a number of days, unless otherwise specified, such number shall refer to calendar days. - 5 - --------------------------------------------------------------------------------   Additional Definitions. Each of the following definitions is set forth in the Section of this Agreement indicated below:       Acquisition Transaction   Section 6.6(b) AMP   Section 6.7(b) Assumed Liabilities   Section 2.4(a) Chargeback Contracts   Section 6.7(e) Chargebacks   Section 6.7(a) Closing   Section 2.7(a) Closing Date   Section 2.7(a) Duramed   Preamble Duramed Disclosure Schedule   Section 4.3 Defaulting Party   Section 8.1(c) DMFs   Section 3.4 Excluded Assets   Section 2.1(c) FDA Letter   Section 3.1 Financial Information   Section 4.1(d) General Assignment and Assumption   Section 2.7(c) Indemnitee   Section 7.5(a) Indemnitor   Section 7.5(a) Licenses   Section 2.2(a) Managed Market Activities   Section 6.7(a) Parties   Preamble Party   Preamble Purchase Price   Section 2.5 Purchased Assets   Section 2.1(a) Rebate Contracts   Section 6.7(d) Rebates   Section 6.7(a) Representatives   Section 10.1 Retained Liabilities   Section 2.4(b) SEC   Section 11.14(a) Shire   Preamble Shire Disclosure Schedule   Section 4.1 Third Party Claim   Section 7.5(a) Transaction Agreements   Section 11.4 ARTICLE 2 SALE OF ASSETS, LICENSES AND CLOSING      2.1 Sale of Assets.           (a) On the Closing Date, and subject to the terms and conditions of this Agreement, Shire will, and will cause its Affiliates to, sell, assign, convey and transfer to Duramed, and Duramed will purchase and accept from Shire and its Affiliates, all of Shire’s and its Affiliates’ right, title and interest in and to the following assets (collectively, the “Purchased Assets”): - 6 - --------------------------------------------------------------------------------                  (i) the Product NDA;                (ii) the Book and Records; provided that any lists included therein may be redacted as necessary to conceal information pertaining to products other than the Product;                (iii) the Technical Data;                (iv) all unfulfilled customer orders for the Product arising in the Territory as of the Closing Date (a list of such orders to be provided to Duramed on or prior to the Closing) and any future customer orders received by Shire for the Product;                (v) to the extent their transfer is permitted by law, all Regulatory Approvals, including all applications therefor;                (vi) all refunds or credit of Taxes relating to the foregoing attributable to any period following the Closing;                (vii) any guarantees, warranties, indemnities and similar rights in favor of Shire or its Affiliates with respect to any of the foregoing; and                (viii) all rights to causes of action, lawsuits, judgments, claims and demands of any nature available to or being pursued by Shire or its Affiliates with respect to the Adderall Business or the ownership, use, function or value of any of the foregoing, whether arising by way of counterclaim or otherwise.           (b) Notwithstanding Section 2.1(a) above, the transfer of the Product NDA shall occur in accordance with the provisions of Article 3.           (c) For purposes of clarification, the Purchased Assets shall not include any assets, rights or interests other than those specifically listed or described in Section 2.1(a). Without limiting the generality of the foregoing, the Parties agree and acknowledge that the Purchased Assets shall not include: (i) the Excluded Intellectual Property, (ii) any and all NDAs or other product approvals and Technical Data related to Adderall XR or anything else related to the approval, sale, marketing or manufacturing of Adderall XR, (iii) any Adderall product other than the Product, and (iv) any plant, real property, equipment, accounts receivable, cash and cash equivalents, employees or any refund or credit of Taxes attributable to any period of time prior to the Closing Date (collectively, the “Excluded Assets”). Duramed acknowledges and agrees that Shire may retain a copy of all or part of the Books and Records that it delivers to Duramed under Section 2.1(a)(ii) for use with products of Shire or its Affiliates other than the Product or to the extent required under applicable law provided that the copy of the Books and Records so retained shall be treated as Duramed’s confidential information.      2.2 Licenses and Other Rights.           (a) Subject to the terms and conditions of this Agreement, Shire hereby grants, or shall cause its Affiliates to grant, to Duramed the following licenses (collectively, the “Licenses”): - 7 - --------------------------------------------------------------------------------                  (i) a worldwide, irrevocable, perpetual, fully-paid, exclusive (even as to Shire) right and license, with the right to sublicense under the Licensed Patents, to use, market, have marketed, offer for sale, import for sale, sell and have sold Products in the Territory;                (ii) an irrevocable, fully-paid, perpetual, exclusive (even as to Shire) right and license under the Product Trade Dress solely to the extent necessary for Duramed to distribute, market and sell the Product in the Territory.           (b) With respect to this Agreement, any Intellectual Property or other rights of Shire not expressly granted to Duramed under the provisions of this Agreement shall be retained by Shire, including the right to conduct such studies and clinical trials within and without the Territory as may be necessary or useful for Shire to obtain Regulatory Approvals solely for the purpose of selling products other than Product.      2.3 [*]. From and after the Closing Date, Shire [*] Duramed or its Affiliates [*] Duramed’s [*] Product in the Territory on the basis that such [*] Shire or of [*] as of the Closing Date or [*].      2.4 Assumed Liabilities.           (a) As of the Closing Date, Duramed shall assume, be responsible for and pay, perform and discharge when due the following (collectively, the “Assumed Liabilities”):                (i) any Liabilities arising from the sale of any Product after the Closing Date, including any product liability, breach of warranty, Patent or trademark infringement claim, or any other action or claim (excluding any Liabilities relating to voluntary or involuntary recalls of Shire Labeled Product, or any Liabilities of Shire under the Supply Agreement) brought, asserted or filed by any third party or Regulatory Authority;                (ii) any Liabilities arising after the Closing Date relating to the Purchased Assets;                (iii) subject to Section 6.7, all Medicare, Medicaid and state program rebates in connection with Duramed Labeled Product sold after the Closing Date;                (iv) subject to Section 6.7, all chargebacks, rebates or any other post-sale rebates, refunds, price adjustments and other similar payments, credits or liabilities in connection with the Duramed Labeled Product, sold after the Closing Date; and                (v) subject to Section 6.7, credits, utilization based rebates, reimbursements, and similar payments to buying groups, insurers and other institutions in connection with Duramed Labeled Product sold after the Closing Date.           (b) Notwithstanding any provision hereof or any schedule or exhibit hereto or thereto, and regardless of any disclosure to Duramed, Duramed shall not assume any liabilities, obligations or commitments of Shire other than the Assumed Liabilities, including such liabilities - 8 - --------------------------------------------------------------------------------              relating to or arising out of the ownership of the Purchased Assets on or prior to the Closing (the “Retained Liabilities”).      2.5 Purchase Price. Subject to the terms and conditions set forth herein, in consideration of the sale, assignment, conveyance, license and delivery of the Purchased Assets and the Licenses, and as consideration for the execution and delivery of the Trademark License Agreement, Duramed will pay to Shire a cash payment of Sixty-Three Million Dollars ($63,000,000), in the manner described in Section 2.7(b), (the “Purchase Price”).      2.6 Independence of Purchase Price Obligation. All payments made or to be made by Duramed to Shire in respect of Purchase Price shall be non-refundable and independent of any obligations that Shire or its Affiliates may have to Duramed under any other agreement.      2.7 Closing.           (a) The closing of the transactions contemplated hereby (the “Closing”) will take place at the offices of Morgan, Lewis & Bockius LLP in Princeton, New Jersey at 10:00 A.M. Eastern Time on the third (3rd) Business Day following the satisfaction or waiver of all conditions or obligations of the Parties set forth in Sections 5.1 and 5.2, or at such other time, date and place as Duramed and Shire agree. The actual date of the Closing is referred to as the “Closing Date.”           (b) At the Closing, Duramed will pay the Purchase Price in full in cash without any deductions or offsets by wire transfer of immediately available funds to a bank account or accounts to be designated by Shire prior to Closing.           (c) At the Closing, Shire will assign and transfer to Duramed all of Shire’s right, title and interest in and to the Purchased Assets, by delivery of a general assignment, assumption and bill of sale in the form of Exhibit D (the “General Assignment and Assumption”) or any other bill of sale or assignment documents reasonably requested by Duramed.           (d) At the Closing, Duramed will assume from Shire the due payment, performance and discharge of the Assumed Liabilities by delivery of the General Assignment and Assumption.           (e) At or prior to the Closing, the Parties shall execute and deliver to one another the agreements listed in Sections 5.1(h) and 5.2(h).      2.8 Allocation of Purchase Price. The Purchase Price shall be allocated among the Purchased Assets, the Licenses, the Trademark License Agreement and the Supply Agreement as set forth on Schedule 2.8 hereto. Duramed and Shire agree to report the sale and purchase of the Purchased Assets, and the rights granted or assets transferred under the Licenses and the Trademark License Agreement for Tax purposes in accordance with the allocations set forth on Schedule 2.8 hereto, or as otherwise agreed to at a later date by the Parties if such Schedule is not attached as of the Closing Date. - 9 - --------------------------------------------------------------------------------        2.9 Delivery of Purchased Assets. At the Closing or as soon as possible thereafter, Shire shall deliver to Duramed, all of the Purchased Assets. Following the Closing, Shire shall reasonably cooperate with Duramed and grant to Duramed and its employees, attorneys, accountants, officers, representatives, and agents, reasonable access to Shire’s personnel to fully transfer and disclose to Duramed all of the Purchase Assets. ARTICLE 3 REGULATORY MATTERS      3.1 Filings with Regulatory Authorities Regarding Transfer of Registrations. Prior to Closing, Shire and Duramed will establish a mutually acceptable and prompt communication and interaction process to ensure to Duramed the prompt and orderly transfer of the Product NDA. Promptly after Closing, the Parties shall file with the FDA and any other relevant Regulatory Authorities all information required in order to transfer the Product NDA from Shire to Duramed, including the letter to the FDA authorizing the transfer in the form attached hereto as Exhibit E (the “FDA Letter”). Where required, Duramed shall also promptly file an application or license variation to Regulatory Authorities or other government/health agencies. Shire shall file the information required of a former owner, and Duramed shall file the information required of a new owner, at each Party’s own expense. Both Duramed and Shire also agree to use all commercially reasonable efforts to take any actions required by the Regulatory Authorities or other government/health agencies to effect the transfer of the Product NDA from Shire to Duramed, and hereby further agree to cooperate with each other in order to effectuate the foregoing transfer of Product NDA at Duramed’s expense. The Parties agree to use all commercially reasonable efforts to complete the filing of the transfer of the Product Registrations within [*] from the Closing Date. Shire may retain an archival copy of the Product Registrations, including supplements and records that are required to be kept under 21 C.F.R. §314.81, but such retention shall not be deemed a license to Shire of such information nor be deemed to constitute any Shire ownership interest therein.      3.2 Responsibility for the Product. From and after the Closing Date, and in no event later than the effective date of the transfer to Duramed of the applicable NDA, Duramed shall assume all regulatory responsibilities under applicable laws in connection with the Product and the Product NDA, including (a) responding to all medical inquiries, (b) responsibility for reporting any adverse drug events in connection with the Product, (c) responsibility for compliance with the Prescription Drug Marketing Act of 1987, as the same may be amended from time to time, and (d) responsibility for any and all fee obligations for holders or owners of approved NDAs and Regulatory Approvals relating to the Product, including those defined under the Prescription Drug User Fee Act of 1992, as the same may be amended from time to time. In connection therewith, Shire shall promptly after Closing deliver to Duramed all records, documentation and other information that Shire has prepared or has had prepared regarding the development, efficacy, safety and legal compliance of the Product, including all correspondence with Regulatory Authorities or other government/health agencies related to the Product. Shire acknowledges that pursuant to the terms of the Pharmacovigilance Agreement, Shire shall be responsible for compliance with certain of the foregoing obligations following the Closing. Without limiting Shire’s obligations under the Pharmacovigilance Agreement, Shire shall cooperate with Duramed following the Closing to provide reasonable assistance in connection with Duramed’s regulatory obligations related to the Product for a period of [*]. - 10 - --------------------------------------------------------------------------------        3.3 Marketing Activities. Immediately following the Closing, Shire and Duramed shall send correspondence to each customer and supplier of the Product, and any other relevant third party agreed to by Shire and Duramed, informing each such party of the sale and transfer of the Product to Duramed, in substantially the form attached hereto as Exhibit F.      3.4 Right of Reference. Duramed shall grant Shire a right of cross-reference or right of reference, including as that term is defined in 21 C.F.R. Section 314.3(b), to all existing Regulatory Approvals, Drug Master Files (“DMFs”), and other regulatory submissions relating to the Product. At Shire’s request [*], Duramed shall provide a copy of any regulatory application or file relating to Product that is the subject of a right of cross-reference or right of reference pursuant to this Section. ARTICLE 4 REPRESENTATIONS AND WARRANTIES      4.1 Representations and Warranties of Shire. Shire represents and warrants to Duramed solely as of the date of this Agreement, subject to such exceptions as are specifically disclosed in the disclosure schedule supplied by Shire to Duramed and dated as of the date hereof (the “Shire Disclosure Schedule”) as follows:           (a) Organization and Standing. Shire is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, with full corporate power and authority to carry on the Adderall Business and to own or lease and to operate its properties in the places where such business is conducted and such properties are owned, leased or operated.           (b) Power and Authority. Shire has all requisite corporate power and authority to execute, deliver, and perform this Agreement, and the other Transaction Agreements, and the other agreements and instruments to be executed and delivered by it pursuant hereto and thereto, and to consummate the transactions contemplated herein and therein.           (c) No Conflicts. The execution, delivery and performance by Shire of this Agreement and the other Transaction Agreement, and the consummation of the transactions contemplated hereby and thereby, do not and will not conflict with or result in a violation of or a default under (with or without the giving of notice or the lapse of time or both) (i) any applicable law, (ii) the certificate of incorporation or by-laws or other organizational documents of Shire, or (iii) any Contract or other contract, agreement, instrument, judgment, order or decree to which Shire is a party or by which Shire may be bound or affected.           (d) Financial Information. Shire has provided to Duramed [*], and for the [*] (“Financial Information”). Such information was derived from the books and records of Shire and was prepared by Shire in good faith and fairly presents, in all material respects, the sales of Product in the Territory for the periods shown. No representations or warranties whatsoever are made with respect to any financial projections.           (e) Corporate Action; Binding Effect. Shire has duly and properly taken all action required by law, its organizational documents, or otherwise, to authorize the execution, delivery, and performance by it of this Agreement, the other Transaction Agreements, and the - 11 - --------------------------------------------------------------------------------              other agreements and instruments to be executed and delivered by it pursuant hereto and thereto and the consummation of transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by Shire and constitutes, and the other Transaction Agreements and the other agreements and instruments contemplated hereby and thereby when duly executed and delivered by Shire will constitute, legal, valid, and binding obligations of Shire enforceable against it in accordance with their respective terms, except as enforcement may be affected by bankruptcy, insolvency, or other similar laws and by general principles of equity.           (f) Consents. No consent or approval of, or filing with or notice to, any Regulatory Authority or Governmental Authority is required or necessary to be obtained by Shire or on its behalf in connection with the execution, delivery, and performance of this Agreement or to consummate the transactions contemplated hereby and thereby, except (i) in connection with the transfer of the Product Registrations, (ii) the notification requirements of the HSR Act, or (iii) as relates solely to Duramed.           (g) Assets.                (i) Shire or one of its Affiliates owns and has good and marketable title to all the Purchased Assets, in each case free and clear of any and all Liens other than Permitted Liens.                (ii) Except for Excluded Assets, there are no assets or properties used in the operation of the Adderall Business and owned by any Person other than Shire that will not be sold or licensed to Duramed hereunder. The Purchased Assets [*] for the [*] or are [*], and [*] and, [*] Shire [*] the Purchased Assets [*] or in the [*] with the [*].           (h) Litigation or Disputes. Except as set forth on Schedule 4.1(h), there is no claim, action, suit, demand, citation, grievance, subpoena, inquiry, proceeding, investigation, or arbitration relating to the Product, the Purchased Assets or the Adderall Business pending or, to Shire’s knowledge, threatened against Shire or any of its Affiliates by or before any Regulatory Authority, federal, state, or other governmental court, department, commission, or board (whether domestic or foreign). Except as set forth on Schedule 4.1(h), there is not currently outstanding against Shire or any of its Affiliates any judgment, decree, injunction, rule or order of any Regulatory Authority or Governmental Authority relating to the Purchased Assets or the Adderall Business.                (i) Licensed Patents, Technical Data and Other Intellectual Property.                (i) Shire owns or has the lawful right and license to use the Licensed Patents.                (ii) Shire has not received any written notice, and Shire otherwise has no knowledge of, the infringement by any Person of any Licensed Patent or the Technical Data.                (iii) Shire owns all of the Technical Data. The Technical Data contains all of the technical, scientific, chemical, biological, pharmacological and toxicological data generated by Shire for the Product. - 12 - --------------------------------------------------------------------------------                  (iv) Shire has the full right, power and authority to grant the Licenses as described herein.                (v) The Licensed Patents have been duly registered with, filed in or issued by, as the case may be, the United States Patent and Trademark Office and the Canadian Intellectual Property Office.                (vi) No claim or demand of any Person has been made nor is there any proceeding that is pending, or to the knowledge of Shire, threatened, which (i) challenges the rights of Shire in respect of the Licensed Patents, Technical Data, Product Trademark or Product Trade Dress or (ii) asserts that Shire or any of its Affiliates is infringing, or is otherwise in conflict with, or is required to pay any royalty, license fee, charge or other amount with regard to, any such Intellectual Property of any third party. None of the Licensed Patents, Technical Data, Product Trademark or Product Trade Dress is subject to any outstanding order, ruling, decree, judgment or stipulation by or with any court, arbitrator, or administrative agency. To Shire’s knowledge, the sale of the Product does not infringe or otherwise conflict with any rights of any Person in respect of any Intellectual Property.           (j) Compliance with Laws. Shire has conducted its operations in connection with the Purchased Assets and the manufacture and sale of the Product in the Territory in material compliance with all applicable laws. Except as set forth on Schedule 4.1(j), Shire has not received any written notice of violation of any applicable law from any Regulatory Authority or Governmental Authority relating to the Adderall Business, the Purchased Assets or the Product within the past [*].           (k) Regulatory Issues. Except as set forth in Schedule 4.1(k), during the [*] prior to the date of this Agreement, with respect to the Product in the Territory, the Purchased Assets or the Adderall Business, neither Shire nor any of its Affiliates has received or been subject to (i) any FDA Form 483’s relating to the Product, (ii) any FDA Notices of Adverse Findings relating to the Product, or (iii) any warning letters or other written correspondence from the FDA or any other Regulatory Authority concerning the Product in which the FDA or such other Regulatory Authority asserted that the operations of Shire were not in compliance with applicable law, with respect to the Product or the Adderall Business. Except as discussed in Schedule 4.1(k) or as would not have a Product Material Adverse Effect, during the last [*] there has not been any occurrence of any product recall, market withdrawal or replacement, or post-sale warning conducted by or on behalf of Shire concerning the Product, any product recall, market withdrawal or replacement conducted by or on behalf of any entity as a result of any alleged defect in the Product or the Technical Data.           (l) Product Warranties. Except for warranties arising solely pursuant to applicable law, (i) Shire has not made any warranties express or implied, written or oral, to any third party with respect to the Product and (ii) there are no pending or threatened claims with respect to any such warranty, and except for the warranties arising solely pursuant to applicable law, Shire has no any liability with respect to any such warranty, whether known or unknown, absolute, accrued, contingent or otherwise and whether due or to become due. - 13 - --------------------------------------------------------------------------------             (m) Taxes. There are no Liens for Taxes upon the Purchased Assets or the rights granted under the Licenses except for Permitted Liens. None of the Purchased Assets is “tax-exempt use property” within the meaning of Section 168 of the Code.           (n) Other. In the past [*], to Shire’s knowledge (i) there has not been a Product Material Adverse Effect that is not otherwise generally known to the public, and (ii) the Product has been distributed by Shire only in the United States.      4.2 Disclaimer of Warranties. EXCEPT AS EXPRESSLY PROVIDED HEREIN, SHIRE PROVIDES THE PURCHASED ASSETS AND LICENSES “AS IS” AND SHIRE DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH REGARD TO THE PURCHASED ASSETS AND THE LICENSES, INCLUDING THE WARRANTY OF MERCHANTABILITY AND THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.      4.3 Representations and Warranties of Duramed. Duramed represents and warrants to Shire, subject to such exceptions as are specifically disclosed in the disclosure schedule supplied by Duramed to Shire and dated as of the date hereof (the “Duramed Disclosure Schedule”), as follows:           (a) Organization and Standing. Duramed is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation.           (b) Power and Authority. Duramed has all requisite corporate power and authority to execute, deliver, and perform this Agreement, and the other Transaction Agreements, and the other agreements and instruments to be executed and delivered by it pursuant hereto and thereto, and to consummate the transactions contemplated herein and therein.           (c) No Conflicts. The execution, delivery and performance by Duramed of this Agreement and the other Transaction Agreement, and the consummation of the transactions contemplated hereby and thereby, do not and will not conflict with or result in a violation of or a default under (with or without the giving of notice or the lapse of time or both) (i) any law applicable to Duramed, (ii) the certificate of incorporation or by-laws or other organizational documents of Duramed or (iii) except as set forth in Section 4.3(c) of Duramed Disclosure Schedule, any Contract or other contract, agreement, instrument, judgment, order or decree to which Duramed is a party or by which Duramed may be bound or affected, except in the case of clauses (iii), as would not have a Duramed Material Adverse Effect.           (d) Corporate Action; Binding Effect. Duramed has duly and properly taken all action required by law, its organizational documents, or otherwise, to authorize the execution, delivery, and performance by it of this Agreement, the other Transaction Agreements, and the other agreements and instruments to be executed and delivered by it pursuant hereto and thereto and the consummation of transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by Duramed and constitutes, and the other Transaction Agreements and the other agreements and instruments contemplated hereby and thereby when duly executed and delivered by Duramed will constitute, legal, valid, and binding obligations of Duramed enforceable against it in accordance with their respective terms, except as enforcement - 14 - --------------------------------------------------------------------------------              may be affected by bankruptcy, insolvency, or other similar laws and by general principles of equity.           (e) Litigation or Disputes; Compliance with Laws. There is no claim, action, suit, demand, citation, grievance, subpoena, inquiry, proceeding, investigation, or arbitration pending or, to Duramed’s knowledge, threatened against Duramed by or before any Regulatory Authority, federal, state, or other governmental court, department, commission, or board (whether domestic or foreign) and, to Duramed’s knowledge, Duramed is not in violation of or in default with any applicable law, the result of any of which, either individually or cumulatively, would have a Duramed Material Adverse Effect.           (f) Consents. No consent or approval of, or filing with or notice to, any Regulatory Authority or Governmental Authority is required or necessary to be obtained by Duramed in connection with the execution, delivery, and performance of this Agreement or the other Transaction Agreements or to consummate the transactions contemplated hereby and thereby, except (i) in connection with the transfer of the Product Registrations, (ii) the notification requirements of the HSR Act or (iii) as relates solely to Shire.           (g) Financing. As of the date of this Agreement, Duramed has access to, and as of the Closing Date, Duramed will have, sufficient funds necessary to pay the Purchase Price.      4.4 Survival of Representations/Warranties. All of the representations and warranties of Shire contained in Section 4.1 shall survive the Closing and continue in full force and effect for a period of [*] thereafter, provided that (a) all representations and warranties provided in Sections 4.1(b), 4.1(c), 4.1(f), and 4.1(g), shall survive [*] and (b) the representations and warranties set forth in Section 4.1(m) shall survive until [*] after the end of the applicable statute of limitations. All of the representations and warranties set forth of Duramed contained in Section 4.3 shall survive the Closing and continue in full force and effect for a period of [*] thereafter, provided that all representations and warranties provided in Sections 4.3(b), 4.3(c), 4.3(d) and 4.3(f) shall survive [*].      4.5 Brokers. Each Party represents that no agent, broker, investment banker, financial advisor or other Person, is or will be entitled to any brokers’ or finder’s fee or any other commission or similar fee in connection with this Agreement or any of the transactions contemplated hereby. ARTICLE 5 CONDITIONS TO CLOSING      5.1 Conditions to Obligations of Duramed. The obligations of Duramed hereunder to consummate the transactions contemplated by this Agreement are subject to the fulfillment, at or before the Closing, as applicable, of each of the following conditions (all or any of which may be waived in whole or in part by Duramed, but only in writing, in its sole discretion):           (a) Representations and Warranties. The representations and warranties made by Shire in this Agreement shall be true and correct in all material respects on and as of the Closing Date as though made on and as of the Closing Date or, in the case of representations and warranties made as of a specified date earlier than the Closing Date, on and as of such earlier date. - 15 - --------------------------------------------------------------------------------             (b) Performance. Shire shall have performed and complied with, in all material respects, the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Shire at or before the Closing.           (c) Orders and Laws. There shall not be in effect on the Closing Date any judgment, order, decree, ruling or charge restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement. No court or other Governmental Authority shall have determined any applicable law to make illegal the consummation of the transactions contemplated hereby, and no proceeding with respect to the application of any such applicable law to such effect shall be pending.           (d) HSR. The applicable waiting period under the HSR Act, if any, shall have been terminated or expired.           (e) Effective Date. The Settlement Agreement shall have become effective in accordance with its terms.           (f) Deliveries. Shire shall have executed and delivered the item described in Section 2.7(d).           (g) FDA Letter. The FDA Letter shall have been executed by Duramed and Shire in preparation for filing.           (h) Product Material Adverse Effect. There shall not have occurred, or be continuing, a Product Material Adverse Effect.           (i) Other Agreements. Duramed and Shire or its Affiliate shall have executed and delivered the other Transaction Agreements.      5.2 Conditions to Obligations of Shire. The obligations of Shire hereunder to consummate the transactions contemplated by this Agreement are subject to the fulfillment, at or before the Closing, as applicable, of each of the following conditions (all or any of which may be waived in whole or in part by Shire, but only in writing, in its sole discretion):           (a) Representations and Warranties. The representations and warranties made by Duramed in this Agreement shall be true and correct in all material respects on and as of the Closing Date as though made on and as of the Closing Date or, in the case of representations and warranties made as of a specified date earlier than the Closing Date, on and as of such earlier date.           (b) Performance. Duramed shall have performed and complied with, in all material respects, the agreements, covenants, and obligations required by this Agreement to be so performed or complied with by Duramed at or before the Closing.           (c) Orders and Laws. There shall not be in effect on the Closing Date any judgment, order, decree, ruling or charge restraining, enjoining, or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement. No court or other Governmental Authority shall have determined any applicable law to make illegal - 16 - --------------------------------------------------------------------------------              the consummation of the transactions contemplated hereby or by the other Transaction Agreements, and no proceeding with respect to the application of any such applicable law to such effect shall be pending.           (d) HSR. The applicable waiting period under the HSR Act, if any, shall have been terminated or expired.           (e) Effective Date. The Settlement Agreement shall have become effective in accordance with its terms.           (f) Deliveries. Duramed shall have executed and delivered to Shire the items described in Section 2.7(b) and 2.7(d).           (g) FDA Letter. The FDA Letter shall have been executed by Shire and Duramed in preparation for filing.           (h) Other Agreements. Duramed and Shire or its Affiliate shall have executed and delivered the other Transaction Agreements. ARTICLE 6 COVENANTS      6.1 HSR Filing.           (a) To the extent necessary, each of Duramed and Shire shall simultaneously with the filing of the Settlement Agreement with the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice, file with the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice any notification and report form required of it in the reasonable opinion of both Parties under the HSR Act with respect to the transactions contemplated hereby. The Parties shall cooperate with one another to the extent necessary in the preparation of any notification and report form required to be filed under the HSR Act and in the response to any request for information, including any Second Request for information issued under the HSR Act. Each Party shall be responsible for its own costs and expenses associated with any filing under the HSR Act; provided, however, that Duramed shall be responsible for all filing fees required by the HSR Act.           (b) Duramed and Shire will cooperate and use all reasonable efforts to make all other registrations, filings and applications, to give all notices and to obtain as soon as practicable all governmental and other consents, transfers, approvals, orders, qualifications, authorizations, permits and waivers, if any, and to do all other things, necessary or desirable for the consummation of the transactions contemplated hereby.           (c) Duramed shall be [*] of this Agreement, or [*] of the HSR waiting period by the FTC and/or DOJ, including [*] Section 7A(e) of the Clayton Act and 16 C.F.R. Section 803.20 . - 17 - --------------------------------------------------------------------------------        6.2 Conduct of the Business Until Closing. Except for the actions taken or omitted to be taken pursuant to the prior written consent of Duramed, which consent shall not be unreasonably withheld or delayed, from the date of this Agreement until the Closing, Shire shall:           (a) carry on the Adderall Business in, and only in, the ordinary course, in substantially the same manner as heretofore conducted;           (b) perform in all material respects all of its obligations under any agreements and instruments relating to or affecting the Purchased Assets, and comply in all material respects with all laws applicable to it, the Purchased Assets or the Adderall Business;           (c) not enter into or assume any material agreement, contract or instrument relating to the Purchased Assets, or enter into or permit any material amendment, supplement, waiver or other modification in respect thereof; and           (d) not make any material change in the selling, distribution, pricing, advertising or collection practices for the Product, including any special effort or program to sell, consign or solicit order for the Product to customers or to discount, factor or collect sooner than normal any accounts receivable.      6.3 Post-Closing Orders and Payments. From and after the Closing Date, Shire shall (i) not accept any purchase orders on behalf of Duramed, (ii) promptly deliver to Duramed any purchase orders for Product received after the Closing and any payments received from third parties for Product purchased from Duramed after the Closing, and (iii) refer all inquiries it shall receive with respect to the Product, to Duramed or its designee. Likewise, Duramed shall promptly deliver to Shire any payments Duramed receives from third parties for Product purchased from Shire prior to the Closing.      6.4 Right to Investigate. After the date hereof up to the Closing, Shire shall afford to representatives of Duramed reasonable access to offices, plants, properties, books and records of Shire relating to the Product and the Purchased Assets, during normal business hours, in order that Duramed may have an opportunity to make such reasonable investigations as it desires with respect to the Product.      6.5 Retention of Records. Shire will, and will cause each of its Affiliates to, retain all books and records relating to the Adderall Business and the Purchased Assets in the United States in accordance with Shire’s record retention policies as presently in effect or as otherwise required by law.      6.6 Non-Solicitation.           (a) During the period commencing upon the signing of this Agreement and ending upon the first anniversary of the Closing Date, Duramed (which for purposes of this Section 6.6 includes its Affiliates) shall not, either directly or indirectly, solicit, recruit, induce, encourage or attempt to solicit, recruit, induce or encourage any employee of Shire or its Affiliates who work, or at any time within [*] prior to the Closing Date, worked, on matters involving the Product to terminate his or her employment relationship with Shire or its Affiliates and become employed by Duramed or become employed by an independent contractor for - 18 - --------------------------------------------------------------------------------              Duramed, whether or not such employee is a full-time employee and whether or not such employment relationship is pursuant to a written agreement or is at-will. Nothing in this Section 6.6(a) shall apply if the employee is hired in response to a public advertisement or general solicitation disseminated by either Party.           (b) Prior to the Closing Date, neither Shire nor any of its Affiliates or any Person acting on their behalf shall (i) solicit or encourage any inquiries or proposals for, or enter into any discussions with respect to, the acquisition of any properties and assets held for use in connection with, necessary for the conduct of, or otherwise material to, the Adderall Business (an “Acquisition Transaction”) or (ii) furnish or cause to be furnished any non-public information concerning the Adderall Business to any Person (other than Duramed), for purposes of facilitating an Acquisition Transaction. Shire shall promptly notify Duramed of any inquiry or proposal received by Shire with respect to any such Acquisition Transaction. Shire shall not sell, transfer or otherwise dispose of, grant any option or proxy to any Person with respect to, create any Lien upon, or transfer any interest in, any Purchased Asset, other than in the ordinary course of business and consistent with this Agreement.      6.7 Managed Markets.           (a) On the Closing Date and to the extent permitted by applicable law, Duramed shall become responsible for the marketing and promotion of Duramed Labeled Product across all managed market and government segments in the Territory and with respect thereto, shall have exclusive responsibility for: (i) contract execution, (ii) government reporting, rebate and chargeback processing and payment, federal supply schedule calculations and pricing schedules, (iii) contract compliance, monitoring and audits, and (iv) contract administration and claims processing (collectively, the “Managed Market Activities”). Without limiting the generality of the foregoing, with respect to rebates under Medicaid and federal supply service contracts, Duramed shall assume following the Closing Date responsibility therefor under its own Medicaid and federal supply service contracts. On or prior to the Closing Date Duramed shall have obtained its own NDC number for the Product and shall ensure that all sales of Product by Duramed can be accomplished under the NDC number of Duramed. Duramed shall use its new NDC numbers on all invoices, orders and other communications with customers and Regulatory Authorities or other governmental entities. Following the Closing Date, Duramed shall be responsible for the processing, payment, administration and support of (x) all chargebacks under any government, managed market or other contract (“Chargebacks”) and (y) all rebates due pursuant to any United States government (federal or state) rebate program under any government, managed market or other contract (“Rebates”) for Duramed Labeled Product. Shire shall be responsible for the processing, payment, administration and support of all Chargebacks and Rebates for Shire Labeled Product.           (b) Shire shall provide Duramed with all information relating to the Product and the prices thereof that Duramed reasonably requires in order to comply with applicable rules and regulations relating to Medicaid Rebates. When requested, such information shall be provided by Shire to Duramed promptly, and in any event, within [*] after Duramed’s written request therefor. Promptly after the Closing Date, Shire shall provide Duramed with the baseline Average Manufacturers Price (“AMP”) for the Product. Within [*] after the end of the [*] after - 19 - --------------------------------------------------------------------------------              the Closing Date, Duramed shall calculate a unit (tablet/capsule) AMP and “Best Price” for the Product and provide such calculations in writing to Shire.           (c) Shire shall provide to Duramed within [*] after request therefor all information reasonably requested by Duramed to enable Duramed to calculate the price to be paid for each Product by a “covered entity” under the Public Health Service Act, as defined in 42 U.S.C. § 256b(a)(4).           (d) Shire shall use reasonable best efforts to terminate all Contracts providing for the payment of commercial Rebates with respect to the Product (“Rebate Contracts”) as of the [*] following the Closing. Shire shall not assign to Duramed, and Duramed shall not assume from Shire, any of the Rebate Contracts. Shire shall continue processing Rebates owed under the Rebate Contracts with respect to Product dispensed prior to the termination of such Rebate Contracts. Upon Closing, Shire shall issue a letter to commercial Rebate customers advising such customers of Shire’s responsibilities in connection with Rebate Contracts and associated Rebates.           (e) Shire shall use reasonable best efforts to terminate all Contracts providing for payment of Chargebacks to government and commercial customers with respect to Product (“Chargeback Contracts”) upon Closing. Shire shall not assign to Duramed, and Duramed shall not assume from Shire, any of the Chargeback Contracts. Upon Closing, Shire shall issue a letter to the trade (wholesalers and distributors) and to commercial Chargeback customers advising such customers of Shire’s responsibilities in connection with Chargeback Contracts and associated Chargebacks and administrative fees.      6.8 Returns. From and after the Closing Date (a) Shire shall be solely responsible, at its own cost and expense, for the processing, payment, administration and support of all returns of Shire Labeled Product, regardless of when the return is made, and (b) Duramed shall be solely responsible, at its own cost and expense, for the processing, payment, administration and support of all returns of Duramed Labeled Product. If any quantities of Duramed Labeled Products are returned to Shire, Shire shall notify Duramed as soon as practicable and ship them to the facility designated by Duramed at Duramed’s cost. Shire, at its option, may advise the customer who made the return that Duramed Labeled Products should have been returned to Duramed. At Duramed’s request, Shire shall destroy the Duramed Labeled Products and Duramed shall reimburse Shire for such cost of destruction. If any quantities of Shire Labeled Products are returned to Duramed, Duramed shall notify Shire as soon as practicable and ship them to the facility designated by Shire at Shire’ cost. At Shire’s request, Duramed shall destroy Shire Labeled Products and Shire shall reimburse Duramed for such cost of destruction.      6.9 Certain Sales. Duramed shall not sell any Product following the Closing Date under Shire’s NDC Number or any Shire labeling or packaging material for the Product. Shire shall not sell any Product following the Closing except pursuant to the Supply Agreement. ARTICLE 7 INDEMNIFICATION      7.1 Indemnification by Shire. From and after the Closing, Shire shall reimburse and indemnify Duramed, Duramed’s Affiliates, and their respective officers, directors, employees, - 20 - --------------------------------------------------------------------------------   and agents in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred, or sustained by any of them or to which any of them becomes subject, resulting from, arising out of, or relating to:           (a) the Retained Liabilities or the Excluded Assets;           (b) any misrepresentation or breach of representation or warranty by Shire made or contained in this Agreement;           (c) any failure of Shire to materially perform or observe any covenant or agreement to be performed or observed by Shire pursuant to this Agreement;           (d) any action or inaction of Shire with respect to the Purchased Assets prior to the Closing Date, except for Losses arising as a result of Liabilities expressly included in the Assumed Liabilities; and           (e) any product liability claim with respect to the Shire Labeled Product sold prior to the Closing.      7.2 Indemnification by Duramed. From and after the Closing, Duramed shall reimburse and indemnify Shire, Shire’s Affiliates and their respective officers, directors, employees, and agents in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred, or sustained by any of them or to which any of them becomes subject, resulting from, arising out of, or relating to:           (a) the Assumed Liabilities;           (b) any misrepresentation or breach of representation or warranty by Duramed made or contained in this Agreement;           (c) any failure by Duramed to materially perform or observe any covenant or agreement to be performed or observed by Duramed pursuant to this Agreement; and           (d) any action or inaction of Duramed with respect to the Purchased Assets after the Closing Date.      7.3 Limitation of Liability.           (a) Notwithstanding anything to the contrary contained in this Agreement, no amounts of indemnity shall be payable as a result of any claim in respect of a Loss arising under Section 7.1 unless and until the indemnified parties thereunder have suffered, incurred, sustained, or become subject to Losses referred to in such Sections in excess of [*] in the aggregate (in which event the indemnifying Party shall be liable for the entire amount of such Losses).           (b) The maximum aggregate liability of Shire under this Article 7 shall not exceed [*], provided, however, that Losses related to or arising out of any Third Party Claim shall not be subject to any such limitation. - 21 - --------------------------------------------------------------------------------             (c) Notwithstanding anything to the contrary contained in this Agreement, no amounts of indemnity shall be payable as a result of any claim in respect of a Loss arising under Sections 7.1 or 7.2:                (i) with respect to any Loss, to the extent that the Party seeking indemnification had a reasonable opportunity, but failed, in good faith to mitigate the Loss; or                (ii) with respect to any Loss, to the extent that such Loss is caused by (A) any misrepresentation or breach of warranty, covenant or agreement by the Party seeking indemnification in the Agreement or (B) the gross negligence or intentional misconduct of such Party or its Affiliates or any of their respective officers, directors, employees, or agents.           (d) No Party hereto shall be entitled to any indemnification under Section 7.1(b) or Section 7.2(b), as applicable, if (i) the other Party shall have notified such Party in writing on or prior to the Closing Date, or disclosed to such Party in the Shire Disclosure Schedule or the Duramed Disclosure Schedule, as applicable and as may be supplemented or amended prior to the Closing Date, of the breach of, or inaccuracy in, such representation or warranty and (ii) such Party has permitted the Closing to occur.      7.4 No Consequential Damages. IN NO EVENT SHALL ANY PARTY BE LIABLE TO ANY OTHER PARTY FOR INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY KIND ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, EXCEPT TO THE EXTENT THAT SUCH DAMAGES ARISE FROM THIRD PARTY CLAIMS SUBJECT TO INDEMNIFICATION UNDER ARTICLE 7.      7.5 Procedures for Indemnification for Third Party Claims.           (a) In the case of a third party claim or demand (“Third Party Claim”) made by any Person who is not a Party to this Agreement (or an Affiliate thereof) as to which a Party (the “Indemnitor”) may be obligated to provide indemnification pursuant to this Agreement, such Party seeking indemnification hereunder (“Indemnitee”) will notify the Indemnitor in writing of the Third Party Claim (and specifying in reasonable detail the factual basis for the Third Party Claim and to the extent known, the amount of the Third Party Claim) reasonably promptly after becoming aware of such Third Party Claim; provided, however, that failure to give such notification will not affect the indemnification provided hereunder except to the extent the Indemnitor shall have been actually prejudiced as a result of such failure.           (b) If a Third Party Claim is made against an Indemnitee, the Indemnitor will be entitled, within [*] after receipt of written notice from the Indemnitee of the commencement or assertion of any such Third Party Claim, to assume the defense thereof (at the expense of the Indemnitor) with counsel selected by the Indemnitor and reasonably satisfactory to the Indemnitee, for so long as the Indemnitor is conducting a good faith and diligent defense. Should the Indemnitor so elect to assume the defense of a Third Party Claim:                (i) the Indemnitor will not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that if under applicable standards of professional conduct a conflict of - 22 - --------------------------------------------------------------------------------   interest exists between the Indemnitor and the Indemnitee in respect of such claim, such Indemnitee shall have the right to employ separate counsel (which shall be reasonably satisfactory to the Indemnitor) to represent such Indemnitee with respect to the matters as to which a conflict of interest exists and in that event the reasonable fees and expenses of such separate counsel shall be paid by such Indemnitor; and provided further, that the Indemnitor shall only be responsible for the reasonable fees and expenses of one separate counsel for such Indemnitee;                (ii) so long as the Indemnitor is conducting the defense of the Third Party Claim in accordance with Section 7.1 or 7.2, as the case may be, the Indemnitee may retain separate co-counsel at its sole cost and expense and participate if reasonably practicable in the defense of the Third Party Claim;                (iii) the Indemnitor will promptly supply to the Indemnitee copies of all material correspondence and documents relating to or in connection with such Third Party Claim and keep the Indemnitee informed of developments relating to or in connection with such Third Party Claim, as may be reasonably requested by the Indemnitee (including providing to the Indemnitee on reasonable request updates and summaries as to the status thereof); and                (iv) all Indemnitees shall reasonably cooperate with the Indemnitor in the defense thereof (such cooperation to be at the expense, including reasonable legal fees and expenses, of the Indemnitor).           (c) If the Indemnitor does not elect to assume control of the defense of any Third Party Claim within the [*] period set forth above, or if such good faith and diligent defense is not being or ceases to be conducted by the Indemnitor, the Indemnitee shall have the right, at the expense of the Indemnitor, after [*] notice to the Indemnitor of its intent to do so, to undertake the defense of the Third Party Claim for the account of the Indemnitor (with counsel selected by the Indemnitee), and to compromise or settle such Third Party Claim, exercising reasonable business judgment.           (d) If the Indemnitor acknowledges in writing its obligation to indemnify the Indemnitee for a Third Party Claim, the Indemnitee will agree to any settlement, compromise, or discharge of such Third Party Claim that the Indemnitor may recommend that by its terms obligates the Indemnitor to pay the full amount of Losses (whether through settlement or otherwise) in connection with such Third Party Claim and unconditionally and irrevocably releases the Indemnitee completely from all Liability in connection with such Third Party Claim; provided, however, that, without the Indemnitee’s prior written consent, the Indemnitor shall not consent to any settlement, compromise, or discharge (including the consent to entry of any judgment), and the Indemnitee may refuse to agree to any such settlement, compromise, or discharge, that provides for injunctive or other nonmonetary relief affecting the Indemnitee. If the Indemnitor acknowledges in writing its obligation to indemnify the Indemnitee for a Third Party Claim, the Indemnitee shall not (unless required by law) admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the Indemnitor’s prior written consent (which consent shall not be unreasonably withheld or delayed). - 23 - --------------------------------------------------------------------------------        7.6 Losses That Are Not Third Party Claims. Any claim on account of Losses which does not involve a Third Party Claim shall be asserted by reasonably prompt written notice (stating in reasonable detail, the basis of such claim and a reasonable estimate of the amount thereof) given by the Indemnitee to the Indemnitor. For a period of [*] from and after receipt of the written notice, the Parties shall attempt in good faith to resolve such claim for indemnification. If the Parties are unable to resolve such claim, the Indemnitee may thereafter pursue any and all remedies at its disposal to enforce said indemnification claim.      7.7 Termination of Indemnification Obligations. The obligations of each Party to indemnify, defend and hold harmless the other Party and other Indemnitees (a) pursuant to Sections 7.1(b) and 7.2(b) shall terminate when the applicable Survival Period expires pursuant to Section 4.4, and (b) pursuant to Sections 7.1(a), (c), (d) and (e), and Sections 7.2(a), (c) and (d) shall survive until the earlier of the expiration of the applicable statute of limitations, if any, and the sixth (6th) anniversary of the Closing Date; provided, however, that such obligations to indemnify, defend, and hold harmless shall not terminate with respect to any individual item as to which the Indemnitee shall have before the expiration of the Survival Period, made a claim by delivering a written notice (stating in reasonable detail the basis of such claim and a reasonable estimate of the amount thereof) to the Indemnitor.      7.8 Other Matters. In the event of payment in full by an Indemnitor to any Indemnitee in connection with any Third Party Claim, such Indemnitor will be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right or claim relating to such Third Party Claim against any claimant or plaintiff asserting such Third Party Claim or against any other Person. Such Indemnitee will cooperate with such Indemnitor in a reasonable manner, and at the cost and expense of such Indemnitor, in prosecuting any subrogated right or claim.      7.9 Other Limitations.           (a) For the avoidance of doubt and without limitation to the provisions of Articles 4 and 5, an Indemnitor shall have no obligation to indemnify, defend and hold harmless an Indemnitee from and against any portion of Losses under Section 7.1 or Section 7.2 to the extent that such portion of such Losses results directly from any action taken by, or at the express written request of, such Indemnitee. Neither Party nor any of its respective Affiliates shall have or be subject to any liability to the other Party, its Affiliates or any other Person resulting from the distribution to, or use of any information, documents or materials made available to it by the other Party, including any information, documents or materials in any data rooms, management presentations or other form in expectation of the transactions contemplated hereby.           (b) No liability shall arise in respect of any breach of any representation, warranty, covenant or agreement herein to the extent that liability for such breach occurs (or is increased) directly as a result of any retrospective application of a change in applicable law, or in accounting policies, procedures or practices, announced by a Governmental Authority or, if not announced in advance of taking effect, taking effect, after the Closing Date, unless Shire or Duramed, as the case may be, knew of any such retrospective application of a change in applicable law, or in such accounting policies, procedures or practices at the time of Closing. - 24 - --------------------------------------------------------------------------------             (c) No Party shall be entitled to recover any Losses or other amounts due from the other Party pursuant to this Agreement by retaining or setting off amounts (whether or not such amounts are liquidated or reduced to judgment) against any amounts due or to become due from such first Party to such second Party hereunder or under any Transaction Agreement or under any document or instrument delivered pursuant hereto or thereto or in connection herewith or therewith. For the avoidance of doubt, the foregoing is without prejudice to any right of set-off expressly provided for in any Transaction Agreement, which does not involve setting off amounts due under this Agreement.           (d) All amounts paid by Shire or Duramed under this Article 7 shall be treated for all purposes as adjustments to the Purchase Price except to the extent such treatment is not permitted by applicable law. In the event that treatment as an adjustment to the Purchase Price is disputed by any taxing authority, the Party receiving notice of such dispute shall promptly notify and consult with the other Party concerning resolution of such dispute.      7.10 Exclusive Remedy. Other than in the case of fraud, the indemnification provided to any Person pursuant to this Article 7 shall be such Person’s sole remedy for any claims arising hereunder, or otherwise in connection with or arising out of the transactions described herein, including any breach by any Party hereto of any representation, warranty, or covenant contained in this Agreement, or in any certificate or document (to the extent such certificate or documents relate to matters covered by the representation, warranties, or covenants contained herein) required to be delivered in connection herewith, provided that nothing herein shall limit the rights of either Party to seek and obtain injunctive relief to specifically enforce the other Party’s obligations.      7.11 Net Losses and Subrogation.           (a) Notwithstanding anything contained herein to the contrary, the amount of any Losses incurred or suffered by an Indemnitee shall be calculated after giving effect to: (i) any insurance proceeds received by the Indemnitee (or any of its Affiliates) with respect to such Losses; (ii) any Tax benefit realized by the Indemnitee (or any of its Affiliates) arising from the facts or circumstances giving rise to such Losses; and (iii) any recoveries obtained by the Indemnitee (or any of its Affiliates) from any other third party. Each Indemnitee shall exercise its reasonable efforts to obtain such proceeds, benefits and recoveries, provided that the Indemnitee shall not be obligated to make such an insurance claim if the Indemnitee in its reasonable judgment believes that the cost of pursuing such an insurance claim together with any corresponding increase in insurance premiums or other chargebacks to the Indemnitee, as the case may be, would exceed the value of the claim for which the Indemnitee is seeking indemnification. If any such proceeds, benefits or recoveries are received by an Indemnitee (or any of its Affiliates) with respect to any Losses after the Indemnitee (or any Affiliate) has received the benefit of any indemnification hereunder with respect thereto, the Indemnitee (or such Affiliate) shall pay to the Indemnitor the amount of such proceeds, benefits or recoveries (up to the amount of the Indemnitor’s payment).           (b) Upon making any payment to an Indemnitee in respect of any Losses, the Indemnitor will, to the extent of such payment, be subrogated to all rights of the Indemnitee (and its Affiliates) against any third party in respect of the Losses to which such payment relates. Such - 25 - --------------------------------------------------------------------------------              Indemnitee (and its Affiliates) and Indemnitor will execute upon request all instruments reasonably necessary to evidence or further perfect such subrogation rights. ARTICLE 8 TERMINATION      8.1 Termination Prior to Closing. This Agreement may be terminated at any time prior to Closing:           (a) by mutual written consent of Duramed and Shire;           (b) by Duramed or Shire in the event that any competent Governmental Authority indicates its intention to initiate a judicial or administrative action to obtain an order, decree or ruling to restrain, enjoin, or otherwise prohibit the transactions contemplated by this Agreement, and such order, decree, ruling, or other action shall have become final and non-appealable; or           (c) by a Party in the event that the other Party (the “Defaulting Party”) shall have breached, or failed to comply with, any of such Defaulting Party’s obligations under this Agreement, or any representation or warranty made by the Defaulting Party shall have been incorrect in any material respects when made; or           (d) by either Duramed or Shire if the Closing is not consummated pursuant to the terms of this Agreement prior to December 31, 2006, provided that the right to terminate the Agreement under this Section 8.1 (c) shall not be available to a Party hereto if such Party has failed to perform in all material respects its obligation under this Agreement and such failure has been the cause of, or results in, the failure of the Closing to occur on or before such date.      8.2 Effect of Termination Prior to Closing. In the event of termination of this Agreement as provided in Section 8.1, this Agreement shall forthwith become void and there shall be no liability on the part of either Party hereto except (a) as set forth in Section 11.1, and (b) nothing herein shall relieve either Party from Liability for any breach of this Agreement prior to such termination. ARTICLE 9 PATENT PROSECUTION, MAINTENANCE AND ENFORCEMENT      9.1 Discretionary Duty to Maintain. Shire may, at its sole discretion and cost, maintain the Licensed Patents.      9.2 Abandonment of Maintenance by Shire. Shire shall notify Duramed in the event it decides at any time to discontinue the maintenance of any Licensed Patent. Such notification shall be given at least [*] prior to the date on which such patent will become abandoned. Duramed shall then have the option, exercisable upon written notification to Shire, to assume full responsibility, at its discretion and sole cost, for prosecution of the affected maintenance of such patent. In the event Duramed exercises such option, such Licensed Patent shall be assigned to Duramed. Shire shall provide all assistance reasonably necessary to assign to the Duramed all rights, interests and titles of such Licensed Patent. - 26 - --------------------------------------------------------------------------------        9.3 Patent Marking. Duramed and its sublicensees and Affiliates shall mark all Products made under this Agreement with a notice in accordance with 35 U.S.C. §287.      9.4 Suits for Infringement of the Licensed Patents. If Shire or Duramed becomes aware of infringement of any patent included in the Licensed Patents by a third party, such Party shall promptly notify the other Party in writing to that effect. If, prior to the expiration of [*] from said notice, Shire has not obtained a discontinuance of such infringement or brought suit in such country against the third party infringer and such infringement is relevant in a material respect to a Product or the Purchased Assets, then Duramed shall have the right to bring suit in such country against such infringer and join Shire as a party. The foregoing shall not preclude the Parties from jointly seeking such discontinuance or bringing suit and, in any event, each Party will cooperate with the other in any suit and will have the right to consult with the other and be represented by its own counsel at its own expense. Prior to disposition of any moneys recovered, the expenses of the Parties in bringing suit shall be reimbursed out of the moneys recovered, with the Party bringing the suit being reimbursed first, then fifty percent (50%) of the remainder, if any, of moneys recovered by either Party upon final judgment or settlement of any infringement suit shall be retained by the Party bringing the suit, and fifty percent (50%) shall be paid to the other Party; provided, however, that (a) if Shire has not obtained a discontinuance of such infringement or brought suit against the third party infringer and Duramed determines to bring such suit, Duramed shall be entitled to one hundred percent (100%) of such remainder, and (b) in no event shall any Party who has not voluntarily joined in the relevant action be entitled to recovery of any damages hereunder. No settlement by a Party bringing a suit shall diminish the rights or interests of the other Party without the other Party’s written consent. ARTICLE 10 DISPUTE RESOLUTION      10.1 Disputes. The Parties hereby agree that all disputes arising under this Agreement shall be referred to a senior executive of Duramed and a senior executive of Shire (the “Representatives”). If any such matter has not been resolved within [*] of such referral to the Representatives either Party may invoke the provisions of Section 10.2 for such dispute. No dispute resolution procedure set forth in this Agreement shall be construed as an agreement to arbitrate under any federal or state arbitration Law, including the Federal Arbitration Act, and shall not deprive a court of competent jurisdiction from resolving any dispute arising under, or related to, this Agreement.      10.2 Litigation. Any dispute that is not resolved as provided in the preceding Section 10.1, whether before or after termination of this Agreement, may be submitted by either Party only to any court of competent jurisdiction. This Agreement shall be governed by, and construed in accordance with, the Laws of the State of New York. The Parties unconditionally and irrevocably agree and consent to the exclusive jurisdiction of the courts located in New York, NY and waive any objection with respect thereto, for the purpose of any action, suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby and further agree not to commence any such action, suit or proceeding except in any such court.      10.3 Injunctive Relief. Notwithstanding anything to the contrary in this Agreement, either Party shall have the right to seek temporary injunctive relief in any court of competent - 27 - --------------------------------------------------------------------------------   jurisdiction as may be available to such Party under the Laws and rules applicable in such jurisdiction with respect to any matters arising out of the other Party’s performance of its obligations under this Agreement. ARTICLE 11 GENERAL PROVISIONS      11.1 Payment of Transaction Expenses. All legal fees and other expenses incurred on behalf of Shire in connection with the negotiation of this Agreement and the consummation of the transactions contemplated herein will be borne by Shire, whether or not the Closing shall have occurred. All legal fees and other expenses incurred on behalf of Duramed in connection with the negotiation of this Agreement and the consummation of the transactions contemplated herein will be borne by Duramed, whether or not the Closing shall have occurred.      11.2 Access to Information Post-Closing. After the Closing, Duramed agrees to cooperate with Shire and to grant to Shire and its employees, attorneys, accountants, officers, representatives, and agents, during normal business hours and upon at least [*] advance notice, reasonable access to Duramed’s management personnel and to the records relating to the Product (including the Product Registrations) and to permit copying at Shire’s expense or, where reasonably necessary, to loan original documents relating to the Purchased Assets during the period the Purchased Assets were owned by Shire for the sole purposes of (a) any financial reporting or tax matters (including any financial and tax audits, tax contests, tax examination, preparation of any Shire’s tax returns or financial records) relating to the Product, (b) any claims or litigation involving Shire and the Purchased Assets relating to the Product, (c) any investigation of Shire being conducted by any federal, state, or local governmental authority relating to the Product, (d) any matter relating to any indemnification or representation or warranty or any other term of this Agreement, or (e) any similar or related matter. Duramed shall maintain, to the extent required by applicable law, but in any event for not less than six (6) years, all such records and documents in the United States of America and shall not destroy or dispose of any such records and documents prior to the end of such required or six (6) year period without the prior written consent of Shire.      11.3 Notices. All notices or other communications that are required or permitted under this Agreement shall be in writing and delivered personally, sent by facsimile (and promptly confirmed by personal delivery or overnight courier as provided in this Agreement), or sent by internationally-recognized overnight courier to the addresses below. Any such communication shall be deemed to have been given (a) when delivered, if personally delivered or sent by facsimile on a Business Day (so long as promptly confirmed by personal delivery or overnight courier as provided in this Agreement), and (b) on the second Business Day after dispatch, if sent by internationally-recognized overnight courier. Unless otherwise specified in writing, the mailing addresses of the Parties shall be as described below.       For Duramed:   Duramed Pharmaceuticals, Inc.     400 Chestnut Ridge Road     Woodcliff Lake, NJ 07677     Phone: 201-930-3300     Fax: 201-930-3330 Attention: President - 28 - --------------------------------------------------------------------------------         with a copy to:   Barr Pharmaceuticals, Inc.     400 Chestnut Ridge Road     Woodcliff Lake, NJ 07677     Phone: 201-930-3300     Fax: 888-843-0563     Attention: General Counsel       For Shire:   Shire LLC     725 Chesterbrook Boulevard     Wayne, Pennsylvania 19087-5637     Fax: (484) 595-8163     Attention: General Counsel       with a copy to:   Morgan, Lewis & Bockius LLP     502 Carnegie Center     Princeton, NJ 08540     Fax: (609) 919-6701     Attention: Randall B. Sunberg      11.4 Entire Agreement; Amendment. This Agreement, the Pharmacovigilance Agreement, the Trademark License Agreement and the Supply Agreement, including the exhibits and schedules attached hereto and thereto (each of which is herby and thereby incorporated herin and therein by reference) (collectively, the “Transaction Agreements”), sets forth the complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties hereto and supersedes and terminates all prior agreements and understandings between the Parties, which shall continue to govern the obligations of the Parties with respect to information disclosed thereunder with respect to periods prior to the Effective Date. There are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties other than as are set forth herein. No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon the Parties unless reduced to writing and signed by an authorized officer of each Party. For the avoidance of doubt, the Parties agree that all covenants, promises, agreements, warranties, representations, conditions, and understandings set forth herein are made and deemed effective as of the Effective Date, and that the execution of this Agreement shall not constitute a waiver of any right or claim of either Party as of the Effective Date.      11.5 Assignment. Neither this Agreement nor any of the rights or obligations of the Parties hereunder may be assigned by either Party without the prior written consent of the other Party; provided, however, that (a) Shire or Duramed may assign this Agreement to an Affiliate, and (b) following the Closing, either Party shall be entitled, without the prior written consent of the other, to assign its rights and obligations hereunder in connection with a merger or similar reorganization or the sale or all or substantially all of its assets. Any attempted assignment or delegation in contravention hereof shall be null and void. Subject to the foregoing, this - 29 - --------------------------------------------------------------------------------   Agreement and all rights and powers granted and obligations created hereby will bind and inure to the benefit of the Parties and their respective successors and assigns.      11.6 Headings. The headings for each article and section in this Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular article or section.      11.7 Independent Parties. In making and performing this Agreement, Shire and Duramed shall act at all times as independent contractors and nothing contained in this Agreement shall be construed or implied for any purpose to create an agency, partnership, limited partnership, joint venture or employer and employee relationship between Shire and Duramed and this Agreement shall not be construed to suggest otherwise. At no time shall one Party make commitments or incur any charges or expenses for or in the name of the other Party.      11.8 No Waiver. Any delay in enforcing a Party’s rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of such Party’s rights to the future enforcement of its rights under this Agreement, excepting only as to an express written and signed waiver as to a particular matter for a particular period of time.      11.9 Severability. If any one or more of the provisions of this Agreement is held to be invalid or unenforceable by any court of competent jurisdiction from which no appeal can be or is taken, the provision shall be considered severed from this Agreement and shall not serve to invalidate any remaining provisions hereof. The Parties shall make a good faith effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by the Parties when entering this Agreement may be realized.      11.10 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Signatures provided by facsimile transmission shall be deemed to be original signatures.      11.11 No Third Party Beneficiaries. No Person other than Shire and Duramed and permitted assignees hereunder shall be deemed an intended beneficiary hereunder or have any right to enforce any term of this Agreement.      11.12 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.      11.13 No Strict Construction. This Agreement has been prepared jointly and shall not be strictly construed against either Party.      11.14 Public Disclosure. No announcement or other disclosure, public or otherwise, concerning the financial or other terms of this Agreement shall be made, either directly or indirectly, by any Party without first obtaining the written approval of the other Party and agreement upon the nature and text of such announcement or disclosure, such approval and agreement not to be unreasonably withheld or delayed. Notwithstanding the foregoing: - 30 - --------------------------------------------------------------------------------             (a) Each Party agrees that disclosures may need to be made to the Securities and Exchange Commission (“SEC”) and other Regulatory Authorities and each Party agrees that it shall reasonably cooperate with the other with respect to all disclosures regarding this Agreement to such Regulatory Authorities. In addition, the Parties will coordinate in advance with each other in connection with the redaction of certain provisions of this Agreement with respect to any SEC filings, and each Party shall use reasonable efforts to seek confidential treatment for such terms; provided, however, that each Party shall ultimately retain control over what information to disclose to the SEC or any other such agencies.           (b) The Parties shall be free to publicly disclose information contained in any materials that have been previously approved for disclosure by the other Party, without further approvals from the other Party hereunder, to the extent there have been no material additions or changes thereto.      11.15 Bulk Sales Laws. The Parties hereby waive compliance with any UCC bulk sales or comparable statutory provisions of each applicable jurisdiction. [Remainder of page intentionally left blank] - 31 - --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the Parties hereto have each caused this Agreement to be duly executed as of the date first above written           SHIRE LLC             By:   /s/ Matthew Emmens               Name:   Matthew Emmens     Title:   CEO               SHIRE LLC             By:   /s/ Matthew Emmens               Name:   Matthew Emmens     Title:   CEO               DURAMED PHARMACEUTICALS, INC.           By:   /s/ Fred Wilkinson               Name:   Fred Wilkinson     Title:   President & C.O.O.     [Signature Page to Product Acquisition and License Agreement]   --------------------------------------------------------------------------------   EXHIBIT A ADDERALL® IR PHARMACOVIGILANCE AGREEMENT DATE: As of August 14, 2006 PARTIES: (1)   SHIRE DEVELOPMENT, INC., having its place of business at 725 Chesterbrook Boulevard, Wayne, PA 19087-5637 (“Shire”) (2)   DURAMED PHARMACEUTICALS, INC., having its place of business at 400 Chestnut Ridge Road, Woodcliff Lake, NJ 07677 (“Duramed”). RECITALS (A)   With effect from August 14, 2006, Shire and Duramed entered into a Product Acquisition and License Agreement (the “Acquisition and License Agreement”) with respect to the promotion of the Product (as defined below) in the Territory (as defined below).   (B)   Pursuant to the terms of the Acquisition and License Agreement, the Parties are obligated to enter into this Agreement to provide for the Parties’ respective obligations in relation to medical information and pharmacovigilance services for the Product.   (C)   In consideration of the above recitals and the mutual promises, covenants and obligations as set out in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged, and intending to be legally bound, the Parties agree as follows. OPERATIVE PROVISIONS 1   INTERPRETATION   1.1   In this Agreement:       “Acquisition and License Agreement” has the meaning given to it in Recital (A).       “Adverse Event” means any untoward medical occurrence in a patient or clinical investigator subject administered the Product and which does not necessarily have a causal relationship with this treatment for which the Product is used. An adverse event can therefore be any unfavorable and unintended sign (including an abnormal laboratory finding), symptom, or disease temporally associated with the   --------------------------------------------------------------------------------       use of a medicinal (investigational) product, whether or not related to the Product. A pre-existing condition that worsened in severity after administration of the Product would be considered an adverse event. “Awareness Date” or “Clock Date” means the date on which a Party first becomes aware of an Adverse Event or a Suspected Adverse Drug Reaction and, in relation to a third party Representative of a Party, such as clinical research organizations or distributors, that have contractual and/or regulatory obligations to report Adverse Events or a Suspected Adverse Drug Reaction to that Party, the date on which such third parties first become aware of that Adverse Event or a Suspected Adverse Drug Reaction. For both Parties this is considered day zero. “Business Day” means a day (other than a Saturday or Sunday) on which banks in the United States are open for business. “Confidential Information” means all secret, confidential or proprietary information or data, whether provided in written, oral, graphic, video, computer, electronic or other form, provided pursuant to this Agreement or generated pursuant to this Agreement. “Effective Date” has the meaning given to it in the Acquisition and License Agreement. “Marketing Authorization” means any authorization granted by a Regulatory Authority required to permit the commercial marketing and sale of the Product in the Territory. “Medical Information” means information about the Product including, but not limited to, clinical and technical matters such as therapeutic uses for both the licensed and unlicensed indications, drug interactions, drug-disease information, Adverse Events, product stability and other product characteristics. “Periodic Safety Report” means a safety report generated at set times and in accordance with FDA guidelines for the purpose of demonstrating the current risk/benefit analysis of the Product according to present knowledge and produced to provide a historical perspective on the safety issues surrounding the Product. “Product” has the meaning given to it in the Acquisition and License Agreement. “Reference Safety Information” means the recognized Adverse Reactions to the Product contained in all or any one of Shire’s Developmental Core Safety Information (DCSI) in an investigator’s brochure, Shire’s Company Core Safety Information (CCSI) in a marketed product Company Core Data Sheet (CCDS) and Shire’s official local product labeling (including the local Summary of Product Characteristics (SPC)).   --------------------------------------------------------------------------------   “Regulatory Approval” means the granting of all necessary regulatory and governmental approvals by a regulatory or other governmental body required to market and sell the Product in the Territory. “Regulatory Authority” means any competent regulatory authority or other governmental body responsible for granting any Regulatory Approval. “Representatives” has the meaning set forth in Section 16.1. “Safety Issue” means any event, report, data or information, which could cause a re-evaluation of the safety of the Product including, but not limited to, Suspected Adverse Drug Reaction and Unexpected Suspected Adverse Drug Reaction. “Serious Adverse Event” means any Adverse Event in relation to any dose of the administered Product that:   A.   results in death;     B.   is life threatening;     C.   requires in-patient hospitalization or prolongation of existing hospitalization;     D.   results in persistent or significant disability or incapacity; or     E.   is a congenital anomaly or birth defect. Medical and scientific judgment should be exercised in deciding whether expedited reporting for the Product is appropriate in other situations, such as medically important events that may not be immediately life-threatening or result in death or hospitalization but may jeopardize the patient or may require intervention to prevent one of the other outcomes listed above. These should also usually be considered as Serious Adverse Events. “Serious Suspected Adverse Drug Reaction” means any Suspected Adverse Drug Reaction in relation to any dose of the administered Product that:   A.   results in death;     B.   is life threatening;     C.   requires in-patient hospitalization or prolongation of existing hospitalization;     D.   results in persistent or significant disability or incapacity; or     E.   is a congenital anomaly or birth defect.   --------------------------------------------------------------------------------   Medical and scientific judgment should be exercised in deciding whether expedited reporting for the Product is appropriate in other situations, such as medically important events that may not be immediately life-threatening or result in death or hospitalization but may jeopardize the patient or may require intervention to prevent one of the other outcomes listed above. These should also usually be considered as Serious Suspected Adverse Drug Reactions. “Signal” means an unexpected observation of an event in relation to treatment with the Product which deviates so much from expectations that it calls for immediate and greater attention, including (but not limited to) unlabelled Suspected Adverse Drug Reactions, increased frequency or severity of labeled Suspected Adverse Drug Reactions and any change in the risk/benefit/profile of the Product. “Spontaneous Report” means a communication from an individual (e.g., a health care professional, consumer) to a company or regulatory authority that describes a Suspected Adverse Drug Reaction or medication error. It does not include cases identified from information solicited by the applicant or contractor, such as individual case safety reports or findings derived from a study, company-sponsored patient support program, disease management program, patient registry, including pregnancy registries, or any organized data collection scheme. It also does not include information compiled in support of class action lawsuits. “Suspected Adverse Drug Reaction” means a noxious and unintended response to any dose of the Product for which there is a reasonable possibility that the Product caused the response. In this definition, the phrase “a reasonable possibility” means that the relationship cannot be ruled out. “Territory” has the meaning given to it in the Acquisition and License Agreement. “Unexpected Suspected Adverse Drug Reaction” means any Suspected Adverse Drug Reaction that is not included in the current U.S. labeling for the Product. “Valid Safety Reports” means the minimum information required for expedited reporting which should at least include all of the following:   A.   an identifiable patient;     B.   a suspected medicinal product or therapeutic device;     C.   an identifiable reporter; and     D.   a Suspected Adverse Drug Reaction or an Adverse Event.   --------------------------------------------------------------------------------       “Warm Transfer” means the direct connection of a patient, and such patient’s name and contact information, to an appropriate party following receipt of that patient’s initial telephone call.   1.2   In this Agreement, unless the context otherwise requires:   A.   references to “persons” includes individuals, bodies corporate (wherever incorporated), unincorporated associations and partnerships;     B.   reference to a “Party” is to a Party to this Agreement and “Parties” is to both of them;     C.   the headings are inserted for convenience only and do not affect the construction of the Agreement;     D.   references to one gender includes both genders; and     E.   any reference to an enactment or statutory provision is a reference to it as it may have been, or may from time to time be amended, modified, consolidated or re-enacted. 1.3   The Schedules comprise part of and shall be construed in accordance with the terms of this Agreement. In the event of any inconsistency between the Schedules and the terms of this Agreement, the terms of this Agreement shall prevail.   1.4   Terms used in this Agreement, which are not otherwise defined within the Agreement or the Acquisition and License Agreement shall have the meaning given to them in accordance with FDA Regulations or Guidelines and Shire Standard Operating Procedures (SOPs). In the event of any conflict between Shire’s SOP’s and FDA guidelines, FDA guidelines shall prevail.   2   PURPOSE   2.1   In consideration of the mutual obligations contained in this Agreement, the Parties have agreed to provide for the procedures relating to the exchange of safety and pharmacovigilance information for the Product between Shire and Duramed in order to comply with worldwide regulatory reporting requirements for the Product.   2.2   As between Shire and Duramed, Shire shall have the following responsibilities:   a.   Shire shall handle all telephone calls and other communications that it may receive regarding the items in Section 3.1, including Adverse Events and/or Suspected Adverse Drug Reactions in accordance with the terms of this Agreement. Except to the extent required by law, responding to private third parties regarding complaints, notices and inquiries as to Adverse Events, Suspected Adverse Drug Reactions, or data, documents   --------------------------------------------------------------------------------         or reports related to any of them. Shire shall process all Adverse Events and/or Suspected Adverse Drug Reactions and prepare the data, documents or reports related to them in a final format that is suitable for Duramed to submit to the Regulatory Authority.   b.   Shire shall inform Duramed within three (3) Business Days of any communications of any kind received by Shire from any Regulatory Authority involving safety issues in relation to the Product outside of the Territory, although the Parties acknowledge that the Product is not sold outside of the Territory. To the extent that Shire is required by law to respond, Shire shall, if there is time to do so, submit its response to Duramed before submitting it to the Regulatory Authority. Duramed will provide Shire access to Duramed’s safety data required to respond to a Regulatory Authority request and written approval of and/or comments on such response within a timeframe sufficient to meet any deadlines imposed by the requesting Regulatory Authority. Shire shall, to the extent permitted by law, cooperate fully with Duramed and keep Duramed fully informed as to Regulatory Agency requests received by Shire within the scope of this paragraph and Shire’s responses.     c.   Shire shall, within three (3) Business Days inform Duramed in the event that, at any time, Shire identifies potential safety issues, including calls or communications that Shire receives directly from, private or government, third party in relation to the Product and will provide such further assistance, as Shire and Duramed shall agree. 2.3   Except as specifically set forth in paragraph 2.2 above, Duramed shall have following responsibilities:   a.   Duramed shall refer all drug safety and pharmacovigilance related queries from healthcare providers or their staff, or any third party in relation to the Product. The Shire contact to receive this information is identified in Section 11.1 of this agreement as the “Appointed Medical Information Contact”.     b.   Duramed shall ensure compliance and correspond with the U.S. Regulatory Authority on reporting requirements related to Adverse Events and Suspected Adverse Drug Reactions, including but not limited to FDA requirements, submission of Periodic Safety Reports, 15-day safety reports and MedWatch reports. Duramed reserves the right to exercise final control over its submissions and response to Regulatory Agency communications directed to, and requiring a response from, Duramed.     c.   Duramed shall ensure that there is a mechanism available during normal business hours to receive notices regarding any safety issue under this Agreement;   --------------------------------------------------------------------------------     d.   Duramed shall handle all telephone calls and other communications that it may receive regarding Adverse Events and/or Suspected Adverse Drug Reactions in accordance with the terms of this Agreement;     e.   Duramed shall inform Shire within three (3) Business Days of any communications of any kind received by Duramed from any Regulatory Authority involving safety issues in relation to the Product in the Territory. To the extent that Duramed is required by law to respond, Duramed shall, if there is time to do so, submit its response to Shire before submitting it to the Regulatory Authority. Shire will provide Duramed with safety data required to respond to a Regulatory Authority request and written approval of and/or comments on such response within a timeframe sufficient to meet any deadlines imposed by the requesting Regulatory Authority. Duramed reserves the right to exercise final control over its response to Regulatory Agency communications directed to, and requiring a response from, Duramed, to the extent required by Duramed, in its sole judgment, in order to maintain Duramed’s compliance with all applicable legal requirements. Duramed shall, to the extent permitted by law, cooperate fully with Shire and keep Shire fully informed as to Regulatory Agency requests received by Duramed within the scope of this paragraph and Duramed responses.     f.   Duramed shall within three (3) Business Days inform Shire in the event that, at any time, Duramed identifies potential safety issues in relation to the Product and will provide such further assistance, as Shire and Duramed shall agree. 3   SCOPE   3.1   This Agreement covers:   a.   all Spontaneous Reports of Adverse Events and Suspected Adverse Drug Reactions in relation to the Product;     b.   all Serious Suspected Adverse Drug Reactions arising from post-marketing surveillance with the Product;     c.   all information required for periodic reporting in relation to the Product;     d.   all other information as required by Regulatory Authorities for the Product; and     e.   the provision of Medical Information to support third party inquiries.   --------------------------------------------------------------------------------   4   LANGUAGE OF ALL EXCHANGE AND TERMINOLOGY   4.1   The language of all information exchanged pursuant to this Agreement, including reports to Regulatory Authorities, shall (unless specifically stated otherwise) be in English, or if any other language, accompanied by a translation into English. In the event of any conflict between the English text and the text in any other language, the English text shall prevail.   5   CONTACT PERSONNEL AND METHODS FOR ADVERSE EVENT TRANSMISSION   5.1   The names and details of contact personnel for Shire and Duramed are detailed in Schedule 1.   5.2   Any changes in names or details of any of the contact personnel for a Party in relation to the Product must be notified by that Party to the other Party in writing to the address set out in Schedule 1 as soon as reasonably practicable after the change occurs.   5.3   Any notice given under this Agreement shall be in writing and (i) personally delivered or (ii) sent by fax or (iii) e-mail to the address of the other Party as set out in Schedule 1 (or such other address as may have been notified in writing from time to time by a Party to the other Party) and any such notice shall be deemed to have been served at the time of delivery (if personally delivered) or upon receipt of confirmation of transmission by the sender’s fax machine (if sent by fax) and in the case of email upon receipt of delivery confirmation by the sender’s computer (if sent by e-mail).   6   SAFETY DATABASE   6.1   The safety information generated pursuant to this Agreement shall be added to the safety database for the Product and shall be held and maintained by Shire and shall be the central repository for all drug safety information received worldwide for the Product.   6.2   The safety database shall be used for all drug safety and pharmacovigilance regulatory responses and purposes for the Product.   6.3   Shire shall provide all safety information reasonably requested by Duramed from Shire’s safety database to provide a response to answer any drug safety and pharmacovigilance related queries in relation to the Product and to meet all regulatory requirements. Shire will provide the information within a reasonable timeline according to the urgency of request. Upon termination of this Agreement, Shire shall transfer the safety database for the Product to Duramed as soon as reasonably practicable.   --------------------------------------------------------------------------------   6.4   With the exception of FDA exchange, which may be implemented at some future point in time, and except as otherwise set forth herein, Duramed shall not have direct access to the safety database for security and data privacy reasons.   7   EXCHANGE OF ADVERSE EVENT AND SUSPECTED ADVERSE DRUG REACTION INFORMATION   7.1   All notification and response periods referred to in this Agreement (unless otherwise specified) will be in calendar days in accordance with FDA regulations.   7.2   The relevant period for any notification or response for either Party (including their Representatives) will commence on the Awareness Date.   7.3   Duramed will attempt to Warm Transfer all calls related to the Product covered in Section 3.1 including Adverse Event and Suspected Adverse Drug Reactions calls to Shire at (888) 300-6414 at the time of receipt. Prior to transferring the call, Duramed staff will obtain a name and contact number. If the Warm Transfer is not successful, Duramed will fax the caller’s name and contact information to Shire’s Pharmacovigilance Department at (866) 557-4473 within two Business Days of receipt. Shire will be responsible for the intake of the Adverse Events and Suspected Adverse Drug Reactions and preparing MedWatch reports for any Adverse Reaction occurring. All written Adverse Events and Suspected Adverse Drug Reactions received by Duramed will be forwarded to Shire within two Business Days of receipt. If Shire directly receives calls related to the Product that is an Adverse Event or Suspected Adverse Drug Reactions, Shire will inform Duramed’s “Appointed Medical Information Contact” within two Business Days of receipt   7.4   Shire shall ensure that there is a mechanism available 24-hour/7 days per week to receive notices for any safety issue under this Agreement.   7.5   Upon receipt of any report from Duramed under Section 7.3, Shire will notify Duramed of receipt of the report as soon as possible; however in no event longer than two Business Days thereafter. Any report from is considered transmitted only after an acknowledgement of receipt is received from Shire.   7.6   Shire will provide final written reports to Duramed by day 12 for an expedited (15 day) report and at least 5 days prior the periodic due date in order for Duramed’s submissions to meet all 15-day safety report and periodic/PSUR regulated timelines.   7.7   No later than the 15th day of each month, Shire will provide a line listing including reported term, manufacturing number, demographics and a narrative for each report received from Duramed the previous month.   --------------------------------------------------------------------------------       Reports received from Literature Reviews   7.8   Shire will be responsible for monitoring the worldwide scientific literature to meet global regulatory reporting requirements and for monitoring drug safety for the Product. Once an Adverse Event or a Suspected Adverse Drug Reaction has been identified, Shire will assess it according to seriousness and where appropriate report it as a literature report quoting the reference for the article for onward reporting by Duramed to the appropriate Regulatory Authority in the Territory.       Management of Follow up information Follow up of initial reports   7.9   Shire shall be responsible for all follow-up activities for any Adverse Events occurring in the Territory.   7.10   Duramed shall notify Shire of any additional information it reasonably requires regarding an Adverse Event occurring in the Territory that Shire has notified it of pursuant to this Section 7 and Shire will use its reasonable endeavors to obtain the additional information within two (2) Business Days. Shire shall notify Duramed of the outcome of the additional information obtained by Shire for submission to the Regulatory Authority, if necessary.   8   ASSESSMENT OF ADVERSE EVENTS       Assessment of Listedness (Expectedness)   8.1   All Adverse Events and Suspected Adverse Drug Reactions will be reported to Shire irrespective of any assessment regarding listedness (expectedness).   8.2   Shire shall be responsible for assessing all Adverse Events and Suspected Adverse Drug Reactions in the Territory and shall determine if any report is required to be made to the Regulatory Authorities in accordance with Section 10. Pursuant to Section 2.3, . Duramed reserves the right to exercise final control over its submissions and response to the Regulatory Authority communications directed to, and requiring a response from, Duramed.   9   SAFETY ISSUES/SIGNALS AND REGULATORY INQUIRIES INVOLVING SAFETY ISSUES   9.1   Shire shall, within 24 hours of it becoming aware, notify Duramed of any significant safety issues other than individual ADRs referenced in Section 7 in relation to the Product. Shire and Duramed shall discuss in good faith how to deal with any such significant safety issues and shall co-operate with the reasonable requests of the other Party in relation to such issues. Significant safety issues relating to the Product may occur as a result of a request from a Regulatory Authority; potential changes in the risk/benefit of the Product; Product quality   --------------------------------------------------------------------------------       issues that may have a clinical impact such as Product contamination or deterioration; external influences such as media or literature and ongoing safety surveillance.   9.2   Shire and Duramed agree to reasonably collaborate on any labeling changes that are safety related. Duramed is responsible for the maintenance of labeling changes to the Product and will notify Shire of all safety related changes.   9.3   Should Shire become aware of any potential safety signal, Shire shall promptly notify Duramed.   10   REGULATORY AUTHORITY INTERACTION       Expedited Reporting Responsibilities   10.1   Subject to Sections 7.6 to 7.10, Shire will be responsible for assessing the “reportability” and submitting reports of Serious Suspected Adverse Drug Reactions for the Product (according to current FDA regulations) to Duramed to be submitted to the Regulatory Authority.   10.2   Either Party shall permit the other Party or its representatives to inspect, review and audit of its operations concerning Pharmacovigilance and adverse event collection and reporting in line with FDA regulations, in accordance with the terms of this Agreement. Any information obtained through such inspections, reviews and audits shall be treated as confidential information of the audited Party. Such audits, reviews and inspections shall be conducted during normal business hours, upon reasonable notice, and no more than once per year (other than in an emergency situation), and in a manner that does not unreasonably interfere with ongoing operations. The date and time of the audit will be determined and agreed on by both parties, but shall be scheduled to occur within four (4) weeks of the audit request, unless otherwise agreed. It is understood that Regulatory Agency inspections of each Party’s facilities occur periodically and audits will not be conducted in such a way as to conflict with those inspections.       Periodic Reporting   10.3   Shire shall prepare and submit to Duramed pursuant to Section 7.6 the Periodic Safety Report for the Product in the Territory, according to its internal standard operating procedures and in the format as detailed in 21CFR 314. The periodicity of the Periodic Safety Report will be according to the International Birth Date of the Product.   10.4   Prior to regulatory submission, there should be discussion between the Parties to promote harmonization and co-ordination if any safety signals or proposed amendments to the Reference Safety Information are recommended. However, this must be achieved within the applicable regulatory timeframe.   --------------------------------------------------------------------------------   11   MEDICAL INFORMATION/QUESTIONS   11.1   Duramed shall transfer all Medical Information inquiries received from third Parties in the Territory regarding the Product to the person or persons specified in Schedule 1 (“Appointed Medical Information Contact”).   11.2   If the inquiry is a request for information in connection with a report of an Adverse Event or Suspected Adverse Drug Reaction, Duramed shall confirm to the Appointed Medical Information Contact that the report has been notified to Shire in accordance with Sections 7.3 and 7.6.   12   AMENDMENTS TO THIS SAFETY AGREEMENT   12.1   This Safety Agreement becomes effective on the Effective Date.   12.2   If a Party becomes aware of any change of law or regulation which affects any of the matters the subject of this Agreement, it shall notify the other Party of any such change. The Parties shall promptly meet and discuss any such changes and negotiate in good faith any amendments to this Agreement, which either Party honestly believes are necessary or desirable as a result of such changes.   12.3   Revision of attachments (Schedules) will not require that this Safety Agreement be re-issued and signed off, but shall require the written agreement of both Parties.   12.4   Changes in company personnel and methods of communication must be conveyed immediately to both Parties, to ensure the correct and timely flow of information.   13   CONFIDENTIALITY   13.1   Each Party agrees and undertakes that it will treat and keep confidential all Confidential Information, which may become known, to that Party from the other Party.   14   DURATION AND TERMINATION   14.1   This Agreement commences on the Effective Date and shall continue in force until terminated by either Party in accordance with Section Error! Reference source not found..   14.2   [*]   15   CONSEQUENCES OF TERMINATION   15.1   Articles 13, 15, 16 and 17 shall survive the termination of this Agreement.   --------------------------------------------------------------------------------   15.3   The termination or expiration of this Agreement shall not release either of the Parties from any liability which at the time of termination or expiration has already accrued to the other Party, nor affect in any way the survival of any other right, duty or obligation of the Parties which is expressly stated elsewhere in this Agreement to survive such termination or expiration.   16   RESOLVING DISPUTES   16.1   The Parties hereby agree that all disputes arising under this Agreement shall be referred to a senior executive of Duramed and a senior executive of Shire (the “Representatives”). If any such matter has not been resolved within fifteen (15) Business Days of such referral to the Representatives either Party may invoke the provisions of Section 16.2 for such dispute. No dispute resolution procedure set forth in this Agreement shall be construed as an agreement to arbitrate under any federal or state arbitration Law, including but not limited to the Federal Arbitration Act, and shall not deprive a court of competent jurisdiction from resolving any dispute arising under, or related to, this Agreement.   16.2   Any dispute that is not resolved as provided in the preceding Section 16.1, whether before or after termination of this Agreement, may be submitted by either Party only to any court of competent jurisdiction. This Agreement shall be governed by, and construed in accordance with, the Laws of the State of New York. The Parties unconditionally and irrevocably agree and consent to the exclusive jurisdiction of the courts located in New York, NY and waive any objection with respect thereto, for the purpose of any action, suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby and further agree not to commence any such action, suit or proceeding except in any such court.   16.3   Notwithstanding anything to the contrary in this Agreement, either Party shall have the right to seek temporary injunctive relief in any court of competent jurisdiction as may be available to such Party under the Laws and rules applicable in such jurisdiction with respect to any matters arising out of the other Party’s performance of its obligations under this Agreement.   17   GENERAL PROVISIONS   17.1   Except as expressly provided for in this Agreement, no variation to the terms of this Agreement shall be effective unless in writing and signed on behalf of each Party by a director or other authorised person.   17.3   Failure by either Party on one or more occasions to avail itself of a right conferred by this Agreement shall not be construed as a waiver of such Party’s right to enforce such right or any other right.   --------------------------------------------------------------------------------   17.4   This Agreement and the Acquisition and License Agreement contain the entire agreements and understandings between the Parties and supersede all previous agreements and understandings between the Parties with respect to the subject matter of this Agreement. In the event of a conflict between the terms of any of the aforementioned agreements, the Acquisition and License Agreement shall control to the extent of any inconsistency. Each Party acknowledges that, in entering into this Agreement, it is not relying on any representation or warranty (whether made orally or in writing) except as expressly provided in this Agreement.   --------------------------------------------------------------------------------        In Witness Whereof, this Agreement has been signed by the authorized representatives of the Parties on the day and year first written above.                   SIGNED for and on behalf of     )     /s/ Matthew Emmens                       SHIRE DEVELOPMENT, INC.     )     Signature                 CEO                                   Print Name and Title                       SIGNED for and on behalf of     )     /s/ Fred Wilkinson                       DURAMED PHARMACEUTICALS, INC   Signature                 President & C.O.O.                                   Print Name and Title     [Signature Page to Pharmacovigilance Agreement]   --------------------------------------------------------------------------------   SCHEDULE 1 Contact Information   --------------------------------------------------------------------------------   EXHIBIT B TRADEMARK LICENSE AGREEMENT           This TRADEMARK LICENSE AGREEMENT (this “Agreement”) is entered into as of August 14, 2006, by and among Shire LLC, a Kentucky limited liability company (together with its Affiliates, “Shire”), and Duramed Pharmaceuticals, Inc., a corporation organized and existing under the laws of Delaware (“Duramed”) (each a “Party” and collectively, the “Parties”). RECITALS           WHEREAS, Shire is in the business of formulating, manufacturing, marketing and distributing the pharmaceutical product known as Adderall IR™ and owns the pharmaceutical product known as Adderall IR™;           WHEREAS, pursuant to that certain Product Acquisition and License Agreement, executed concurrently herewith (the “Product Acquisition Agreement”) Shire is selling to Duramed certain rights to the Adderall IR™ product and certain assets relating to the Adderall Business (as defined in the Product Acquisition Agreement);           WHEREAS, pursuant to the terms and conditions of this Agreement, Shire desires to license to Duramed, and Duramed desires to acquire, a license to use certain trademark rights related to the Adderall Business; and           WHEREAS, the execution of this Agreement is a condition of the Parties entering into the Product Acquisition Agreement.           NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement and in the Product Acquisition Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: ARTICLE I DEFINITIONS           1.1 Any capitalized terms used but not otherwise defined in this Agreement shall have the meanings set forth in the Product Acquisition Agreement. The following capitalized terms shall have the following meanings when used in this Agreement:           1.2 “Affiliate” means a Person that, directly or indirectly, through one or more intermediates, controls, is controlled by, or is under common control with, the Person specified. For the purposes of this definition, control shall mean the direct or indirect ownership of (a) in the case of corporate entities, securities authorized to cast more than fifty percent (50%) of the votes in any election for directors, (b) in the case of non-corporate entities, more than fifty percent (50%) ownership interest with the power to direct the management and policies of such non-corporate entity, or (c) such lesser percentage as may be the maximum percentage allowed   --------------------------------------------------------------------------------              to be owned by a foreign corporation under the applicable laws or regulations of a particular jurisdiction of the equity having the power to vote in the election of directors or to direct the management and policies of such Person.           “Licensed Activities” shall mean the manufacture, advertising, marketing, promoting, selling and distributing of the Product.           “Licensed Marks” shall mean the trademarks set forth on the attached Schedule A.           “Losses” means any and all liabilities, damages, fines, penalties, deficiencies, losses and expenses (including interest, court costs, amounts paid in settlement, reasonable fees of attorneys, accountants and other experts or other reasonable expenses of litigation or other proceedings or of any claim, default or assessment); provided, however, that the term “Losses” shall not include any special, consequential, indirect, punitive or similar damages, except to the extent actually paid by a Party pursuant to any Third Party Claim.           “Product” shall mean the pharmaceutical product in all dosage forms identified in NDA # 11-522, as may be amended or supplemented from time-to-time in accordance with applicable law.           “Promotional Materials” shall mean any materials used in connection with the Licensed Activities, including web sites, press releases, finished and unfinished commercials, and copies of related text and story boards, and other content, for all television, radio, online, print or other advertisements, and all packaging, labels, documentation and all other materials that either include any of the Licensed Marks or are used or distributed in connection with a Product.           “Person” shall mean an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.           “Term” shall have the meaning set forth in Article IV of this Agreement.           “Territory” shall mean the United States, and its territories and possessions. ARTICLE II TERMS AND CONDITIONS           2.1 Grant of License. Subject to the terms and conditions of this Agreement, Shire grants to Duramed an exclusive, fully-paid-up, royalty-free, license during the Term of this Agreement to use the Licensed Marks in connection with the Licensed Activities in the Territory. During the Term of this Agreement, Shire shall have no right to license any third party to use any Licensed Mark, or to use any Licensed Mark itself or through any of its Affiliates, in connection with an oral immediate release mixed amphetamine salt pharmaceutical product or other oral immediate release pharmaceutical product for treating Attention Deficit Hyperactivity Disorder. 2 --------------------------------------------------------------------------------             2.2 Limitations on Use. All rights not expressly granted to Duramed under this Agreement are reserved to Shire. Without limiting the generality of the foregoing, Duramed shall not have the right to use any of the Licensed Marks: (i) other than in connection with the Licensed Activities, (ii) as a trade name, Duramed name, or fictitious business name, or (iii) other than in accordance with this Agreement. Duramed shall not use or authorize any other Person to use the Licensed Marks outside the Territory during or after the Term.           2.3 Ownership. As between the Parties, Shire owns all right, title and interest in and to the Licensed Marks and the goodwill associated with the Licensed Marks, and any use of the Licensed Marks by Duramed and any associated goodwill shall inure to the benefit of Shire. Except as expressly set forth in this Agreement, Duramed shall have no right, title or interest in or to the Licensed Marks. Duramed shall not, during or after the Term, in any jurisdiction: (i) challenge Shire’s title or rights in and to the Licensed Marks, or the validity of the Licensed Marks or any applications and registrations thereof, or (ii) register, attempt to register or assist any Person other than Shire in registering, any of the Licensed Marks or any confusingly similar variations thereof. In no event shall Duramed use any of the Licensed Marks in a manner that may tarnish or disparage Shire or Shire’s rights in any of the Licensed Marks.           2.4 Marking. All Promotional Materials shall clearly state that Shire owns the Licensed Marks. Duramed shall use the following form of such notice, in a clearly visible or audible (as appropriate) manner: “ADDERALL® is a registered trademark of Shire LLC, used under license.” Duramed shall have the right to use the Licensed Marks in combination with other marks, names or symbols of Duramed without Shire’s consent (so long as they do not include terms identical or confusingly similar to terms that Shire uses).           2.5 Protection of the Licensed Marks. At Shire’s request and sole expense, Duramed shall cooperate fully and in good faith with Shire in securing, protecting, enforcing and defending Shire’s rights in the Licensed Marks. Without limiting the generality of the foregoing, Duramed shall execute any and all documents, and take any actions, as deemed necessary in the reasonable opinion of Shire, to confirm or otherwise establish or maintain the validity, or enforceability of, and Shire’s rights in and to, the Licensed Marks.           2.6 Domain Name. Shire acknowledges that Duramed shall have the right to register and maintain a web site at www.adderallir.com. Upon termination of this Agreement, Duramed shall transfer to Shire any domain names that incorporate any of the Licensed Marks.           2.7 Quality Control Standards. Duramed shall maintain the quality of the Product at the same or better level of quality as the therapeutic equivalent of the Product marketed by Barr Laboratories, Inc. under ANDA No. 40-422 as of the Effective Date and comply materially with all applicable laws and regulations governing the provision of the Product. Duramed shall not alter or modify the Licensed Marks in any way. As long as this Agreement is in effect, Duramed shall provide to Shire representative samples of the Product and Promotional Materials pursuant to Shire’s request; provided that such request shall not be made more than once every six (6) months. 3 --------------------------------------------------------------------------------   ARTICLE III INFRINGEMENT           3.1 If Shire or Duramed becomes aware of infringement of any Licensed Marks by a third party, such Party shall promptly notify the other Party in writing to that effect. If, prior to the expiration of ninety (90) days from said notice, Shire has not obtained a discontinuance of such infringement or brought suit in the Territory against the third party infringer and such infringement is relevant in a material respect to the Product, then Duramed shall have the right to bring suit against such infringer and join Shire as a party. The foregoing shall not preclude the Parties from jointly seeking such discontinuance or bringing suit and, in any event, each Party will cooperate with the other in any suit and will have the right to consult with the other and be represented by its own counsel at its own expense. Prior to disposition of any moneys recovered, the expenses of the Parties in bringing suit shall be reimbursed out of the moneys recovered, with the Party bringing the suit being reimbursed first, then the remainder, if any, of moneys recovered by either Party upon final judgment or settlement of any infringement suit shall be retained by the Party bringing the suit. No settlement by a Party bringing a suit shall diminish the rights or interests of the other Party without the other Party’s written consent. ARTICLE IV TERM AND TERMINATION           4.1 Term. This Agreement shall commence on the Effective Date and shall continue for an initial term of ten (10) years (the “Initial Term”). This Agreement shall automatically renew for successive additional ten (10) year terms (each a “Renewal Term”) unless earlier terminated in accordance with this Article IV (the Initial Term, together with any successive Renewal Terms, being the “Term”).           4.2 Termination for Cause. Shire may terminate this Agreement at any time in the event Duramed materially breaches this Agreement and such material breach continues uncured for a period of 180 days after written notice thereof; provided, however, in the event Duramed has in good faith commenced cure within such 180 day period, but cannot practically complete such cure within such 180 day period, Duramed shall have an additional 180 day cure period. In the event a material breach of this Agreement is incapable of cure, without limiting any other rights of Shire, including the right to seek injunctive relief, Shire shall not have the right to terminate this Agreement if (i) Duramed is providing full cooperation to mitigate the breach, and (ii) the breach was not caused by the willful misconduct by Duramed.           4.3 Non-Use. Shire may terminate this Agreement on written notice to Duramed if Duramed ceases using the Licensed Marks in connection with the Licensed Activities for a period of two (2) years or more.           4.4 Upon Termination. Upon any termination of this Agreement by either Party for any reason: (i) all rights granted to Duramed shall immediately terminate, and (ii) Duramed shall immediately cease all use of the Licensed Marks. 4 --------------------------------------------------------------------------------   ARTICLE V LIMITED WARRANTIES, DISCLAIMER AND LIMITATIONS           5.1 Mutual Representations. Each Party hereby represents and warrants to the other Party as follows:           (a) Due Authorization. Such Party is a corporation duly incorporated and in good standing (where such concept applies) as of the Effective Date, and the execution, delivery and performance of this Agreement by such Party have been duly authorized by all necessary action on the part of such Party.           (b) Due Execution. This Agreement has been duly executed and delivered by such Party and constitutes a legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms.           (c) No Conflict. Such Party’s execution, delivery and performance of this Agreement do not: (i) violate, conflict with or result in the breach of any provision of the charter or by-laws (or similar organizational documents) of such Party; (ii) conflict with or violate any law, rule, regulation or governmental order applicable to such Party or any of its assets, properties or businesses; or (iii) conflict with, result in any 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 any agreement to which it is a party.           (d) Duly Licensed. Such Party is duly licensed, authorized or qualified to do business and is in good standing (where such concept applies) in every jurisdiction in which a license, authorization or qualification is required for the ownership or leasing of its assets or the transaction of business of the character transacted by it, except where the failure to be so licensed, authorized or qualified would not have a material adverse effect on such Party’s ability to fulfill its obligations hereunder.           5.2 Shire Representations and Warranties. Shire hereby represents and warrants to Duramed that, as of the Effective Date:           (a) There is no action or proceeding pending or, to Shire’s knowledge, threatened, with respect to any Licensed Marks. There are no material unsatisfied judgments or outstanding orders, injunctions, decrees, stipulations or awards (whether rendered by a court, an administrative agency or by an arbitrator) against Shire or its Affiliates with respect to any Licensed Marks.           (b) To Shire’s knowledge, the use of the Licensed Marks does not infringe or misappropriate the intellectual property rights of any third party. Neither Shire nor any of its Affiliates has received any written notice from any Person, or has knowledge of, any actual or threatened claim or assertion that the use of the Licensed Marks infringes or misappropriates the intellectual property rights of any third party. 5 --------------------------------------------------------------------------------             (c) Shire has the right to grant to Duramed the licenses set forth in this Agreement, free of any rights or claims of any third party and without payment by Shire of any royalties, license fees or other amounts to any Third Party.           (d) All Licensed Marks are subsisting and, to Shire’s knowledge, valid and enforceable.           (e) To Shire’s knowledge, there is no infringement by a third party of any Licensed Marks.           5.3 DISCLAIMER. EXCEPT TO THE EXTENT EXPRESSLY SET FORTH IN ARTICLE V, SHIRE DOES NOT MAKE, AND SPECIFICALLY DISCLAIMS, ANY REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE CONCERNING ANY MATTER SUBJECT TO THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT. ARTICLE VI INDEMNIFICATION           6.1 Indemnification by Shire. Shire hereby agrees to hold Duramed, its Affiliates, and their respective directors, agents and employees harmless from and against any and all Losses arising in connection with any and all charges, complaints, actions, suits, proceedings, hearings, investigations, claims, demands, judgments, orders, decrees, stipulations or injunctions by a third party (each a “Third Party Claim”) resulting directly from (a) any breach by Shire of any of its representations, warranties, covenants or obligations pursuant to this Agreement, and (b) any claim that the use of the Licensed Marks as permitted hereunder infringes the intellectual property rights of any third party.           6.2 Indemnification by Duramed. Duramed hereby agrees to hold Shire, its Affiliates, and their respective directors, agents and employees harmless from and against any and all Losses arising in connection with any and all Third Party Claims resulting directly from (a) any breach by Duramed of any of its representations, warranties, covenants or obligations pursuant to this Agreement, (b) except for such matters as Shire is obligated to indemnify Duramed under 6.1, use of the Licensed Marks in connection with Licensed Activities, including claims based on product liability of the Product.           6.3 Notice of Claim. All indemnification claims in respect of any indemnitee seeking indemnity under 6.1 or 6.2 (collectively, the “Indemnitees” and each an “Indemnitee”) shall be made solely by the corresponding Party (the “Indemnified Party”). The Indemnified Party shall give the indemnifying Party (the “Indemnifying Party”) prompt written notice (an “Indemnification Claim Notice”) of any Losses or the discovery of any fact upon which such Indemnified Party intends to base a request for indemnification under 6.1 or 6.2, but in no event shall the Indemnifying Party be liable for any Losses that result from any delay in providing such notice which materially prejudices the defense of such Third Party Claim. Each Indemnification Claim Notice shall contain a description of the claim and the nature and amount of such Loss (to 6 --------------------------------------------------------------------------------              the extent that the nature and amount of such Loss are known at such time). Together with the Indemnification Claim Notice, the Indemnified Party shall furnish promptly to the Indemnifying Party copies of all notices and documents (including court papers) received by any Indemnitee in connection with the Third Party Claim. The Indemnifying Party shall not be obligated to indemnify the Indemnified Party to the extent any admission or statement made by the Indemnified Party materially prejudices the defense of such Third Party Claim.           6.4 Control of Defense. At its option, the Indemnifying Party may assume the defense of any Third Party Claim subject to indemnification as provided for in under 6.1 and 6.2 by giving written notice to the Indemnified Party within thirty (30) days after the Indemnifying Party’s receipt of an Indemnification Claim Notice. Upon assuming the defense of a Third Party Claim, the Indemnifying Party may appoint as lead counsel in the defense of the Third Party Claim any legal counsel it selects. Should the Indemnifying Party assume the defense of a Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party or any other Indemnitee for any legal expenses subsequently incurred by such Indemnified Party or other Indemnitee in connection with the analysis, defense or settlement of the Third Party Claim.           6.5 Right to Participate in Defense. Without limiting 6.3, any Indemnitee shall be entitled to participate in, but not control, the defense of a Third Party Claim for which it has sought indemnification hereunder and to employ counsel of its choice for such purpose; provided, however, that such employment shall be at the Indemnitee’s own expense unless (a) the employment thereof has been specifically authorized by the Indemnifying Party in writing, or (b) the Indemnifying Party has failed to assume the defense and employ counsel in accordance with 6.3 (in which case the Indemnified Party shall control the defense).           6.6 Settlement. With respect to any Losses relating solely to the payment of money damages in connection with a Third Party Claim that shall not result in the Indemnitee’s becoming subject to injunctive or other relief or otherwise adversely affect the business of the Indemnitee in any manner, and as to which the Indemnifying Party shall have acknowledged in writing the obligation to indemnify the Indemnitee hereunder, the Indemnifying Party shall have the sole right to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss, on such terms as the Indemnifying Party, in its reasonable discretion, shall deem appropriate (provided, however that such terms shall include a complete and unconditional release of the Indemnified Party from all liability with respect thereto), and shall transfer to the Indemnified Party all amounts which said Indemnified Party shall be liable to pay prior to the time of the entry of judgment. With respect to all other Losses in connection with Third Party Claims, where the Indemnifying Party has assumed the defense of the Third Party Claim in accordance with 6.3, the Indemnifying Party shall have authority to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss provided it obtains the prior written consent of the Indemnified Party (which consent shall be at the Indemnified Party’s reasonable discretion). The Indemnifying Party that has assumed the defense of the Third Party Claim in accordance with 6.3 shall not be liable for any settlement or other disposition of a Loss by an Indemnitee that is reached without the written consent of such Indemnifying Party. Regardless of whether the Indemnifying Party chooses to defend or prosecute any Third Party Claim, no Indemnitee shall admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim without first offering to the Indemnifying Party the opportunity to assume the defense of the Third Party Claim in accordance with 6.3. 7 --------------------------------------------------------------------------------             6.7 Cooperation. If the Indemnifying Party chooses to defend or prosecute any Third Party Claim, the Indemnified Party shall, and shall cause each other Indemnitee to, cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection with such Third Party Claim. Such cooperation shall include access during normal business hours afforded to the Indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third Party Claim, and making Indemnitees and other employees and agents available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder, and the Indemnifying Party shall reimburse the Indemnified Party for all its reasonable out-of-pocket expenses incurred in connection with such cooperation.           6.8 Expenses of the Indemnified Party. Except as provided above, the reasonable and verifiable costs and expenses, including fees and disbursements of counsel, incurred by the Indemnified Party in connection with any Third Party Claim shall be reimbursed on a calendar quarter basis by the Indemnifying Party, without prejudice to the Indemnifying Party’s right to contest the Indemnified Party’s right to indemnification and subject to refund in the event the Indemnifying Party is ultimately held not to be obligated to indemnify the Indemnified Party. ARTICLE VII MISCELLANEOUS           7.1 Entire Agreement; Amendment. This Agreement, together with the Product Acquisition Agreement, including the exhibits attached hereto and thereto (each of which is hereby and thereby incorporated herein and therein by reference), set forth the complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties hereto and supersedes and terminates all prior agreements and understandings between the Parties, which shall continue to govern the obligations of the Parties with respect to information disclosed thereunder with respect to periods prior to the Effective Date. There are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties other than as are set forth herein. No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon the Parties unless reduced to writing and signed by an authorized officer of each Party. For the avoidance of doubt, the Parties agree that all covenants, promises, agreements, warranties, representations, conditions, and understandings set forth herein are made and deemed effective as of the Effective Date, and that the execution of this Agreement shall not constitute a waiver of any right or claim of either Party as of the Effective Date.           7.2 Notices. All notices or other communications that are required or permitted under this Agreement shall be in writing and delivered personally, sent by facsimile (and promptly confirmed by personal delivery or overnight courier as provided in this Agreement), or sent by internationally-recognized overnight courier to the addresses below. Any such communication shall be deemed to have been given (a) when delivered, if personally delivered or sent by facsimile on a Business Day (so long as promptly confirmed by personal 8 --------------------------------------------------------------------------------              delivery or overnight courier as provided in this Agreement), and (b) on the second Business Day after dispatch, if sent by internationally-recognized overnight courier. Unless otherwise specified in writing, the mailing addresses of the Parties shall be as described below.       For Duramed:   Duramed Pharmaceuticals, Inc.     400 Chestnut Ridge Road     Woodcliff Lake, NJ 07677     Phone: 201-930-3300     Fax: 201-930-3330     Attention: President       with a copy to:   Barr Pharmaceuticals, Inc.     400 Chestnut Ridge Road     Woodcliff Lake, NJ 07677     Phone: 201-930-3300     Fax: 888-843-0563     Attention: General Counsel       For Shire:   Shire LLC     725 Chesterbrook Boulevard     Wayne, Pennsylvania 19087-5637     Fax: (484) 595-8163     Attention: General Counsel       with a copy to:   Morgan, Lewis & Bockius LLP     502 Carnegie Center     Princeton, NJ 08540     Fax: (609) 919-6701     Attention: Randall B. Sunberg           7.3 Independent Contractors. In making and performing this Agreement, Shire and Duramed shall act at all times as independent contractors and nothing contained in this Agreement shall be construed or implied for any purpose to create an agency, partnership, limited partnership, joint venture or employer and employee relationship between Shire and Duramed and this Agreement shall not be construed to suggest otherwise. At no time shall one Party make commitments or incur any charges or expenses for or in the name of the other Party. Except as otherwise provided in this Agreement, each Party shall be solely responsible for its own costs and expenses associated with this Agreement.           7.4 No Strict Construction. This Agreement has been prepared jointly and shall not be strictly construed against either Party.           7.5 Governing Law. This Agreement shall be governed by and construed under the substantive laws of the State of New York without giving effect to the choice of law provisions thereof. 9 --------------------------------------------------------------------------------        7.6 Assignment. Neither Party shall sell, transfer, assign, delegate, pledge or otherwise dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this Agreement or any of its rights or obligations under this Agreement without the prior written consent of the other Party (which consent may be granted, withheld or conditioned at such other Party’s sole and absolute discretion); provided, however, that either Party may assign or transfer this Agreement or any of its rights or obligations under this Agreement without the consent of the other Party to any Affiliate of such Party, or to any third party with which it merges or consolidates, or to which it transfers all or substantially all of its assets to which this Agreement pertains. The assigning Party (unless it is not the surviving entity) shall remain jointly and severally liable with, and shall guarantee the performance of, the relevant Affiliate or third party assignee under this Agreement, and the relevant Affiliate assignee, third party assignee or surviving entity shall assume in writing all of the assigning Party’s obligations under this Agreement. Any purported assignment or transfer in violation of this 7.6 shall be void ab initio and of no force or effect.      7.7 Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Signatures provided by facsimile transmission shall be deemed to be original signatures.      7.8 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be reasonably necessary or appropriate in order to carry out the purposes and intent of this Agreement.      7.9 Severability. If any one or more of the provisions of this Agreement is held to be invalid or unenforceable by any court of competent jurisdiction from which no appeal can be or is taken, the provision shall be considered severed from this Agreement and shall not serve to invalidate any remaining provisions hereof. The Parties shall make a good faith effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by the Parties when entering this Agreement may be realized.      7.10 Headings. The headings for each article and section in this Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular article or section.      7.11 No Waiver. Any delay in enforcing a Party’s rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of such Party’s rights to the future enforcement of its rights under this Agreement, excepting only as to an express written and signed waiver as to a particular matter for a particular period of time. [signature page follows] 10 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective representatives thereunto duly authorized, all as of the date first written above.                   SHIRE PLC                   By:   /s/ Matthew Emmens                       Name:   Matthew Emmens                       Title:   CEO                                     SHIRE LLC                   By:   /s/ Matthew Emmens                       Name:   Matthew Emmens                       Title:   CEO                                     DURAMED PHARMACEUTICALS, INC.                   By:   /s/ Fred Wilkinson                       Name:   Fred Wilkinson                       Title:   President & C.O.O.                   [Signature Page to Trademark License Agreement] 11 --------------------------------------------------------------------------------   SCHEDULE A Licensed Marks                                       Serial No./   Reg. No./ Mark   Owner   Country   Goods/Services   Filing Date   Reg. Date [*]   [*]   [*]   [*]   [*]   [*] 1 --------------------------------------------------------------------------------   EXHIBIT C SUPPLY AGREEMENT BETWEEN SHIRE LLC AND DURAMED LABORATORIES, INC. DATED AS OF AUGUST 14, 2006   --------------------------------------------------------------------------------   SUPPLY AGREEMENT      This SUPPLY AGREEMENT (this “Agreement”), dated as of August 14, 2006, by and among Shire LLC, a Kentucky limited liability company having a place of business at 725 Chesterbrook Boulevard, Wayne, Pennsylvania 19087 (“Shire”), and Duramed Pharmaceuticals, Inc., a Delaware corporation having a place of business at 400 Chestnut Ridge Road, Woodcliff Lake, NJ 07677 (“Duramed”) (each a “Party” and collectively, the “Parties”). RECITALS      WHEREAS, the Parties have entered into that certain Product Acquisition and License Agreement (the “Product Acquisition Agreement”), dated as of the date hereof, pursuant to which Shire shall sell and license to Duramed assets and rights relating to the Products (as defined in the Product Acquisition Agreement) Shire (capitalized terms used herein but not defined herein shall have the meanings set forth in the Product Development Agreement);      WHEREAS, the Product Acquisition Agreement contemplates the Parties entering into this Agreement to govern the supply of Products by Shire to Duramed; and      WHEREAS, Shire desires to manufacture and/or supply the Products to Duramed upon the terms and subject to the conditions of this Agreement.      NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: ARTICLE I DEFINITIONS      “Affiliate” means, with respect to a Party, any entity that directly or indirectly controls, is control led by, or is under common control with, such Party, but only for so long as such control continues. For purposes of this definition, “control” means the power to direct the management and affairs of an entity, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. In the case of a corporation, the direct or indirect ownership of fifty percent (50%) or more of its outstanding voting shares shall in any case be deemed to confer control, provided that, the direct or indirect ownership of a lower percentage of such securities shall not necessarily preclude the existence of control.      “API Cost” for a Product means the actual cost paid by Shire on a pass-through basis for the active pharmaceutical ingredient in such Product.      “Changeover Plan” has the meaning set forth in Section 8.2.      “Effective Date” shall mean the Closing Date, as such term is defined in the Product Acquisition Agreement.   --------------------------------------------------------------------------------        “Force Majeure Event” has the meaning set forth in Section 9.1.      “Losses” means any and all liabilities, damages, fines, penalties, deficiencies, losses and expenses (including interest, court costs, amounts paid in settlement, reasonable fees of attorneys, accountants and other experts or other reasonable expenses of litigation or other proceedings or of any claim, default or assessment); provided, however, that the term “Losses” shall not include any special, consequential, indirect, punitive or similar damages, except to the extent actually paid by a Party pursuant to any Third Party Claim.      “Manufacturing” shall mean all activities related to the manufacturing of a Product or any component or ingredient thereof, including packaging, in-process and finished product testing, release of product or any component or ingredient thereof, quality assurance activities related to manufacturing and release of product, ongoing stability tests and regulatory activities related to any of the foregoing.      “Packaging Specifications” means the existing packaging and labeling specifications for Product, other than changes resulting from a new NDC Number and replacement of the Shire name with Duramed’s name, as amended or supplemented from time to time in accordance with Section 3.13.      “Product Specifications” means the specifications for Product set forth in the Product NDA.      “Purchase Order” has the meaning set forth in Section 3.2.      “Rolling Forecast” has the meaning set forth in Section 3.1.      “Product” has the meaning set forth in the Product Acquisition Agreement.      “Supply Price” means (a) with respect to Products included in the Initial Order, [*]      “Term” has the meaning set forth in Section 7.1.      “Termination Assistance Services” has the meaning set forth in Section 8.1. ARTICLE II SUPPLY OF PRODUCTS      Section 2.1. Purchase of Products. Pursuant to the terms and conditions of this Agreement, Duramed shall purchase from Shire, and Shire shall supply to Duramed Products.      Section 2.2. Initial Forecast and Purchase Order. (a) Promptly following the date hereof, Duramed shall submit to Shire (i) an initial non-binding forecast (the “Initial Forecast”), which Initial Forecast shall be updated thereafter in accordance with Section 3.1; and (ii) Duramed’s initial Purchase Order (the “Initial Order”) for Products. 2 --------------------------------------------------------------------------------        (b) Refund for Certain Product Included in the Initial Order. After the Effective Date, Duramed will use its commercially reasonable efforts to sell the Products included in the Initial Order on a first-in, first-out basis. In the event that any product included in the Initial Order cannot be sold by Duramed prior to the date on which such Product has reached twelve (12) months of remaining shelf life, Shire will reimburse Duramed for amounts paid by Duramed under Section 6.1 of this Agreement for such unsellable Products included in the Initial Order. For reference purposes, Schedule 3 sets forth the quantities of inventory of Products in finished goods form held by Shire as of the date hereof.      (c) No later than the Closing Date, Shire shall sell and deliver to Duramed such quantities of Products reflected in such Initial Order, all in Shire labeled packaging, unless Duramed engages a Third-Party to repackage the Product with Duramed labeling at Duramed’s sole cost and expense. Other than the Initial Order, in no event shall Duramed submit a Purchase Order for Products less than three (3) months prior to the required delivery date for such order.      Section 2.3. Assignment of Shire Supply Agreement. At Duramed’s request, commencing as of and after the date hereof, Shire shall use its commercially reasonable best efforts to provide reasonable cooperation to assist in the assignment of Shire’s existing third party supply agreement with respect to the Product to Duramed, including assisting Duramed in obtaining diligence information and other data in connection with such third party supply agreement. Duramed shall not be obligated to accept assignment of such third party supply contract other than at Duramed’s sole option and discretion.      Section 2.4 CBE 30 Request. As promptly as practicable (but in no event more than three business days ) following the date hereof, Shire shall file a “CBE 30” request to designate Duramed (or such other party as Duramed may designate in its discretion) as an alternative packager/repackager for the Products using Duramed labels. Share shall provide reasonable assistance, at Duramed’s costs, to assist Duramed in obtaining a minimum of [*] of saleable finished goods inventory of the Products bearing Duramed labeling and artwork no later than two business days following Closing.      Section 2.5 Purchase Prior to Closing. Prior to the Effective Date, Duramed (or its designee) shall have the option to purchase such amount of existing Shire inventory of the Products existing and in the possession of Shire for the purpose of repackaging such inventory into finished goods inventory bearing Duramed labeling and artwork. Any such purchase of inventory prior to the Effective Date shall correspondingly reduce the amount of inventory Duramed is obligated to purchase in the Initial Order pursuant to Section 2.3 hereof. ARTICLE III FORECASTS, ORDERS AND SHIPMENT      Section 3.1. Forecasted Quantities. At the beginning of each calendar month following the Initial Forecast under Section 2.3 and each month thereafter, Duramed shall provide an updated rolling forecast of Duramed’s estimated requirements for quantities of such Product over the [*] period commencing after the date of such forecast, with expected order amounts, order dates and delivery dates (each such forecast a “Rolling Forecast”). Except as provided below, such Rolling Forecasts shall represent Duramed’s reasonable estimates for 3 --------------------------------------------------------------------------------   planning purposes only and shall not obligate Duramed to purchase any such quantities. Each Rolling Forecast shall be made by Duramed in good faith, taking into account reasonable projections of demand for Products including, without limitation, demand in line with prescription trends, and allowing for reasonable safety stock. Shire shall use commercially reasonable efforts to ensure sufficient manufacturing capacity to meet the Rolling Forecast. Duramed shall forecast in amounts comprising full batch quantities for each Product. The first three (3) months of any given Rolling Forecast for a Product delivered after the Effective Date shall be binding upon Duramed and Duramed shall be required to issue a Purchase Order for such amount of Product. No portion of any Rolling Forecast issued by Duramed prior to the Effective Date shall be binding upon Duramed.      Section 3.2. Purchase Order Form. Duramed shall submit all orders for the purchase of Products using the form of purchase order attached hereto as Schedule 1 (each a “Purchase Order”). Each Purchase Order will be delivered to such location as Shire designates in writing to Duramed from time to time. After Shire receives a Purchase Order, Shire shall acknowledge receipt thereof in writing within five (5) business days, either (i) accepting the Purchase Order, or (ii) seeking clarification of the Purchase Order, if necessary. Shire shall have no obligation to accept any Purchase Order that does not include all information required on Schedule 1 or that is inconsistent with the terms and conditions of this Agreement. In the event that an order is rejected, Shire and Duramed will cooperate in good faith to resolve any supply issues raised by such order. The minimum size of any order placed by Duramed will be a full batch.      Section 3.3. Delivery of Product. Upon acceptance of a Purchase Order, Shire shall deliver all Product by the delivery date covered by such Purchase Order in accordance with the terms of this Agreement and such Purchase Order, including the quantities accepted in each Purchase Order. At the time of delivery to Duramed, all Product manufactured hereunder shall meet the Product Specification applicable thereto in all material respects, and shall be finished, packaged, labeled and/or ready for commercial sale by Duramed as required in accordance with the Packaging Specifications.      Section 3.4. Expedited Delivery. Upon the request of Duramed to supply the quantities of Product under a Purchase Order on an expedited basis, Shire shall notify Duramed of any expected increased costs that Shire anticipates it will incur. Subject to prior written approval by Duramed of these increased costs, Shire shall use reasonable efforts to supply the quantities of Product on an expedited basis. Shire shall not have any liability for any failure to meet any such requested expedited delivery schedule.      Section 3.5. Excess Purchase Orders. Shire shall use commercially reasonable efforts to, but shall not be obligated to supply quantities of any Product in excess of 120% of the quantities set forth in the most recent forecast for such quarter. If Shire believes it will be unable to deliver any additional volume on the date specified by Shire in the applicable Purchase Order, Shire shall notify Duramed in writing as promptly as practicable, and shall provide a proposed alternative delivery schedule. Any agreement on the delivery schedule for such additional volume shall be documented in writing and shall become effective only upon mutual written agreement of both Parties to the terms and conditions thereof. 4 --------------------------------------------------------------------------------        Section 3.6. Cancellation of Orders. Duramed may not cancel an order without payment to Shire in full for the order. Shire shall, in good faith, use commercially reasonable efforts to mitigate the costs of cancellation of any Purchase Order.      Section 3.7. Conflict. The terms of this Agreement shall prevail over any conflicting, inconsistent or additional terms set forth in any Purchase Order.      Section 3.8. Delivery and Risk of Loss. All Products shipped under this Agreement will be shipped Ex-Works (Incoterms 2000) Shire’s manufacturing facility to such location designated by Duramed in the applicable accepted Purchase Order. Duramed will pay all freight, insurance charges, taxes, import and export duties, inspection fees and other charges applicable to the sale and transport of Products. Risk of loss to Products shall pass to Duramed upon delivery to Duramed’s designated carrier. Title to all Products manufactured hereunder shall pass to Duramed on payment by Duramed for the applicable Product or pro-rata portion thereof.      Section 3.9. Certificate of Analysis. A Certificate of Analysis (“COA”) will accompany each shipment of Products in the form attached hereto as Schedule 2.      Section 3.10. Location of Manufacturing. All Products shall be manufactured in a facility that has been designated as an approved manufacturing facility by the applicable Regulatory Approval for such Product. Should Shire desire to change any of the manufacturing site for a Product, or any component thereof, to a site other than those designated in the applicable Regulatory Approval, Shire shall notify Duramed in writing and the Parties shall thereafter meet to discuss the potential consequences of such a change. Shire shall not change manufacturing sites for any Product, or any component thereof, except in accordance with the authorization of the applicable Governmental Authority, and the procedures and requirements set forth in this Agreement.      Section 3.11. Shortage of Materials. In the event that the materials and/or resources required to manufacture and deliver Products to Duramed in accordance with this Agreement are, or are reasonably anticipated to become, in short supply such that Shire may be unable to provide Duramed with the quantities of Products set forth in a Purchase Order, Shire shall notify Duramed of such shortage as promptly as practicable. If Shire so notifies Duramed, Shire and Shire shall promptly meet to discuss how to address the potential shortage. In the event that Shire, at any time, has any information indicating that it may not be able to supply Duramed with all Products in accordance with a confirmed Purchase Order, Shire shall as soon as practicable provide Duramed a written notice to that effect. Any failure by Shire to meet its obligations under this Agreement as a result of a general shortage of raw materials shall not be considered a breach of this Agreement provided that Shire is meeting its obligations under Article IX. To the extent (other than as a result of a Force Majeure Event) that Shire fails to supply at least 80% of the quantities of Product in the aggregate ordered for a particular calendar quarter for two consecutive calendar quarters, Duramed may request and Shire shall, at its cost and expense, qualify a second source of supply. Such second source shall be qualified and ready to manufacture Product within 12 months following such Duramed request. If Shire fails to qualify and have ready such second source, then Duramed shall have the right to qualify and make ready such second source and Shire shall promptly reimburse Duramed for costs and 5 --------------------------------------------------------------------------------   expenses incurred by it in so doing. Such second source shall be used by Shire to supply Product to Duramed under this Agreement at least to the extent required to maintain the second source as a qualified manufacturer of Product.      Section 3.12. Product Specifications. Shire shall manufacture all Product so that, at the time of delivery to Duramed, the Product conforms, in all material respects, to the Product Specifications, cGMP and any reasonable requests communicated by Duramed to Shire in order for Duramed to comply with any legal or regulatory obligations applicable to Duramed. At the time of shipment of Products, the Products shall have a minimum remaining shelf life of not less than 18 months. On mutual agreement of the Parties, the Parties may modify the Product Specifications of the Product by amendment, unless such changes are required by any regulatory authority, in which case Duramed may unilaterally modify the Product Specifications of the Product. Upon modification of such Product Specifications, Shire shall use commercially reasonable efforts to alter its manufacturing processes to meet such Product Specifications and shall not be liable for any failure to meet its obligations hereunder while acting in good faith to meet the new Product Specifications.      Section 3.13. Packaging Specifications. After the initial Purchase Order, Shire shall package all Products in accordance with the Packaging Specifications. Changes in the Packaging Specifications shall be subject to the mutual agreement of the Parties on a schedule to be agreed by the Parties, taking into account the time and cost required for Shire to implement any necessary manufacturing or packaging modifications. Duramed shall compensate Shire for the cost of any inventory of old packaging that cannot be used as a result of any modification by Duramed to the Packaging Specifications, and for any other costs incurred as a result of the implementation of the modifications to the Packaging Specifications requested by Duramed. Duramed will be responsible for ensuring the accuracy of all information contained on all labels for Products and for the compliance of all such labels with applicable Laws and Regulatory Approvals.      Section 3.14. Facility Maintenance; Inspection; Reports. Shire shall, at all times, maintain and operate all facilities where Products are manufactured, packaged or tested, and implement required quality control procedures to perform its obligations under this Agreement. Not more than once every [*] (or more often in the case of a deficiency), Shire shall permit, or cause its contractors to permit, quality assurance representatives of Duramed or designated third parties and representatives of the applicable Government Authority to inspect such facilities upon reasonable advance notice, during normal business hours and on a confidential basis. Shire shall promptly provide, or cause its contractor to provide, Duramed with a copy of any notice from the applicable Government Authority received at the conclusion of an inspection relating to any Product.      Section 3.15. Subcontracting. Shire shall have the right to subcontract manufacture and supply under this Agreement to any Affiliate of Shire or to a Third Party, provided that, (i) Shire shall procure that such Affiliates and Third Parties comply with the terms and conditions of this Agreement, (ii) Shire shall be liable for any non-performance or breach by such Affiliate or Third Party, and (iii) any subcontracting to a Third Party shall be subject to Duramed’s approval, which approval shall not be unreasonably withheld. 6 --------------------------------------------------------------------------------        Section 3.16. Competing Products. Subject to the Product Development Agreement, each of the Parties recognizes and acknowledges that the other and/or its Affiliates have been, and will continue to be, actively involved in the field in which the Products may be sold. Each Party acknowledges that the other Party and/or its Affiliates currently, or may in the future, market, sell and distribute products that compete directly with any Product, and may continue to market, sell and distribute these and other competing products throughout the Term of this Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES      Section 4.1. Mutual Representations. Each Party hereby represents and warrants to the other Party, as of the date hereof, as follows:      (a) Due Authorization. Such Party is a corporation duly incorporated and in good standing (where such concept applies) as of the Effective Date, and the execution, delivery and performance of this Agreement by such Party have been duly authorized by all necessary action on the part of such Party.      (b) Due Execution. This Agreement has been duly executed and delivered by such Party and constitutes a legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms.      (c) No Conflict. Such Party’s execution, delivery and performance of this Agreement do not: (i) violate, conflict with or result in the breach of any provision of the charter or by-laws (or similar organizational documents) of such Party; (ii) conflict with or violate any law, rule, regulation or governmental order applicable to such Party or any of its assets, properties or businesses; or (iii) conflict with, result in any 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 any agreement to which it is a party.      (d) Duly Licensed. Such Party is duly licensed, authorized or qualified to do business and is in good standing (where such concept applies) in every jurisdiction in which a license, authorization or qualification is required for the ownership or leasing of its assets or the transaction of business of the character transacted by it, except where the failure to be so licensed, authorized or qualified would not have a material adverse effect on such Party’s ability to fulfill its obligations hereunder. ARTICLE V QUALITY ASSURANCE      Section 5.1. Shire Compliance. Shire shall manufacture, fill, package, handle and warehouse the Products in conformity with all applicable laws, cGMP requirements and the Product Specifications. Duramed shall maintain all Regulatory Approvals and all permits and licenses issued by any Governmental Authority that are necessary to permit Shire to manufacture and supply the Products. Shire shall advise Duramed of any information of which it becomes 7 --------------------------------------------------------------------------------   aware arising out of Shire’s activities hereunder that have adverse regulatory compliance and/or reporting consequences affecting the Products.      Section 5.2. Inspections. Shire shall advise Duramed of any requests by any Governmental Authority for inspections of the premises used to manufacture Products. In the event the portion of Shire’s facilities at which Product are manufactured is inspected by any Governmental Authority, Shire shall use commercially reasonable efforts to ensure that Duramed shall have the right to be present during such inspection. To the extent relating directly to a Product, Shire shall notify Duramed of any alleged violations or deficiencies relating to a facility at which any Products are manufactured, packaged or stored, and, to the extent relating directly to a Product, shall disclose to Duramed all relevant portions of any notice of observations or potential violations as well as a copy of its response thereto.      Section 5.3. Duramed Compliance. Duramed shall hold, store, handle, ship, deliver, distribute and/or sell the Products (i) in accordance with applicable cGMP requirements, laws and Regulatory Approvals; and (ii) in compliance with the Product Specifications. Duramed shall enter into all necessary compliance agreements as may be reasonably required or designated by Shire, including but not limited to the quality agreement attached hereto as Exhibit A (the “Quality Agreement”) and any other agreements to cover quality assurance and adverse incident reporting, including the safety agreement.      Section 5.4. Quality Control. Upon delivery of Products to Duramed, Duramed shall be solely responsible for compliance with all Laws and Regulatory Approvals with respect to the Products.      Section 5.5. Rejection of Delivered Products. Within [*] of receipt of any Product, Duramed shall inspect the Product and advise Shire of any defect whereby the Product does not conform to the Product Specifications. Any Product not refused within [*] shall be deemed accepted subject to Section 5.6 below; provided, however, that such acceptance or deemed acceptance shall not adversely affect any claim for indemnification provided in Article XI. If Duramed desires to refuse acceptance, Duramed shall, within such [*] period, inform Shire of its refusal to accept the defective Product and the reason(s) therefor. In the event that Duramed refuses acceptance, Shire, upon confirmation of the reasons for refusal of the Product, will replace the defective Product or refund the purchase price thereof, at Duramed’s option. If Shire and Duramed do not agree on the refusal or rejection of Product, then any Party may refer the matter for final analysis to a specialized laboratory of national reputation acceptable to both Parties for the purpose of determining the results. Any determination by such laboratory shall be final and binding upon the Parties. The cost of any such review by a laboratory shall be borne by Duramed if it is determined that the Product conforms to the Product Specifications, and by Shire if determined that it does not.      Section 5.6. Latent Defects. Duramed shall have the right to refuse and reject any Collaboration Product within [*] from the date Duramed becomes aware of a defect in a Product delivered hereunder, in the case of defects that are not evident upon a reasonable initial inspection but which subsequently become evident. 8 --------------------------------------------------------------------------------        Section 5.7. Non-Conforming Products. Notwithstanding any other provisions of this Agreement, Duramed shall return to Shire or its designee any Products that do not conform with the Product Specifications at the time of shipment to Duramed, or if Duramed and Shire mutually agree, to dispose of such Products as Shire may direct. Shire shall be responsible for the costs associated with the proper disposal of all such Products not in conformance with the Product Specifications at the time of shipment and shall promptly replace or credit, at the option of Shire, such non-conforming Products.      Section 5.8. Cost of Recall. In the event that any Product is quarantined or recalled, or is subject to a stop-sale action, whether voluntary or by the action of any Governmental Authority, or as a result of the revocation or expiration of any Regulatory Approval, any expenses, including any out-of-pocket administrative costs and reasonable fees of any experts or attorneys that may be utilized by either Party, government fines or penalties, related to such recall, quarantine or stop-sale, shall be borne by Duramed unless it is determined that the reason for the quarantine, recall or stop-sale action is the result of the breach by Shire of its obligations under this Agreement, and in such case such expenses shall be shared according to the relative responsibility of each Party. Such determination may be made by the Governmental Authority involved, or by mutual agreement of the Parties following examination and review of all records pertinent to the manufacture of the Product subject to such recall.      Section 5.9 Regulatory Actions. If any regulatory authority in the Territory takes any action with respect to a Product that requires a response or action by Shire, Shire shall use commercially reasonable efforts, at the expense of Duramed, to carry out the response or action, at all times in consultation with Duramed, and promptly thereafter Shire shall meet with Duramed and agree a suitable plan of action in order to try and rectify and/or address any problem(s) identified by the Regulatory Authority within a reasonable period of time at the expense of Duramed. Notwithstanding the foregoing, if any of the above expenses result from Shire’s breach, negligence or willful misconduct hereunder, then any expenses incurred under this Section 5.9 shall be Shire’s responsibility. ARTICLE VI PRICE AND PAYMENTS      Section 6.1. Supply Prices. The unit price payable by Duramed for each Product shall be [*].      Section 6.2. Unit Price Negotiation. [*]      Section 6.3. Records, Audit. Shire shall keep complete and accurate records, consistent with GAAP, of the Supply Price. Duramed shall have the right to have an independent certified public accounting firm of internationally recognized standing, reasonably acceptable to Shire, to have access during normal business hours, and upon reasonable prior written notice, to such of the records of Shire as may be reasonably necessary to verify the accuracy of amounts paid by Duramed under this Agreement for any calendar year ending not more than three (3) years prior to the date of such request; provided, however, that, Duramed shall not have the right to conduct more than one such audit in any twelve (12) month period and that Duramed shall not be permitted to audit the same period of time more than once. The 9 --------------------------------------------------------------------------------   accounting firm shall disclose to Duramed only whether the various expenses subject to reimbursement under this Agreement are correct or incorrect and the specific details concerning any discrepancies. Duramed shall bear all costs of such audit, unless the audit reveals a discrepancy in Duramed’s favor of more than[*], in which case Shire shall bear the cost of the audit. If Shire disputes the findings pursuant to this Section 6.3, the Parties shall meet and discuss such dispute. If such dispute is not resolved within forty-five (45) days, then it shall be subject to the dispute resolution provisions contained herein.      Section 6.4. Invoices. Shire may invoice for Product at any time following tender thereof to Duramed’s carrier. All invoices shall be sent to a single address specified in writing by Duramed. Payment for Product shall be due within forty-five (45) days after the date of the invoice by check or electronic funds transmission in United States dollars without any offset or deduction of any nature whatsoever. All electronic payments shall be made to such account as Shire shall have specified in writing to Duramed with written confirmation of payment sent by facsimile to such address as Shire shall have specified in writing to Duramed. If Duramed fails to pay any undisputed invoiced amount when due, a service charge will be imposed by Shire equal to [*].      Section 6.5. Taxes. The Supply Price shall be exclusive of any applicable value added tax and any other taxes, duties and impositions that, if applicable, shall be paid by Duramed to Shire at the same time as the purchase price for such Product. Duramed shall bear the cost of any such taxes, duties or impositions of any kind, nature or description applicable to the sale and transportation of Product, and Duramed will forthwith pay to Shire all such amounts upon demand.      Section 6.6. Separate Sale. Each shipment of Product shall constitute a separate sale, obligating Duramed to pay therefor, whether such shipment is in whole or only partial fulfillment of any Purchase Order.      Section 6.7. Deductions. Duramed shall not to make any deductions of any kind from any payments due to Shire hereunder unless Duramed will have received prior written authorization from Shire authorizing such deduction.      Section 6.8. Audit.      (a) Audit. Duramed shall have the right to have an independent certified public accounting firm of internationally recognized standing, reasonably acceptable to Shire, to have access during normal business hours, and upon reasonable prior written notice, to such of the records of Shire as may be reasonably necessary to verify the accuracy of amounts paid by Duramed under this Agreement for any calendar year ending not more than [*] prior to the date of such request; provided, however, that, Duramed shall not have the right to conduct more than one such audit in any [*] period and that Duramed shall not be permitted to audit the same period of time more than once. The accounting firm shall disclose to Duramed only whether the various expenses subject to reimbursement under this Agreement are correct or incorrect and the specific details concerning any discrepancies. Duramed shall bear all costs of such audit, unless the audit reveals a discrepancy in Duramed’s favor of more than [*], in which case Shire shall bear the 10 --------------------------------------------------------------------------------   cost of the audit. If Shire disputes the findings pursuant to this Section 6.8, the Parties shall meet and discuss such dispute.      (b) Payment of Additional Amounts. If, based on the results of any audit, (a) additional payments are owed by Duramed to Shire under this Agreement, then Duramed shall make such additional payments, or (b) the payments previously made by Duramed to Shire under this Agreement are in excess of the amounts that were actually required to be made, then Shire shall return such excess payments, in each case within fifteen (15) Business Days after the accounting firm’s written report is delivered to the Parties. ARTICLE VII TERM AND TERMINATION      Section 7.1. Term. Subject to the occurrence of the Closing, the term of this Agreement shall commence on the Effective Date and shall continue until terminated in accordance with this Article VII (the “Term”). Duramed may terminate this Agreement as to the supply of particular Product at any time on six (6) months written notice to Shire. Subject to Article VIII, Shire may terminate this Agreement as to the supply of particular Product at any time on eighteen (18) months written notice to Duramed, provided that Shire may not terminate this Agreement under this sentence until ten (10) years following the Effective Date. Termination of this Agreement with respect to one or more Products shall not relieve the Parties of any obligations with respect to any other Products, and this Agreement shall remain in effect as to such other Products.      Section 7.2. Termination Upon Assignment. Duramed shall also have the right to terminate this Agreement in the event that Shire’s existing Third Party supply agreement is assigned to Duramed, effective immediately upon the effectiveness of such assignment but subject to Section 7.4.      Section 7.3 Termination for Cause. Either Party may terminate this Agreement as to the supply of a particular Product at any time in the event that the other Party materially breaches this Agreement and such material breach continues uncured for a period of ninety (90) days after written notice thereof; provided, however, in the event that the breaching Party has in good faith commenced cure within such ninety (90) day period, but cannot practically complete such cure within such ninety (90) day period, the breaching Party shall have an additional ninety (90) day cure period. In the event a material breach of this Agreement is incapable of cure or cannot be cured in the time periods set forth in the previous sentence acting using commercially reasonable efforts, without limiting any other rights of the non-breaching Party, including the right to seek injunctive relief, the non-breaching Party shall not have the right to terminate this Agreement if (i) the breaching Party is providing full cooperation to resolve and/or mitigate the breach, and (ii) the breach was not caused by willful misconduct by the breaching Party.      Section 7.4. Survival. The provisions of Sections 5.8 and 7.4, and Articles VIII, X, XI and XII shall survive termination or expiration of this Agreement. Termination of this Agreement shall not affect the obligation of any Party to pay the other Party any amounts due hereunder accrued prior to the termination date hereof. Except in the event of termination by Shire under Section 7.3, upon termination of this Agreement Shire shall deliver to Duramed on 11 --------------------------------------------------------------------------------   an ex-works basis all manufactured and work-in progress quantities of Product in its possession that have been manufactured in respect of a specific Purchase Order(s) accepted by Shire hereunder subject to payment in advance therefor by Duramed. The right to terminate this Agreement shall not prejudice any other right or remedy in equity or at law of a Party in respect of any breaches of this Agreement. ARTICLE VIII TERMINATION ASSISTANCE SERVICES      Section 8.1. Termination Assistance Services. If (i) Shire terminates this Agreement as to the supply of Product under Section 7.1 (and Duramed intends to continue marketing and selling the Product), or (ii) Duramed terminates this Agreement under Section 7.1 or 7.2 (and Duramed intends to continue marketing and selling the Product), Shire shall for a period of one (1) year thereafter, upon Duramed’s request, provide any cooperation reasonably requested by Duramed that may be required to facilitate the transfer of the manufacture of the applicable Product to Duramed or Duramed’s designee (“Termination Assistance Services”). Duramed shall reimburse Shire for the reasonable costs of Shire in providing Termination Assistance Services. The rights of Duramed under this Section 8.1 shall be without prejudice to the Parties’ rights to pursue legal remedies for breach of this Agreement, either for breaches prior to termination or during the period this Agreement is continued in force post termination.      Section 8.2. Development of Changeover Plan. If and to the extent requested by Duramed, whether prior to, upon, or following termination of this Agreement by Duramed, Shire shall use commercially reasonable efforts to assist Duramed in developing a plan that shall specify the tasks to be performed by the Parties in connection with the Termination Assistance Services and the schedule for the performance of such tasks (a “Changeover Plan”). The Changeover Plan shall include descriptions of the services, fees, documentation and access requirements that will promote an orderly transition of the manufacture of Product to Duramed or its designee.      Section 8.3. Know-How, Infrastructure, and Software. In connection with the Termination Assistance Services, Shire shall make available to Duramed or its designee, to the extent owned or controlled by and in the possession of Shire and reasonably required to manufacture the applicable Product, (i) copies of all applicable requirements, standards, policies, reports and report formats, user manuals, technical manuals, system architecture, processes, operating procedures and other documentation, (ii) copies of flow charts of the manufacturing procedures and work instructions related to manufacturing the relevant Product, (iii) a list of all material equipment, including the source of such equipment, utilized in the production of the applicable Product, (iv) copies of all current specifications, including packaging, for the relevant Product, (v) copies of all standard operating procedures for the manufacturing procedures to be made available to Duramed, (vi) all necessary environmental conditions necessary to manufacture the relevant Product and copies of any existing external environmental impact studies based on the materials or methods employed in the manufacturing method to be made available to Duramed, and (vii) such other documentation as the Parties may agree. ARTICLE IX FORCE MAJEURE 12 --------------------------------------------------------------------------------        Section 9.1. Force Majeure. No Party shall be responsible for failure or delay in performance hereunder due to reasons beyond its reasonable control, including without limitation, by reason of fire, flood, riot, freight embargoes, acts of God or of the public enemy, war or civil disturbances, general shortage of raw materials, or any future laws, rules, regulations or acts of any government affecting a Party that would delay or prohibit performance hereunder (a “Force Majeure Event”). Upon the occurrence of a Force Majeure Event, the Party whose performance is so affected shall promptly give notice to the other Party of the occurrence or circumstance upon which it intends to rely to excuse its performance. During the duration of the Force Majeure Event, the Party so affected shall use its reasonable commercial efforts to avoid or remove such Force Majeure Event and shall take reasonable steps to resume its performance under this Agreement with the least possible delay. Any Force Majeure Event must be beyond the control and without the fault or negligence of the Party claiming excusable delay, provided that, breaches by any Party’s subcontractors shall not excuse any delay or failure by that Party. ARTICLE X CONFIDENTIALITY      Section 10.1. Confidential Information. As used in this Agreement, the term “Confidential Information” means all secret, confidential or proprietary information or data, whether provided in written, oral, graphic, video, computer, electronic or other form, provided pursuant to this Agreement or generated pursuant to this Agreement by one Party or its Affiliates (the “Disclosing Party”) to the other Party or its Affiliates (the “Receiving Party”), including but not limited to, information relating to the Disclosing Party’s existing or proposed research, development efforts, patent applications, business or products, and any other materials that have not been made available by the Disclosing Party to the general public. Confidential Information shall not include any information or materials that: (a) were already known to the Receiving Party (other than under an obligation of confidentiality), at the time of disclosure by the Disclosing Party, to the extent such Receiving Party has documentary evidence to that effect; (b) were generally available to the public or otherwise part of the public domain at the time of disclosure thereof to the Receiving Party; (c) became generally available to the public or otherwise part of the public domain after disclosure or development thereof, as the case may be, other than through any act or omission of a Party in breach of such Party’s confidentiality obligations under this Agreement; (d) were disclosed to a Party, other than under an obligation of confidentiality, by a third party who had no obligation to the Disclosing Party not to disclose such information to others; or (e) were independently discovered or developed by or on behalf of the Receiving Party without the use of the Confidential Information belonging to the other Party, to the extent such Receiving Party has documentary evidence to that effect. 13 --------------------------------------------------------------------------------        Section 10.2. Confidentiality Obligations. Each of Duramed and Shire shall keep confidential all Confidential Information of the other Party with the same degree of care it maintains the confidentiality of its own Confidential Information but in no event less than a reasonable degree of care. Neither Party shall use such Confidential Information for any purpose other than in performance of this Agreement or disclose the same to any other Person other than to such of its and its Affiliates’ directors, managers, employees, independent contractors, agents or consultants who are bound by confidentiality obligations consistent with those contained herein and who have a need to know such Confidential Information to implement the terms of this Agreement or enforce its rights under this Agreement. Upon termination of this Agreement, the Receiving Party shall return or destroy all documents, tapes or other media containing Confidential Information of the Disclosing Party that remain in the possession of the Receiving Party and its Affiliates or their directors, managers, employees, independent contractors, agents or consultants, except that the Receiving Party may keep one copy of the Confidential Information in the legal department files of the Receiving Party, solely for archival purposes. Such archival copy shall continue to be subject to the provisions of this Article X.      Section 10.3. Permitted Disclosure and Use. Notwithstanding Section 10.2, a Party may disclose Confidential Information belonging to the other Party only to the extent such disclosure is reasonably necessary to: (a) obtain Regulatory Approval to the extent such disclosure is made to a Governmental Authority; (b) comply with or enforce any of the provisions of this Agreement; (c) comply with Laws; or (d) comply with applicable stock exchange regulations. If a Party deems it necessary to disclose Confidential Information of the other Party pursuant to this Section 10.3, such Party shall give reasonable advance notice of such disclosure to the other Party to permit such other Party sufficient opportunity to object to such disclosure or to take measures to ensure confidential treatment of such information. In addition, notwithstanding Section 10.2, the Parties shall cooperate to prepare standardized public responses to anticipated inquiries from the public, press, stockholders, investors and/or analysts with respect to the activities hereunder. Despite the foregoing, each Party agrees that the other Party is free to disclose this Agreement in its entirety to the United States Federal Trade Commission and the United States Department of Justice, or to any court with jurisdiction over the litigations settled under the Settlement Agreement between Shire Laboratories Inc. and Barr Laboratories Inc. dated August 14, 2006.      Section 10.4. Unauthorized Disclosure. The Receiving Party acknowledges and agrees that the Confidential Information of the Disclosing Party constitutes proprietary information and trade secrets valuable to the Disclosing Party, and that the unauthorized use, loss or outside disclosure of such Confidential Information shall be presumed to cause irreparable injury to the Disclosing Party.      Section 10.5. Notification. The Receiving Party shall notify the Disclosing Party promptly upon discovery of any unauthorized use or disclosure of the Disclosing Party’s Confidential Information, and shall cooperate with the Disclosing Party in any reasonably requested fashion to assist the Disclosing Party to regain possession of such Confidential Information and to prevent its further unauthorized use or disclosure. The Receiving Party acknowledges that monetary damages may not be a sufficient remedy for unauthorized disclosure of Confidential Information and that the Disclosing Party may be entitled, without 14 --------------------------------------------------------------------------------   waiving other rights or remedies, to such injunctive or equitable relief as may be deemed proper by a court of competent jurisdiction in the event of such unauthorized disclosure.      Section 10.6. Confidentiality of this Agreement. The terms of this Agreement shall be Confidential Information of each Party and, as such, shall be subject to the provisions of this Section 10.6. ARTICLE XI INDEMNIFICATION      Section 11.1. Indemnification by Duramed. Duramed hereby agrees to hold Shire, its Affiliates, and their respective directors, agents and employees harmless from and against any and all Losses arising in connection with any and all charges, complaints, actions, suits, proceedings, hearings, investigations, claims, demands, judgments, orders, decrees, stipulations or injunctions by a third party (each a “Third Party Claim”) resulting directly from (a) any breach by Duramed of any of its representations, warranties, covenants or obligations pursuant to this Agreement, (b) the negligence or willful misconduct by Duramed or its Affiliates or their respective officers, directors, employees, agents or consultants in performing any obligations under this Agreement, (c) the Product, including the use, handling, storage, sale or other disposition of Product (including, without limitation, those Third Party Claims that involve product defect, product liability, death or bodily injury (or allegations thereof) to any individual or any property, or (d) infringement of intellectual property based on the Product Specification, Packaging Specifications, manufacture, use, sale, offer for sale, importation or other distribution of Product, except to the extent that such Losses in (a) through (d) result from the negligence or willful misconduct of Shire or it’s third party supplier of Product or breach of this Agreement by Shire.      Section 11.2. Indemnification by Shire. Shire hereby agrees to hold Duramed, its Affiliates, and their respective directors, agents and employees harmless from and against any and all Losses arising in connection with any and all Third Party Claims resulting directly from (a) any breach by Shire of any of its representations, warranties, covenants or obligations pursuant to this Agreement, or (b) the negligence or willful misconduct of Shire or its Affiliates or their respective officers, directors, employees, agents or consultants in performing any obligations under this Agreement, or (c) claims that involve product defect, product liability, death or bodily injury (or allegations thereof) to any individual or any property to the extent that such claim results from Shire’s breach, negligence or willful misconduct hereunder, or the negligence or willful misconduct of Shire’s third party supplier of Products, except to the extent that such Losses in (a) through (c) result from the negligence or willful misconduct of Duramed, or the breach of this Agreement by Duramed.      Section 11.3. Notice of Claim. All indemnification claims in respect of any indemnitee seeking indemnity hereunder (collectively, the “Indemnitees” and each an “Indemnitee”) shall be made solely by the corresponding Party (the “Indemnified Party”). The Indemnified Party shall give the indemnifying Party (the “Indemnifying Party”) prompt written notice (an “Indemnification Claim Notice”) of any Losses or the discovery of any fact upon which such Indemnified Party intends to base a request for indemnification hereunder, but in no event shall the Indemnifying Party be liable for any Losses that result from any delay in providing such notice which materially prejudices the defense of such Third Party Claim. Each 15 --------------------------------------------------------------------------------   Indemnification Claim Notice must contain a description of the claim and the nature and amount of such Loss (to the extent that the nature and amount of such Loss are known at such time). Together with the Indemnification Claim Notice, the Indemnified Party shall furnish promptly to the Indemnifying Party copies of all notices and documents (including court papers) received by any Indemnitee in connection with the Third Party Claim. The Indemnifying Party shall not be obligated to indemnify the Indemnified Party to the extent any admission or statement made by the Indemnified Party materially prejudices the defense of such Third Party Claim.      Section 11.4. Control of Defense. At its option, the Indemnifying Party may assume the defense of any Third Party Claim subject to indemnification hereunder by giving written notice to the Indemnified Party within thirty (30) days after the Indemnifying Party’s receipt of an Indemnification Claim Notice. Upon assuming the defense of a Third Party Claim, the Indemnifying Party may appoint as lead counsel in the defense of the Third Party Claim any legal counsel it selects. Should the Indemnifying Party assume the defense of a Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party or any other Indemnitee for any legal expenses subsequently incurred by such Indemnified Party or other Indemnitee in connection with the analysis, defense or settlement of the Third Party Claim.      Section 11.5. Right to Participate in Defense. Without limiting Section 11.4, any Indemnitee shall be entitled to participate in, but not control, the defense of a Third Party Claim for which it has sought indemnification hereunder and to employ counsel of its choice for such purpose; provided, however, that such employment shall be at the Indemnitee’s own expense unless (a) the employment thereof has been specifically authorized by the Indemnifying Party in writing, or (b) the Indemnifying Party has failed to assume the defense and employ counsel in accordance with Section 11.4 (in which case the Indemnified Party shall control the defense).      Section 11.6. Settlement. With respect to any Losses relating solely to the payment of money damages in connection with a Third Party Claim and that shall not result in the Indemnitee’s becoming subject to injunctive or other relief or otherwise adversely affect the business of the Indemnitee in any manner, and as to which the Indemnifying Party shall have acknowledged in writing the obligation to indemnify the Indemnitee hereunder, the Indemnifying Party shall have the sole right to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss, on such terms as the Indemnifying Party, in its reasonable discretion, shall deem appropriate (provided, however that such terms shall include a complete and unconditional release of the Indemnified Party from all liability with respect thereto), and shall transfer to the Indemnified Party all amounts which said Indemnified Party shall be liable to pay prior to the time of the entry of judgment. With respect to all other Losses in connection with Third Party Claims, where the Indemnifying Party has assumed the defense of the Third Party Claim in accordance with Section 11.4, the Indemnifying Party shall have authority to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss provided it obtains the prior written consent of the Indemnified Party (which consent shall be at the Indemnified Party’s reasonable discretion). The Indemnifying Party that has assumed the defense of the Third Party Claim in accordance with Section 11.4 shall not be liable for any settlement or other disposition of a Loss by an Indemnitee that is reached without the written consent of such Indemnifying Party. Regardless of whether the Indemnifying Party chooses to defend or prosecute any Third Party Claim, no Indemnitee shall admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim without first offering to the 16 --------------------------------------------------------------------------------   Indemnifying Party the opportunity to assume the defense of the Third Party Claim in accordance with Section 11.4.      Section 11.7. Cooperation. If the Indemnifying Party chooses to defend or prosecute any Third Party Claim, the Indemnified Party shall, and shall cause each other Indemnitee to, cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection with such Third Party Claim. Such cooperation shall include access during normal business hours afforded to the Indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third Party Claim, and making Indemnitees and other employees and agents available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder, and the Indemnifying Party shall reimburse the Indemnified Party for all its reasonable out-of-pocket expenses incurred in connection with such cooperation.      Section 11.8. Expenses of the Indemnified Party. Except as provided above, the reasonable and verifiable costs and expenses, including fees and disbursements of counsel, incurred by the Indemnified Party in connection with any Third Party Claim shall be reimbursed on a calendar quarter basis by the Indemnifying Party, without prejudice to the Indemnifying Party’s right to contest the Indemnified Party’s right to indemnification and subject to refund in the event the Indemnifying Party is ultimately held not to be obligated to indemnify the Indemnified Party.      Section 11.9. Insurance. At all times from the Closing Date until [*] following termination or expiration of this Agreement, each of Shire and Duramed will maintain product liability insurance (or self insurance), that is reasonable and customary in the U.S. pharmaceutical industry for companies of comparable size, but in no event less than [*] per occurrence and [*] in the aggregate limit of liability per year. Each of Shire and Duramed shall provide written proof of such insurance or self insurance to the other Party upon request.      Section 11.10. Exclusion of Certain Damages. IN NO EVENT SHALL ANY PARTY BE LIABLE TO ANY OTHER PARTY FOR INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY KIND ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, OR FOR ANY DIRECT OR INDIRECT LOSS OF PROFIT, LOST BUSINESS OPPORTUNITY, LOSS OF OR DISRUPTION TO PRODUCTION OR GOODWILL, EXCEPT TO THE EXTENT SUCH DAMAGES: (A) ARE INCLUDED IN A THIRD-PARTY CLAIM FOR WHICH SUCH PARTY IS INDEMNIFIED HEREUNDER; OR (B) ARE FOR BREACH OF CONFIDENTIALITY OBLIGATIONS. ARTICLE XII MISCELLANEOUS      Section 12.1. Entire Agreement; Amendment. This Agreement, together with the Product Acquisition Agreement, including the exhibits attached hereto and thereto (each of which is hereby and thereby incorporated herein and therein by reference), set forth the complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, 17 --------------------------------------------------------------------------------   representations, conditions and understandings between the Parties hereto and supersedes and terminates all prior agreements and understandings between the Parties, which shall continue to govern the obligations of the Parties with respect to information disclosed thereunder with respect to periods prior to the Effective Date. There are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties other than as are set forth herein. No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon the Parties unless reduced to writing and signed by an authorized officer of each Party. For the avoidance of doubt, the Parties agree that all covenants, promises, agreements, warranties, representations, conditions, and understandings set forth herein are made and deemed effective as of the Effective Date, and that the execution of this Agreement shall not constitute a waiver of any right or claim of either Party as of the Effective Date.      Section 12.2. Notices. All notices or other communications that are required or permitted under this Agreement shall be in writing and delivered personally, sent by facsimile (and promptly confirmed by personal delivery or overnight courier as provided in this Agreement), or sent by internationally-recognized overnight courier to the addresses below. Any such communication shall be deemed to have been given (a) when delivered, if personally delivered or sent by facsimile on a Business Day (so long as promptly confirmed by personal delivery or overnight courier as provided in this Agreement), and (b) on the second Business Day after dispatch, if sent by internationally-recognized overnight courier. Unless otherwise specified in writing, the mailing addresses of the Parties shall be as described below.               For Duramed:   Duramed Laboratories, Inc.         400 Chestnut Ridge Road         Woodcliff Lake, NJ 07677         Phone: 201-930-3300         Fax: 201-930-3330         Attention: President               with a copy to:   Barr Pharmaceuticals, Inc.         400 Chestnut Ridge Road         Woodcliff Lake, NJ 07677         Phone: 201-930-3300         Fax: 888-843-0563         Attention: General Counsel               For Shire:   Shire LLC         725 Chesterbrook Boulevard         Wayne, Pennsylvania 19087-5637         Fax: (484) 595-8163         Attention: General Counsel               with a copy to:   Morgan, Lewis & Bockius LLP         502 Carnegie Center         Princeton, NJ 08540         Fax: (609) 919-6701 18 --------------------------------------------------------------------------------                     Attention: Randall B. Sunberg      Section 12.3. Independent Contractors. In making and performing this Agreement, Shire and Duramed shall act at all times as independent contractors and nothing contained in this Agreement shall be construed or implied for any purpose to create an agency, partnership, limited partnership, joint venture or employer and employee relationship between Shire and Duramed and this Agreement shall not be construed to suggest otherwise. At no time shall one Party make commitments or incur any charges or expenses for or in the name of the other Party. Except as otherwise provided in this Agreement, each Party shall be solely responsible for its own costs and expenses associated with this Agreement.      Section 12.4. Maintenance of Records. Each Party shall keep and maintain all records required by Law with respect to the Products and shall make copies of such records available to the other Party upon reasonable request.      Section 12.5. United States Dollars. References in this Agreement to “Dollars” or “$” shall mean the legal tender of the United States.      Section 12.6. No Strict Construction. This Agreement has been prepared jointly and shall not be strictly construed against either Party.      Section 12.7. Assignment. Neither Party shall sell, transfer, assign, delegate, pledge or otherwise dispose of, whether voluntarily, involuntarily, by operation of Law or otherwise, this Agreement or any of its rights or obligations under this Agreement without the prior written consent of the other Party (which consent may be granted, withheld or conditioned at such other Party’s sole and absolute discretion); provided, however, that either Party may assign or transfer this Agreement or any of its rights or obligations under this Agreement without the consent of the other Party to any Affiliate of such Party, or to any Third Party (a) with which it merges or consolidates, or to which it transfers all or substantially all of its assets to which this Agreement pertains or (b) in part, in connection with the sale or transfer of such Party’s business relating to Commercialization of a Collaboration Product within a particular country. The assigning Party (unless it is not the surviving entity) shall remain jointly and severally liable with, and shall guarantee the performance of, the relevant Affiliate or Third Party assignee under this Agreement, and the relevant Affiliate assignee, Third Party assignee or surviving entity shall assume in writing all of the assigning Party’s obligations under this Agreement. Any purported assignment or transfer in violation of this Section 12.7 shall be void ab initio and of no force or effect. Notwithstanding anything to the contrary herein or in the Product Acquisition Agreement, in the event any assignment by Duramed hereunder gives rise to any obligation to withhold any amounts payable to Shire under this Agreement, Duramed shall pay Shire in full, without regard to any amounts so withheld, subject to Shire’s obligation to reimburse Duramed upon Shire’s recovery from the applicable taxing authority of any amounts so withheld. Notwithstanding the foregoing, Duramed shall be liable for, and indemnify Shire against, any non-U.S. taxes, any value-added or sales taxes, any duties or levies and assessments, howsoever designated or computed that are required to be paid or withheld by Duramed on such payments. Duramed shall so indemnify Shire within forty-five (45) days of Shire’s receipt of notification from Shire (in accordance with Section 12.2 hereof) that either (i) based upon current facts and circumstances, Shire does not have or will not have during the applicable tax year any or 19 --------------------------------------------------------------------------------   sufficient foreign tax credits available to utilize to offset such tax liability; or (ii) Shire has applied for a refund from the taxing authority at issue (such notice to include a copy of such refund application). Notwithstanding anything in this Agreement to the contrary, in the event that withholding taxes are paid on behalf of Shire by Duramed, if Shire uses a foreign tax credit received as a result of the payment of withholding taxes by Duramed and thereby reduces the amount of U.S. income tax that Shire otherwise would have paid, or otherwise receives a refund, Shire shall refund to Duramed the amount of such reduction with respect to such foreign tax credit or such refund.      Section 12.8. Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Signatures provided by facsimile transmission shall be deemed to be original signatures.      Section 12.9. Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be reasonably necessary or appropriate in order to carry out the purposes and intent of this Agreement.      Section 12.10. Severability. If any one or more of the provisions of this Agreement is held to be invalid or unenforceable by any court of competent jurisdiction from which no appeal can be or is taken, the provision shall be considered severed from this Agreement and shall not serve to invalidate any remaining provisions hereof. The Parties shall make a good fait effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by the Parties when entering this Agreement may be realized.      Section 12.11. Headings. The headings for each article and section in this Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular article or section.      Section 12.12. No Waiver. Any delay in enforcing a Party’s rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of such Party’s rights to the future enforcement of its rights under this Agreement, excepting only as to an express written and signed waiver as to a particular matter for a particular period of time. [signature page follows] 20 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective representatives thereunto duly authorized, all as of the date first written above.                   SHIRE LLC                   By:   /s/ Matthew Emmens                       Name:   Matthew Emmens                       Title:   CEO                                     DURAMED PHARMACEUTICALS, INC.                   By:   /s/ William McKee                       Name:   William McKee                       Title:   Sr. V.P., Chief Financial Officer & Treasurer                   SHIRE plc, a British public limited company having a principal place of business at Hampshire International Business Park, Chineham, Basingstoke, England RG24 8EP, hereby guarantees in the performance of Shire of all obligations of Shire under this Agreement, in accordance with the terms and conditions of this Agreement, including any applicable notice or cure periods. SHIRE PLC           By:   /s/ Matthew Emmens               Name:   Matthew Emmens                Title:   CEO               [Signature Page to Adderall IR Supply Agreement] 1 --------------------------------------------------------------------------------   EXHIBIT A QUALITY AGREEMENT 2 --------------------------------------------------------------------------------   SCHEDULE 1 FORM OF COA 3 --------------------------------------------------------------------------------   SCHEDULE 3 – REFERENCE INVENTORY AMOUNTS OF FINISHED GOODS PRODUCT HELD BY SHIRE AS OF THE DATE HEREOF       ADDERALL IR DOSAGE   # OF BOTTLES OF 100 TABLETS [*]   [*] [*]   [*] [*]   [*] [*]   [*] [*]   [*] [*]   [*] [*]   [*] 4 --------------------------------------------------------------------------------   EXHIBIT D GENERAL ASSIGNMENT AND BILL OF SALE      THIS GENERAL ASSIGNMENT AND BILL OF SALE (this “General Assignment”), dated as of September 29, 2006, is made and entered into by and between Shire LLC, a Kentucky limited liability company (“Shire”), and Duramed Pharmaceuticals, Inc., a Delaware corporation (“Duramed”). All capitalized words and terms used in this General Assignment and not defined herein shall have the respective meanings ascribed to them in the Product Acquisition and License Agreement, dated as of August 14, 2006 (the “Agreement”).      WHEREAS, Shire and Duramed have entered into the Agreement pursuant to which Shire, among other things, desires to sell, transfer, convey and license to Duramed Shire’s right, title and interest in and to certain rights to the Product and the Purchased Assets, and Duramed wishes to assume certain liabilities relating to the Product; and      WHEREAS, in performance of their respective obligations under the Agreement, Shire and Duramed desire to execute and deliver this General Assignment.      NOW, THEREFORE, for and in consideration of the Purchase Price and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:      1. Shire does hereby sell, assign, convey and transfer unto Duramed the Purchased Assets. Duramed and its successors and assigns are to have and to hold all of such Purchased Assets unto Duramed and its successors and assigns forever.      2. This General Assignment shall inure to the benefit of, and be binding upon, the parties hereto and their respective heirs, successors, trustees, transferees and permitted assigns.      3. Each of the parties agrees that it will, from time to time after the date hereof, without further consideration, execute, acknowledge and deliver all such further acts, assignments, transfers, conveyances, evidences of title, assumptions and assurances as may be required to carry out the intent of this General Assignment and to sell, assign, convey, transfer and deliver the Purchased Assets to Duramed.      4. This General Assignment is made in accordance with, and is subject to, all of the terms and conditions set forth in the Agreement. Except as otherwise expressly set forth herein, the terms and conditions of the Agreement shall control the terms and conditions of this General Assignment.      5. This General Assignment may be executed in two counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument. This General Assignment may be executed by facsimile signatures, which signatures shall have the same force and effect as original signatures.   --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have executed this General Assignment and Assumption as of the date first above written.                   SHIRE LLC                   By:   /s/ Matthew Emmens                           Name: Matthew Emmens             Title:   CEO                       DURAMED PHARMACEUTICALS, INC.                   By:   /s/ Fred Wilkinson                           Name: Fred Wilkinson           Title:   President & C.O.O.       --------------------------------------------------------------------------------   EXHIBIT E Form of FDA Letter [DATE] Thomas Laughren, MD Director, Division of Psychiatry Products Office of Drug Evaluation I Centre for Drug Evaluation and Research Document Control Room Food and Drug Administration 5901-B Ammendale Road Beltsville, MD 20705-1266 ARTICLE 1 NDA 11-522 ADDERALL (MIXED SALTS OF A SINGLE-ENTITY AMPHETAMINE PRODUCT) TABLETS ARTICLE 2 CHANGE IN OWNERSHIP OF AN APPLICATION Reference is made to NDA 11-522 for Adderall Tablets; and to 21 CFR § 314.72 pertaining to a change in ownership of an application. This is to notify the agency that Duramed Pharmaceuticals, Inc., (“Duramed”), a subsidiary of Barr Pharmaceuticals, Inc, is the regulatory agent for Duramed Pharmaceuticals, Inc. In accordance with provisions of §314.72, we are submitting an application form signed by the new owner along with the following information:   1.   Duramed commits to the agreements, promises, and conditions made by Shire, the former owner of NDA 11-522, and contained in the application;     2.   The change in ownership is effective [DATE]; and     3.   Duramed has a complete copy of the approved application, including supplements and records that are to be kept under 21 CFR § 314.81 All future correspondence regarding NDA 11-522 should be directed to:   --------------------------------------------------------------------------------   Joseph A. Carrado, M.Sc., R.Ph. Vice President, Clinical Regulatory Affairs Duramed Research, Inc. One Belmont Avenue, 11th Floor Bala Cynwyd, PA 19004 Phone (610) 747 2910 Fax: (610) 747 6607 Also, please find attached a copy of Shire’s Transfer of Ownership letter, dated [DATE], for the Division’s convenience. If you have any questions or require any additional information, please contact the undersigned at (610) 747-2910. Sincerely, Joseph A. Carrado, M.S.c., R.Ph. Vice President Clinical Regulatory Affairs   --------------------------------------------------------------------------------   EXHIBIT F Form of Correspondence to Third Parties   --------------------------------------------------------------------------------   SCHEDULE 1.18 Licensed Patents [*]   --------------------------------------------------------------------------------   SCHEDULE 1.31 Product Trademark                                       Serial No./   Reg. No./ Mark   Owner   Country   Goods/Services   Filing Date   Reg. Date [*]   [*]   [*]   [*]   [*]   [*]   --------------------------------------------------------------------------------   SCHEDULE 2.8 Allocation of Purchase Price   --------------------------------------------------------------------------------   SCHEDULE 4.1 Shire Disclosure Schedule   --------------------------------------------------------------------------------   SCHEDULE 4.1(h) Litigation 1. Branson v. Shire Richwood Inc.      Filed on October 3, 2002 in the Circuit Court, Boone County, Kentucky, plaintiff, claims that an alleged psychotic episode leading to the death of her child was caused by the her ingestion of Adderall. The Court filed the Judgment on April 17, 2006 and plaintiff failed to file a notice of appeal of the jury’s defense verdict by the deadline to appeal, May 17, 2006. 2. [*] 3. UZammit v. Shire US Inc.      Pio Peter Zammit, the plaintiff, claims that his ingestion of 20mg of Adderall caused him to suffer a heart attack on April 24, 2002. Plaintiff claims negligence and failure to warn strict products liability for failing to adequately warn of the risks of heart attack while taking Adderall. Plaintiff is currently appealing the District Court’s dismissal of the case to the Sixth Circuit. Shire has filed a motion to dismiss plaintiff’s appeal. 4. [*]  

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.   SERIES B WARRANT TO PURCHASE   SHARES OF COMMON STOCK   OF   MERCHANDISE CREATIONS, INC.   Expires December 7, 2011   No.: W-B-06-01 Number of Shares: 1,777,777[1] Date of Issuance: December 7, 2006   FOR VALUE RECEIVED, the undersigned, Merchandise Creations, Inc., a Nevada corporation (together with its successors and assigns, the “Issuer”), hereby certifies that Vision Opportunity Master Fund, Ltd. or its registered assigns is entitled to subscribe for and purchase, during the Term (as hereinafter defined), up to One Million Seven Hundred Seventy-Seven Thousand Seven Hundred Seventy-Seven (1,777,777) shares (subject to adjustment as hereinafter provided) of the duly authorized, validly issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise price per share equal to the Warrant Price then in effect, subject, however, to the provisions and upon the terms and conditions hereinafter set forth. Capitalized terms used in this Warrant and not otherwise defined herein shall have the respective meanings specified in Section 8 hereof.   1.            Term. The term of this Warrant shall commence on December 7, 2006 and shall expire at 6:00 p.m., eastern time, on December 7, 2011 (such period being the “Term”).     2. Method of Exercise; Payment; Issuance of New Warrant; Transfer and Exchange.   (a)          Time of Exercise. The purchase rights represented by this Warrant may be exercised in whole or in part during the Term for such number of shares of Common Stock equal to fifty percent (50%) of the number of shares of Common Stock that have been exercised by the Holder pursuant to the Series J Warrant issued by the Issuer to the Holder pursuant to the Purchase Agreement. _________________________  Post 20-for-1 forward stock split to be effected on December 11, 2006.     -1-   --------------------------------------------------------------------------------     (b)          Method of Exercise. The Holder hereof may exercise this Warrant, in whole or in part, by the surrender of this Warrant (with the exercise form attached hereto duly executed) at the principal office of the Issuer, and by the payment to the Issuer of an amount of consideration therefor equal to the Warrant Price in effect on the date of such exercise multiplied by the number of shares of Warrant Stock with respect to which this Warrant is then being exercised, payable at such Holder’s election (i) by certified or official bank check or by wire transfer to an account designated by the Issuer, (ii) by “cashless exercise” in accordance with the provisions of subsection (c) of this Section 2, but only when a registration statement under the Securities Act providing for the resale of the Warrant Stock is not then in effect, or (iii) by a combination of the foregoing methods of payment selected by the Holder of this Warrant.   (c)          Cashless Exercise. Notwithstanding any provisions herein to the contrary and commencing one (1) year following the Original Issue Date if (i) the Per Share Market Value of one share of Common Stock is greater than the Warrant Price (at the date of calculation as set forth below) and (ii) a registration statement under the Securities Act providing for the resale of the Warrant Stock is not then in effect by the date such registration statement is required to be effective pursuant to the Registration Rights Agreement (as defined in the Purchase Agreement) or not effective at any time during the Effectiveness Period (as defined in the Registration Rights Agreement) in accordance with the terms of the Registration Rights Agreement, unless the registration statement is not effective as a result of the Issuer exercising its rights under Section 3(n) of the Registration Rights Agreement, in lieu of exercising this Warrant by payment of cash, the Holder may exercise this Warrant by a cashless exercise and shall receive the number of shares of Common Stock equal to an amount (as determined below) by surrender of this Warrant at the principal office of the Issuer together with the properly endorsed Notice of Exercise in which event the Issuer shall issue to the Holder a number of shares of Common Stock computed using the following formula:   X = Y - (A)(Y) B   Where   X = the number of shares of Common Stock to be issued to the Holder.     Y = the number of shares of Common Stock purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised.     A = the Warrant Price.     B = the Per Share Market Value of one share of Common Stock.   (d)          Issuance of Stock Certificates. In the event of any exercise of this Warrant in accordance with and subject to the terms and conditions hereof, certificates for the shares of Warrant Stock so purchased shall be dated the date of such exercise and delivered to the Holder hereof within a reasonable time, not exceeding three (3) Trading Days after such exercise (the “Delivery Date”) or, at the request of the Holder (provided that a registration statement under the Securities Act providing for the resale of the Warrant Stock is then in effect), issued and   -2-   --------------------------------------------------------------------------------   delivered to the Depository Trust Company (“DTC”) account on the Holder’s behalf via the Deposit Withdrawal Agent Commission System (“DWAC”) within a reasonable time, not exceeding three (3) Trading Days after such exercise, and the Holder hereof shall be deemed for all purposes to be the holder of the shares of Warrant Stock so purchased as of the date of such exercise. Notwithstanding the foregoing to the contrary, the Issuer or its transfer agent shall only be obligated to issue and deliver the shares to the DTC on a holder’s behalf via DWAC if such exercise is in connection with a sale and the Issuer and its transfer agent are participating in DTC through the DWAC system. The Holder shall deliver this original Warrant, or an indemnification undertaking with respect to such Warrant in the case of its loss, theft or destruction, at such time that this Warrant is fully exercised. With respect to partial exercises of this Warrant, the Issuer shall keep written records for the Holder of the number of shares of Warrant Stock exercised as of each date of exercise.   (e)          Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise. In addition to any other rights available to the Holder, if the Issuer fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Stock pursuant to an exercise on or before the Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Stock which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Issuer shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of shares of Warrant Stock that the Issuer was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of shares of Warrant Stock for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Issuer timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Issuer shall be required to pay the Holder $1,000. The Holder shall provide the Issuer written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Issuer. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Issuer’s failure to timely deliver certificates representing shares of Common Stock upon exercise of this Warrant as required pursuant to the terms hereof. (f)         Transferability of Warrant. Subject to Section 2(h) hereof, this Warrant may be transferred by a Holder, in whole or in part, without the consent of the Issuer. If transferred pursuant to this paragraph, this Warrant may be transferred on the books of the Issuer by the Holder hereof in person or by duly authorized attorney, upon surrender of this Warrant at the principal office of the Issuer, properly endorsed (by the Holder executing an assignment in the form attached hereto) and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer. This Warrant is exchangeable at the principal office of the Issuer for Warrants to purchase the same aggregate number of shares of Warrant Stock, each new   -3-   --------------------------------------------------------------------------------   Warrant to represent the right to purchase such number of shares of Warrant Stock as the Holder hereof shall designate at the time of such exchange. All Warrants issued on transfers or exchanges shall be dated the Original Issue Date and shall be identical with this Warrant except as to the number of shares of Warrant Stock issuable pursuant thereto.   (g)          Continuing Rights of Holder. The Issuer will, at the time of or at any time after each exercise of this Warrant, upon the request of the Holder hereof, acknowledge in writing the extent, if any, of its continuing obligation to afford to such Holder all rights to which such Holder shall continue to be entitled after such exercise in accordance with the terms of this Warrant, provided that if any such Holder shall fail to make any such request, the failure shall not affect the continuing obligation of the Issuer to afford such rights to such Holder.     (h) Compliance with Securities Laws.   (i)           The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Warrant Stock to be issued upon exercise hereof are being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Warrant Stock to be issued upon exercise hereof except pursuant to an effective registration statement, or an exemption from registration, under the Securities Act and any applicable state securities laws.   (ii)          Except as provided in paragraph (iii) below, this Warrant and all certificates representing shares of Warrant Stock issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form:   THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.   (iii)        The Issuer agrees to reissue this Warrant or certificates representing any of the Warrant Stock, without the legend set forth above if at such time, prior to making any transfer of any such securities, the Holder shall give written notice to the Issuer describing the manner and terms of such transfer. Such proposed transfer will not be effected until: (a) either (i) the Issuer has received an opinion of counsel reasonably satisfactory to the Issuer, to the effect that the registration of such securities under the Securities Act is not required in connection with such proposed transfer, (ii) a registration   -4-   --------------------------------------------------------------------------------   statement under the Securities Act covering such proposed disposition has been filed by the Issuer with the Securities and Exchange Commission and has become effective under the Securities Act, (iii) the Issuer has received other evidence reasonably satisfactory to the Issuer that such registration and qualification under the Securities Act and state securities laws are not required, or (iv) the Holder provides the Issuer with reasonable assurances that such security can be sold pursuant to Rule 144 under the Securities Act; and (b) either (i) the Issuer has received an opinion of counsel reasonably satisfactory to the Issuer, to the effect that registration or qualification under the securities or “blue sky” laws of any state is not required in connection with such proposed disposition, or (ii) compliance with applicable state securities or “blue sky” laws has been effected or a valid exemption exists with respect thereto. The Issuer will respond to any such notice from a holder within three (3) Trading Days. In the case of any proposed transfer under this Section 2(h), the Issuer will use reasonable efforts to comply with any such applicable state securities or “blue sky” laws, but shall in no event be required, (x) to qualify to do business in any state where it is not then qualified, (y) to take any action that would subject it to tax or to the general service of process in any state where it is not then subject, or (z) to comply with state securities or “blue sky” laws of any state for which registration by coordination is unavailable to the Issuer. The restrictions on transfer contained in this Section 2(h) shall be in addition to, and not by way of limitation of, any other restrictions on transfer contained in any other section of this Warrant. Whenever a certificate representing the Warrant Stock is required to be issued to a the Holder without a legend, in lieu of delivering physical certificates representing the Warrant Stock, the Issuer shall cause its transfer agent to electronically transmit the Warrant Stock to the Holder by crediting the account of the Holder’s Prime Broker with DTC through its DWAC system (to the extent not inconsistent with any provisions of this Warrant or the Purchase Agreement).   (i)           Accredited Investor Status. In no event may the Holder exercise this Warrant in whole or in part unless the Holder is an “accredited investor” as defined in Regulation D under the Securities Act.     3. Stock Fully Paid; Reservation and Listing of Shares; Covenants.   (a)          Stock Fully Paid. The Issuer represents, warrants, covenants and agrees that all shares of Warrant Stock which may be issued upon the exercise of this Warrant or otherwise hereunder will, when issued in accordance with the terms of this Warrant, be duly authorized, validly issued, fully paid and non-assessable and free from all taxes, liens and charges created by or through the Issuer. The Issuer further covenants and agrees that during the period within which this Warrant may be exercised, the Issuer will at all times have authorized and reserved for the purpose of the issuance upon exercise of this Warrant a number of authorized but unissued shares of Common Stock equal to at least one hundred fifty (150%) of the number of shares of Common Stock issuable upon exercise of this Warrant without regard to any limitations on exercise.   (b)          Reservation. If any shares of Common Stock required to be reserved for issuance upon exercise of this Warrant or as otherwise provided hereunder require registration or qualification with any Governmental Authority under any federal or state law before such shares may be so issued, the Issuer will in good faith use its best efforts as expeditiously as possible at   -5-   --------------------------------------------------------------------------------   its expense to cause such shares to be duly registered or qualified. If the Issuer shall list any shares of Common Stock on any securities exchange or market it will, at its expense, list thereon, and maintain and increase when necessary such listing, of, all shares of Warrant Stock from time to time issued upon exercise of this Warrant or as otherwise provided hereunder (provided that such Warrant Stock has been registered pursuant to a registration statement under the Securities Act then in effect), and, to the extent permissible under the applicable securities exchange rules, all unissued shares of Warrant Stock which are at any time issuable hereunder, so long as any shares of Common Stock shall be so listed. The Issuer will also so list on each securities exchange or market, and will maintain such listing of, any other securities which the Holder of this Warrant shall be entitled to receive upon the exercise of this Warrant if at the time any securities of the same class shall be listed on such securities exchange or market by the Issuer.   (c)          Covenants. The Issuer shall not by any action including, without limitation, amending the Articles of Incorporation or the by-laws of the Issuer, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder hereof against dilution (to the extent specifically provided herein) or impairment. Without limiting the generality of the foregoing, the Issuer will (i) not permit the par value, if any, of its Common Stock to exceed the then effective Warrant Price, (ii) not amend or modify any provision of the Articles of Incorporation or by-laws of the Issuer in any manner that would adversely affect the rights of the Holders of the Warrants, (iii) take all such action as may be reasonably necessary in order that the Issuer may validly and legally issue fully paid and nonassessable shares of Common Stock, free and clear of any liens, claims, encumbrances and restrictions (other than as provided herein) upon the exercise of this Warrant, and (iv) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be reasonably necessary to enable the Issuer to perform its obligations under this Warrant.   (d)          Loss, Theft, Destruction of Warrants. Upon receipt of evidence satisfactory to the Issuer of the ownership of and the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security satisfactory to the Issuer or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Issuer will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same number of shares of Common Stock.   (e)          Payment of Taxes. The Issuer will pay any documentary stamp taxes attributable to the initial issuance of the Warrant Stock issuable upon exercise of this Warrant; provided, however, that the Issuer shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates representing Warrant Stock in a name other than that of the Holder in respect to which such shares are issued.   4.            Adjustment of Warrant Price and Number of Shares Issuable Upon Exercise. The Warrant Price and the number of shares of Warrant Stock that may be purchased upon exercise of this Warrant shall be subject to adjustment from time to time as set forth in this Section 4. The   -6-   --------------------------------------------------------------------------------   Issuer shall give the Holder notice of any event described below which requires an adjustment pursuant to this Section 4 in accordance with the notice provisions set forth in Section 5.     (a) Recapitalization, Reorganization, Reclassification, Consolidation, Merger or Sale.   (i) In case the Issuer after the Original Issue Date shall do any of the following (each, a “Triggering Event”): (a) consolidate or merge with or into any other Person and the Issuer shall not be the continuing or surviving corporation of such consolidation or merger, or (b) permit any other Person to consolidate with or merge into the Issuer and the Issuer shall be the continuing or surviving Person but, in connection with such consolidation or merger, any Capital Stock of the Issuer shall be changed into or exchanged for Securities of any other Person or cash or any other property, or (c) transfer all or substantially all of its properties or assets to any other Person, or (d) effect a capital reorganization or reclassification of its Capital Stock, then, and in the case of each such Triggering Event, proper provision shall be made to the Warrant Price and the number of shares of Warrant Stock that may be purchased upon exercise of this Warrant so that, upon the basis and the terms and in the manner provided in this Warrant, the Holder of this Warrant shall be entitled upon the exercise hereof at any time after the consummation of such Triggering Event, to the extent this Warrant is not exercised prior to such Triggering Event, to receive at the Warrant Price as adjusted to take into account the consummation of such Triggering Event, in lieu of the Common Stock issuable upon such exercise of this Warrant prior to such Triggering Event, the Securities, cash and property to which such Holder would have been entitled upon the consummation of such Triggering Event if such Holder had exercised the rights represented by this Warrant immediately prior thereto (including the right of a shareholder to elect the type of consideration it will receive upon a Triggering Event), subject to adjustments (subsequent to such corporate action) as nearly equivalent as possible to the adjustments provided for elsewhere in this Section 4, and the Warrant Price shall be adjusted to equal the product of (A) the closing price of the common stock of the continuing or surviving corporation as a result of such Triggering Event as of the date immediately preceding the date of the consummation of such Triggering Event multiplied by (B) the quotient of (i) the Warrant Price divided by (ii) the Per Share Market Value of the Common Stock as of the date immediately preceding the Original Issue Date; provided, however, the Holder at its option may elect to receive an amount in cash equal to the value of this Warrant calculated in accordance with the Black-Scholes formula. Immediately upon the occurrence of a Triggering Event, the Issuer shall notify the Holder in writing of such Triggering Event and provide the calculations in determining the number of shares of Warrant Stock issuable upon exercise of the new warrant and the adjusted Warrant Price. Upon the Holder’s request, the continuing or surviving corporation as a result of such Triggering Event shall issue to the Holder a new warrant of like tenor evidencing the right to purchase the adjusted number of shares of Warrant Stock and the adjusted Warrant Price pursuant to the terms and provisions of this Section 4(a)(i). Notwithstanding the foregoing to the contrary, this Section 4(a)(i) shall only apply if the surviving entity pursuant to any such Triggering Event is a company that has a class of equity securities registered pursuant to the Securities Exchange Act of 1934, as amended, and its common stock is listed or quoted on a national securities exchange, national automated quotation system or the OTC Bulletin Board. In the event that the surviving entity pursuant to any such Triggering Event is not a public company that is registered   -7-   --------------------------------------------------------------------------------   pursuant to the Securities Exchange Act of 1934, as amended, or its common stock is not listed or quoted on a national securities exchange, national automated quotation system or the OTC Bulletin Board, then the Holder shall have the right to demand that the Issuer pay to the Holder an amount in cash equal to the value of this Warrant calculated in accordance with the Black-Scholes formula.   (ii)        In the event that the Holder has elected not to exercise this Warrant prior to the consummation of a Triggering Event and has also elected not to receive an amount in cash equal to the value of this Warrant calculated in accordance with the Black-Scholes formula pursuant to the provisions of Section 4(a)(i) above, so long as the surviving entity pursuant to any Triggering Event is a company that has a class of equity securities registered pursuant to the Securities Exchange Act of 1934, as amended, and its common stock is listed or quoted on a national securities exchange, national automated quotation system or the OTC Bulletin Board, the surviving entity and/or each Person (other than the Issuer) which may be required to deliver any Securities, cash or property upon the exercise of this Warrant as provided herein shall assume, by written instrument delivered to, and reasonably satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer under this Warrant (and if the Issuer shall survive the consummation of such Triggering Event, such assumption shall be in addition to, and shall not release the Issuer from, any continuing obligations of the Issuer under this Warrant) and (B) the obligation to deliver to such Holder such Securities, cash or property as, in accordance with the foregoing provisions of this subsection (a), such Holder shall be entitled to receive, and the surviving entity and/or each such Person shall have similarly delivered to such Holder an opinion of counsel for the surviving entity and/or each such Person, which counsel shall be reasonably satisfactory to such Holder, or in the alternative, a written acknowledgement executed by the President or Chief Financial Officer of the Issuer, stating that this Warrant shall thereafter continue in full force and effect and the terms hereof (including, without limitation, all of the provisions of this subsection (a)) shall be applicable to the Securities, cash or property which the surviving entity and/or each such Person may be required to deliver upon any exercise of this Warrant or the exercise of any rights pursuant hereto.   (b)         Stock Dividends, Subdivisions and Combinations. If at any time the Issuer shall:   (i)          make or issue or set a record date for the holders of the Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, shares of Common Stock,   (ii)       subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock (other than with respect to the 20-for-1 forward stock split to be effected on December 11, 2006), or   (iii)      combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock,   then (1) the number of shares of Common Stock for which this Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of   -8-   --------------------------------------------------------------------------------   shares of Common Stock which a record holder of the same number of shares of Common Stock for which this Warrant is exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (2) the Warrant Price then in effect shall be adjusted to equal (A) the Warrant Price then in effect multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares of Common Stock for which this Warrant is exercisable immediately after such adjustment.   (c)         Certain Other Distributions. If at any time the Issuer shall make or issue or set a record date for the holders of the Common Stock for the purpose of entitling them to receive any dividend or other distribution of:   (i)           cash (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of the Issuer),   (ii)          any evidences of its indebtedness, any shares of stock of any class or any other securities or property of any nature whatsoever (other than cash, Common Stock Equivalents or Additional Shares of Common Stock), or   (iii)         any warrants or other rights to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property of any nature whatsoever (other than cash, Common Stock Equivalents or Additional Shares of Common Stock),   then (1) the number of shares of Common Stock for which this Warrant is exercisable shall be adjusted to equal the product of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such adjustment multiplied by a fraction (A) the numerator of which shall be the Per Share Market Value of Common Stock at the date of taking such record and (B) the denominator of which shall be such Per Share Market Value minus the amount allocable to one share of Common Stock of any such cash so distributable and of the fair value (as determined in good faith by the Board of Directors of the Issuer and supported by an opinion from an investment banking firm mutually agreed upon by the Issuer and the Holder) of any and all such evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights so distributable, and (2) the Warrant Price then in effect shall be adjusted to equal (A) the Warrant Price then in effect multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares of Common Stock for which this Warrant is exercisable immediately after such adjustment. A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Issuer to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Section 4(c) and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Section 4(b).     (d) Issuance of Additional Shares of Common Stock. In the event the Issuer shall at   -9-   --------------------------------------------------------------------------------   any time following the Original Issuance Date issue any Additional Shares of Common Stock (otherwise than as provided in the foregoing subsections (b) through (c) of this Section 4), at a price per share less than the Warrant Price then in effect or without consideration, then the Warrant Price upon each such issuance shall be adjusted to the price equal to the consideration per share paid for such Additional Shares of Common Stock.   (e)            Issuance of Common Stock Equivalents. In the event the Issuer shall at any time following the Original Issuance Date take a record of the holders of its Common Stock for the purpose of entitling them to receive a distribution of, or shall in any manner (whether directly or by assumption in a merger in which the Issuer is the surviving corporation) issue or sell, any Common Stock Equivalents, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange shall be less than the Warrant Price in effect immediately prior to the time of such issue or sale, or if, after any such issuance of Common Stock Equivalents, the price per share for which Additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended shall be less than the Warrant Price in effect at the time of such amendment or adjustment, then the Warrant Price then in effect shall be adjusted as provided in Section 4(d). No further adjustments of the number of shares of Common Stock for which this Warrant is exercisable and the Warrant Price then in effect shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Common Stock Equivalents.   (f)           Other Provisions applicable to Adjustments under this Section. The following provisions shall be applicable to the making of adjustments of the number of shares of Common Stock for which this Warrant is exercisable and the Warrant Price then in effect provided for in this Section 4:   (i)          Computation of Consideration. To the extent that any Additional Shares of Common Stock or any Common Stock Equivalents (or any warrants or other rights therefor) shall be issued for cash consideration, the consideration received by the Issuer therefor shall be the amount of the cash received by the Issuer therefor, or, if such Additional Shares of Common Stock or Common Stock Equivalents are offered by the Issuer for subscription, the subscription price, or, if such Additional Shares of Common Stock or Common Stock Equivalents are sold to underwriters or dealers for public offering without a subscription offering, the initial public offering price (in any such case subtracting any amounts paid or receivable for accrued interest or accrued dividends and without taking into account any compensation, discounts or expenses paid or incurred by the Issuer for and in the underwriting of, or otherwise in connection with, the issuance thereof). In connection with any merger or consolidation in which the Issuer is the surviving corporation (other than any consolidation or merger in which the previously outstanding shares of Common Stock of the Issuer shall be changed to or exchanged for the stock or other securities of another corporation), the amount of consideration therefore shall be, deemed to be the fair value, as determined reasonably and in good faith by the Board, of such portion of the assets and business of the nonsurviving corporation as the Board may determine to be attributable to such shares of Common Stock or Common Stock Equivalents, as the case may be. The consideration for any Additional Shares of Common Stock issuable pursuant to any warrants or other rights to subscribe for or purchase the same shall be the consideration received by the Issuer for issuing such warrants or other rights plus the additional consideration payable to the Issuer upon exercise of such warrants or other rights. The consideration for any Additional   -10-   --------------------------------------------------------------------------------   Shares of Common Stock issuable pursuant to the terms of any Common Stock Equivalents shall be the consideration received by the Issuer for issuing warrants or other rights to subscribe for or purchase such Common Stock Equivalents, plus the consideration paid or payable to the Issuer in respect of the subscription for or purchase of such Common Stock Equivalents, plus the additional consideration, if any, payable to the Issuer upon the exercise of the right of conversion or exchange in such Common Stock Equivalents. In the event of any consolidation or merger of the Issuer in which the Issuer is not the surviving corporation or in which the previously outstanding shares of Common Stock of the Issuer shall be changed into or exchanged for the stock or other securities of another corporation, or in the event of any sale of all or substantially all of the assets of the Issuer for stock or other securities of any corporation, the Issuer shall be deemed to have issued a number of shares of its Common Stock for stock or securities or other property of the other corporation computed on the basis of the actual exchange ratio on which the transaction was predicated, and for a consideration equal to the fair market value on the date of such transaction of all such stock or securities or other property of the other corporation. In the event any consideration received by the Issuer for any securities consists of property other than cash, the fair market value thereof at the time of issuance or as otherwise applicable shall be as determined in good faith by the Board. In the event Common Stock is issued with other shares or securities or other assets of the Issuer for consideration which covers both, the consideration computed as provided in this Section 4(f)(i) shall be allocated among such securities and assets as determined in good faith by the Board.   (ii)         When Adjustments to Be Made. The adjustments required by this Section 4 shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that any adjustment of the number of shares of Common Stock for which this Warrant is exercisable that would otherwise be required may be postponed (except in the case of a subdivision or combination of shares of the Common Stock, as provided for in Section 4(b)) up to, but not beyond the date of exercise if such adjustment either by itself or with other adjustments not previously made adds or subtracts less than one percent (1%) of the shares of Common Stock for which this Warrant is exercisable immediately prior to the making of such adjustment. Any adjustment representing a change of less than such minimum amount (except as aforesaid) which is postponed shall be carried forward and made as soon as such adjustment, together with other adjustments required by this Section 4 and not previously made, would result in a minimum adjustment or on the date of exercise. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence.   (iii)       Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the nearest one one-hundredth (1/100th) of a share.   (iv)       When Adjustment Not Required. If the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled.     -11-   --------------------------------------------------------------------------------     (g)          Form of Warrant after Adjustments. The form of this Warrant need not be changed because of any adjustments in the Warrant Price or the number and kind of Securities purchasable upon the exercise of this Warrant.   (h)         Escrow of Warrant Stock. If after any property becomes distributable pursuant to this Section 4 by reason of the taking of any record of the holders of Common Stock, but prior to the occurrence of the event for which such record is taken, and the Holder exercises this Warrant, any shares of Common Stock issuable upon exercise by reason of such adjustment shall be deemed the last shares of Common Stock for which this Warrant is exercised (notwithstanding any other provision to the contrary herein) and such shares or other property shall be held in escrow for the Holder by the Issuer to be issued to the Holder upon and to the extent that the event actually takes place, upon payment of the current Warrant Price. Notwithstanding any other provision to the contrary herein, if the event for which such record was taken fails to occur or is rescinded, then such escrowed shares shall be cancelled by the Issuer and escrowed property returned.   5.            Notice of Adjustments. Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant to Section 4 hereof (for purposes of this Section 5, each an “adjustment”), the Issuer shall cause its Chief Financial Officer to prepare and execute a certificate setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Board made any determination hereunder), and the Warrant Price and Warrant Share Number after giving effect to such adjustment, and shall cause copies of such certificate to be delivered to the Holder of this Warrant promptly after each adjustment. Any dispute between the Issuer and the Holder of this Warrant with respect to the matters set forth in such certificate may at the option of the Holder of this Warrant be submitted to a national or regional accounting firm reasonably acceptable to the Issuer and the Holder, provided that the Issuer shall have ten (10) days after receipt of notice from such Holder of its selection of such firm to object thereto, in which case such Holder shall select another such firm and the Issuer shall have no such right of objection. The firm selected by the Holder of this Warrant as provided in the preceding sentence shall be instructed to deliver a written opinion as to such matters to the Issuer and such Holder within thirty (30) days after submission to it of such dispute. Such opinion shall be final and binding on the parties hereto. The costs and expenses of the initial accounting firm shall be paid equally by the Issuer and the Holder and, in the case of an objection by the Issuer, the costs and expenses of the subsequent accounting firm shall be paid in full by the Issuer.   6.            Fractional Shares. No fractional shares of Warrant Stock will be issued in connection with any exercise hereof, but in lieu of such fractional shares, the Issuer shall round the number of shares to be issued upon exercise up to the nearest whole number of shares.   7.           Ownership Cap and Exercise Restriction. Notwithstanding anything to the contrary set forth in this Warrant, at no time may a Holder of this Warrant exercise this Warrant if the number of shares of Common Stock to be issued pursuant to such exercise would exceed, when aggregated with all other shares of Common Stock owned by such Holder at such time, the number of shares of Common Stock which would result in such Holder beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules thereunder) in excess of 9.9% of the then issued and outstanding shares of Common Stock; provided, however,   -12-   --------------------------------------------------------------------------------   that upon a holder of this Warrant providing the Issuer with sixty-one (61) days notice (pursuant to Section 12 hereof) (the “Waiver Notice”) that such Holder would like to waive this Section 7 with regard to any or all shares of Common Stock issuable upon exercise of this Warrant, this Section 7 will be of no force or effect with regard to all or a portion of the Warrant referenced in the Waiver Notice; provided, further, that this provision shall be of no further force or effect during the sixty-one (61) days immediately preceding the expiration of the term of this Warrant.   8.           Definitions. For the purposes of this Warrant, the following terms have the following meanings:   “Additional Shares of Common Stock” means all shares of Common Stock issued by the Issuer after the Original Issue Date, and all shares of Other Common, if any, issued by the Issuer after the Original Issue Date, except: (i) securities issued (other than for cash) in connection with a merger, acquisition, or consolidation, (ii) securities issued pursuant to the conversion or exercise of convertible or exercisable securities issued or outstanding on or prior to the date of the Purchase Agreement or issued pursuant to the Purchase Agreement (so long as the conversion or exercise price in such securities are not amended to lower such price and/or adversely affect the Holders), (iii) the Warrant Stock, (iv) securities issued in connection with bona fide strategic license agreements or other partnering arrangements so long as such issuances are not for the purpose of raising capital, (v) Common Stock issued or the issuance or grants of options to purchase Common Stock pursuant to the Issuer’s stock option plans and employee stock purchase plans outstanding as they exist on the date of the Purchase Agreement, and (vi) any warrants issued to the placement agent and its designees for the transactions contemplated by the Purchase Agreement.   “Articles of Incorporation” means the Articles of Incorporation of the Issuer as in effect on the Original Issue Date, and as hereafter from time to time amended, modified, supplemented or restated in accordance with the terms hereof and thereof and pursuant to applicable law.   “Board” shall mean the Board of Directors of the Issuer.   “Capital Stock” means and includes (i) any and all shares, interests, participations or other equivalents of or interests in (however designated) corporate stock, including, without limitation, shares of preferred or preference stock, (ii) all partnership interests (whether general or limited) in any Person which is a partnership, (iii) all membership interests or limited liability company interests in any limited liability company, and (iv) all equity or ownership interests in any Person of any other type.   “Common Stock” means the Common Stock, $0.001 par value per share, of the Issuer and any other Capital Stock into which such stock may hereafter be changed.   “Common Stock Equivalent” means any Convertible Security or warrant, option or other right to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Security.     -13-   --------------------------------------------------------------------------------     “Convertible Securities” means evidences of Indebtedness, shares of Capital Stock or other Securities which are or may be at any time convertible into or exchangeable for Additional Shares of Common Stock. The term “Convertible Security” means one of the Convertible Securities.   “Governmental Authority” means any governmental, regulatory or self-regulatory entity, department, body, official, authority, commission, board, agency or instrumentality, whether federal, state or local, and whether domestic or foreign.   “Holders” mean the Persons who shall from time to time own any Warrant. The term “Holder” means one of the Holders.   “Independent Appraiser” means a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Issuer) that is regularly engaged in the business of appraising the Capital Stock or assets of corporations or other entities as going concerns, and which is not affiliated with either the Issuer or the Holder of any Warrant.   “Issuer” means Merchandise Creations, Inc., a Nevada corporation, and its successors.   “Majority Holders” means at any time the Holders of Warrants exercisable for a majority of the shares of Warrant Stock issuable under the Warrants at the time outstanding.   “Original Issue Date” means December 7, 2006.     “OTC Bulletin Board” means the over-the-counter electronic bulletin board.   “Other Common” means any other Capital Stock of the Issuer of any class which shall be authorized at any time after the date of this Warrant (other than Common Stock) and which shall have the right to participate in the distribution of earnings and assets of the Issuer without limitation as to amount.   “Outstanding Common Stock” means, at any given time, the aggregate amount of outstanding shares of Common Stock, assuming full exercise, conversion or exchange (as applicable) of all options, warrants and other Securities which are convertible into or exercisable or exchangeable for, and any right to subscribe for, shares of Common Stock that are outstanding at such time.   “Person” means an individual, corporation, limited liability company, partnership, joint stock company, trust, unincorporated organization, joint venture, Governmental Authority or other entity of whatever nature.   “Per Share Market Value” means on any particular date (a) the last closing bid price per share of the Common Stock on such date on the OTC Bulletin Board or another registered national stock exchange on which the Common Stock is then listed, or if there   -14-   --------------------------------------------------------------------------------   is no such price on such date, then the closing bid price on such exchange or quotation system on the date nearest preceding such date, or (b) if the Common Stock is not listed then on the OTC Bulletin Board or any registered national stock exchange, the last closing bid price for a share of Common Stock in the over-the-counter market, as reported by the OTC Bulletin Board or in the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported by the OTC Bulletin Board or the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the “Pink Sheet” quotes for the applicable Trading Days preceding such date of determination, or (d) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined by an Independent Appraiser selected in good faith by the Majority Holders; provided, however, that the Issuer, after receipt of the determination by such Independent Appraiser, shall have the right to select an additional Independent Appraiser, in which case, the fair market value shall be equal to the average of the determinations by each such Independent Appraiser; and provided, further that all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during such period. The determination of fair market value by an Independent Appraiser shall be based upon the fair market value of the Issuer determined on a going concern basis as between a willing buyer and a willing seller and taking into account all relevant factors determinative of value, and shall be final and binding on all parties. In determining the fair market value of any shares of Common Stock, no consideration shall be given to any restrictions on transfer of the Common Stock imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights.   “Purchase Agreement” means the Note and Warrant Purchase Agreement dated as of December 7, 2006, among the Issuer and the Purchasers.   “Purchasers” means the purchasers of the secured convertible demand promissory notes and the Warrants issued by the Issuer pursuant to the Purchase Agreement.   “Securities” means any debt or equity securities of the Issuer, whether now or hereafter authorized, any instrument convertible into or exchangeable for Securities or a Security, and any option, warrant or other right to purchase or acquire any Security. “Security” means one of the Securities.   “Securities Act” means the Securities Act of 1933, as amended, or any similar federal statute then in effect.   “Subsidiary” means any corporation at least 50% of whose outstanding Voting Stock shall at the time be owned directly or indirectly by the Issuer or by one or more of its Subsidiaries, or by the Issuer and one or more of its Subsidiaries.   “Term” has the meaning specified in Section 1 hereof.   “Trading Day” means (a) a day on which the Common Stock is traded on the OTC Bulletin Board, or (b) if the Common Stock is not traded on the OTC Bulletin   -15-   --------------------------------------------------------------------------------   Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Common Stock is not listed or quoted as set forth in (a) or (b) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close.   “Voting Stock” means, as applied to the Capital Stock of any corporation, Capital Stock of any class or classes (however designated) having ordinary voting power for the election of a majority of the members of the Board of Directors (or other governing body) of such corporation, other than Capital Stock having such power only by reason of the happening of a contingency.   “Warrants” means the Warrants issued and sold pursuant to the Purchase Agreement, including, without limitation, this Warrant, and any other warrants of like tenor issued in substitution or exchange for any thereof pursuant to the provisions of Section 2(c), 2(d) or 2(e) hereof or of any of such other Warrants.   “Warrant Price” initially means $0.01 (post 20-for-1 forward stock split to be effected on December 11, 2006), as such price may be adjusted from time to time as shall result from the adjustments specified in this Warrant, including Section 4 hereto.   “Warrant Share Number” means at any time the aggregate number of shares of Warrant Stock which may at such time be purchased upon exercise of this Warrant, after giving effect to all prior adjustments and increases to such number made or required to be made under the terms hereof.   “Warrant Stock” means Common Stock issuable upon exercise of any Warrant or Warrants or otherwise issuable pursuant to any Warrant or Warrants.     9. Other Notices. In case at any time:     (A) the Issuer shall make any distributions to the holders of Common Stock; or     (B) the Issuer shall authorize the granting to all holders of its Common Stock of rights to subscribe for or purchase any shares of Capital Stock of any class or other rights; or     (C) there shall be any reclassification of the Capital Stock of the Issuer; or     (D) there shall be any capital reorganization by the Issuer; or     (E) there shall be any (i) consolidation or merger involving the Issuer or (ii) sale, transfer or other disposition of all or substantially all of the Issuer’s property, assets or business   -16-   --------------------------------------------------------------------------------   (except a merger or other reorganization in which the Issuer shall be the surviving corporation and its shares of Capital Stock shall continue to be outstanding and unchanged and except a consolidation, merger, sale, transfer or other disposition involving a wholly-owned Subsidiary); or     (F) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Issuer or any partial liquidation of the Issuer or distribution to holders of Common Stock;   then, in each of such cases, the Issuer shall give written notice to the Holder of the date on which (i) the books of the Issuer shall close or a record shall be taken for such dividend, distribution or subscription rights or (ii) such reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or winding-up, as the case may be, shall take place. Such notice also shall specify the date as of which the holders of Common Stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their certificates for Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or winding-up, as the case may be. Such notice shall be given at least twenty (20) days prior to the action in question and not less than ten (10) days prior to the record date or the date on which the Issuer’s transfer books are closed in respect thereto. This Warrant entitles the Holder to receive copies of all financial and other information distributed or required to be distributed to the holders of the Common Stock.   10.          Amendment and Waiver. Any term, covenant, agreement or condition in this Warrant may be amended, or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), by a written instrument or written instruments executed by the Issuer and the Majority Holders; provided, however, that no such amendment or waiver shall reduce the Warrant Share Number, increase the Warrant Price, shorten the period during which this Warrant may be exercised or modify any provision of this Section 10 without the consent of the Holder of this Warrant. No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of this Warrant unless the same consideration is also offered to all holders of the Warrants.   11.          Governing Law; Jurisdiction. This Warrant shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction. This Warrant shall not be interpreted or construed with any presumption against the party causing this Warrant to be drafted. The Issuer and the Holder agree that venue for any dispute arising under this Warrant will lie exclusively in the state or federal courts located in New York County, New York, and the parties irrevocably waive any right to raise forum non conveniens or any other argument that New York is not the proper venue. The Issuer and the Holder irrevocably consent to personal jurisdiction in the state and federal courts of the state of New York. The Issuer and the Holder consent to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 11 shall affect or limit any right to serve process in   -17-   --------------------------------------------------------------------------------   any other manner permitted by law. The Issuer and the Holder hereby agree that the prevailing party in any suit, action or proceeding arising out of or relating to this Warrant or the Purchase Agreement, shall be entitled to reimbursement for reasonable legal fees from the non-prevailing party. The parties hereby waive all rights to a trial by jury.   12.        Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telecopy or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: If to the Issuer: Merchandise Creations, Inc. 8201 Towne Main Drive, #1421 Plano, Texas 75024 Attention: Chief Executive Officer Tel. No.: (972) 987-5880 Fax No.: (972) 987-5880   with copies (which copies shall not constitute notice) to: Gary Agron, Esq. 5445 DTC Parkway, Suite 520 Greenwood Village, CO 80111 Tel No.: (303) 770-7254 Fax No.: (303) 770-7257   If to any Holder: At the address of such Holder set forth on Exhibit A to this Agreement, with copies to Holder’s counsel as set forth on Exhibit A or as specified in writing by such Holder with copies to:   with copies (which copies shall not constitute notice) to: Kramer Levin Naftalis & Frankel LLP 1177 Avenue of the Americas New York, New York 10036 Attention: Christopher S. Auguste Tel. No.: (212) 715-9100 Fax No.: (212) 715-8000     -18-   --------------------------------------------------------------------------------     Any party hereto may from time to time change its address for notices by giving written notice of such changed address to the other party hereto. 13.          Warrant Agent. The Issuer may, by written notice to each Holder of this Warrant, appoint an agent having an office in New York, New York for the purpose of issuing shares of Warrant Stock on the exercise of this Warrant pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to subsection (d) of Section 3 hereof, 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.   14.          Remedies. The Issuer stipulates that the remedies at law of the Holder of this Warrant in the event of any default or threatened default by the Issuer in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise.   15.          Successors and Assigns. This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors and assigns of the Issuer, the Holder hereof and (to the extent provided herein) the Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any such Holder or Holder of Warrant Stock.   16.          Modification and Severability. If, in any action before any court or agency legally empowered to enforce any provision contained herein, any provision hereof is found to be unenforceable, then such provision shall be deemed modified to the extent necessary to make it enforceable by such court or agency. If any such provision is not enforceable as set forth in the preceding sentence, the unenforceability of such provision shall not affect the other provisions of this Warrant, but this Warrant shall be construed as if such unenforceable provision had never been contained herein.   17.          Headings. The headings of the Sections of this Warrant are for convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.   18.          Registration Rights. The Holder of this Warrant is entitled to the benefit of certain registration rights with respect to the shares of Warrant Stock issuable upon the exercise of this Warrant pursuant to that certain Registration Rights Agreement, of even date herewith, by and among the Company and Persons listed on Schedule I thereto (the “Registration Rights Agreement”) and the registration rights with respect to the shares of Warrant Stock issuable upon the exercise of this Warrant by any subsequent Holder may only be assigned in accordance with the terms and provisions of the Registrations Rights Agreement.   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]     -19-   --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the Issuer has executed this Series B Warrant as of the day and year first above written.       MERCHANDISE CREATIONS, INC.         By:                                                                      Name: Title:               -20-   --------------------------------------------------------------------------------       EXERCISE FORM SERIES B WARRANT   MERCHANDISE CREATIONS, INC.   The undersigned _______________, pursuant to the provisions of the within Warrant, hereby elects to purchase _____ shares of Common Stock of Merchandise Creations, Inc. covered by the within Warrant.   Dated: _________________ Signature ___________________________     Address _____________________ _____________________   Number of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder on the date of Exercise: _________________________   The undersigned is an “accredited investor” as defined in Regulation D under the Securities Act of 1933, as amended. The undersigned intends that payment of the Warrant Price shall be made as (check one): Cash Exercise_______ Cashless Exercise_______ If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $________ by certified or official bank check (or via wire transfer) to the Issuer in accordance with the terms of the Warrant. If the Holder has elected a Cashless Exercise, a certificate shall be issued to the Holder for the number of shares equal to the whole number portion of the product of the calculation set forth below, which is ___________. The Company shall pay a cash adjustment in respect of the fractional portion of the product of the calculation set forth below in an amount equal to the product of the fractional portion of such product and the Per Share Market Value on the date of exercise, which product is ____________. X = Y - (A)(Y)   B   Where:       The number of shares of Common Stock to be issued to the Holder __________________(“X”).   The number of shares of Common Stock purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised ___________________________ (“Y”).   -21-   --------------------------------------------------------------------------------       The Warrant Price ______________ (“A”).   The Per Share Market Value of one share of Common Stock _______________________ (“B”).   ASSIGNMENT   FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto __________________ the within Warrant and all rights evidenced thereby and does irrevocably constitute and appoint _____________, attorney, to transfer the said Warrant on the books of the within named corporation.   Dated: _________________ Signature ___________________________     Address _____________________ _____________________   PARTIAL ASSIGNMENT   FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto __________________ the right to purchase _________ shares of Warrant Stock evidenced by the within Warrant together with all rights therein, and does irrevocably constitute and appoint ___________________, attorney, to transfer that part of the said Warrant on the books of the within named corporation.   Dated: _________________ Signature ___________________________     Address _____________________ _____________________   FOR USE BY THE ISSUER ONLY:   This Warrant No. W-___ canceled (or transferred or exchanged) this _____ day of ___________, _____, shares of Common Stock issued therefor in the name of _______________, Warrant No. W-_____ issued for ____ shares of Common Stock in the name of _______________.         -22-      

Exhibit 10.19A THIRD AMENDMENT THIS THIRD AMENDMENT (“Third Amendment”) is made and entered into as of the 1st day of September, 2006 by and between MCZ/CENTRUM FLORIDA XIX, L.L.C., a Delaware limited liability company (the “Seller”) and MHI HOLLYWOOD, LLC, a Delaware limited liability company (the “Purchaser”). RECITALS A. Purchaser and MCZ/Centrum Florida VI Owner, L.L.C., an Illinois limited liability company (“MCZ/Centrum”) entered into that certain agreement dated September 7, 2005 (the “Original Agreement”) regarding the purchase and sale of a hotel condominium unit located in Hollywood, Florida. B. On November 16, 2005, MCZ/Centrum and Purchaser entered into an amendment to the Original Agreement by extending a period of time Purchaser has to satisfy a condition set forth in the Original Agreement (the “First Amendment”). C. On February     , 2006, MCZ/Centrum and Purchaser entered into a second amendment modifying the Original Agreement by extending a period of time Purchaser has to satisfy conditions set forth in the Original Agreement (the “Second Amendment”; the Original Agreement as modified by the First Amendment and the Second Amendment is hereafter referred to as the “Agreement”). D. MCZ/Centrum has assigned all of its right, title and interest in the Agreement to Seller. E. The Seller and Purchaser desire to modify and amend certain terms and provisions of the Agreement as hereinafter set forth. NOW, THEREFORE, for and in consideration of mutual promises and covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Recitals. The recitals to this Third Amendment are true and correct and are incorporated herein by reference and made a part hereof. 2. Defined Terms. Any defined terms utilized in this Third Amendment but not defined herein shall have the meaning ascribed to said terms in the Agreement. 3. Comfort Letter. All provisions in the Agreement regarding the Comfort Letter are hereby deleted. 4. License Agreement. The License Agreement attached to the Agreement as Exhibit G is hereby deleted and replaced with the License Agreement and the addendum thereto (the “Addendum”) in the form attached hereto as Exhibit “A” (as amended to date, the “License Agreement”). -------------------------------------------------------------------------------- 5. Failure to Obtain License Agreement. Section 5.2 of the Agreement is hereby amended to provide that in the event Purchaser does not obtain the License Agreement consistent with the form of license agreement and addendum thereto attached hereto as Exhibit A on or before September 15, 2006, then at any time thereafter and prior to the date Purchaser obtains the License Agreement substantially in the form of Exhibit A, either Purchaser or Seller may terminate the Agreement in which event the Deposit shall be returned to Purchaser and the parties released from all further obligations under the Agreement except for the obligations that survive termination. 6. Design Criteria. All reference in the Agreement to the Design Criteria shall mean the current design standards of Holiday Hospitality Franchising, Inc. (“Franchisor”) for Crowne Plaza® hotels and the property improvement plan for the Hotel Condominium attached to the License Agreement as Attachment “B” which are more particularly described on Exhibit “B” attached hereto which Exhibit “B” shall replace Exhibit “H” to the Agreement for all purposes. 7. Repurchase Option. Section 5.4 of the Agreement is hereby deleted and replaced with the following: A. In the event that the License Agreement is terminated for any reason, other than a termination by Franchisor as a result of an Inventory Default (as defined in the License Agreement) following the breach by Seller of its obligations under Section 24 of this Third Amendment, Purchaser shall have one hundred twenty (120) days from the date of termination of the License Agreement (the “Cure Period”) to enter into a new license with a nationally recognized hotel chain of similar quality, which shall be subject to the approval of Seller, which approval shall not be unreasonably withheld or delayed, and which approval shall be deemed given if the new license is with one of the companies listed on Exhibit “C” attached hereto for operation of the Property consistent with the terms of the City of Hollywood Ordinance Number 0-2006-24. During the Cure Period and thereafter until Seller either exercises the Buy Back Option, as hereinafter defined, and/or reacquires the Hotel Unit or Purchaser enters into a new license agreement with a nationally recognized hotel chain of similar quality (the “New License Agreement”), Purchaser shall continue to operate the Property in a first class manner consistent with its previous operation under the License Agreement. In the event that Purchaser does not enter into the New License Agreement prior to the end of the Cure Period at any time thereafter and prior to Purchaser entering into the New License Agreement (the “Option Period”), Seller shall have the right to repurchase the Hotel Unit (the “Buy Back Option”) for the fair market value of the Hotel Unit, the Personal Property and the Rental Agreements as determined pursuant to the procedure set forth below, provided that Seller shall have the right to exercise the Buy Back Option only in the event Seller owns not less than 50 Units at the time Seller exercises the Buy Back Option. In the event Seller does not own 50 or more Units on the date that Seller exercises the Buy Back Option, the Condominium Association shall have the exclusive right to exercise the Buy Back Option. B. In the event Seller, or the Association, as the case may be, (the “Option Holder”) exercises the Buy Back Option, within twenty (20) days of Purchaser’s receipt of the notice of the Option Holder’s election to exercise the Buy Back Option, Seller and Purchaser shall each hire and appoint a disinterested MAI appraiser with at least ten (10) years professional experience in Broward County, Florida, as a real estate appraiser of property similar in nature to   2 -------------------------------------------------------------------------------- the Hotel Unit. The appraisers thus appointed shall appoint, as an appraiser, a third disinterested MAI appraiser with at least ten (10) years professional experience in Broward County, Florida, as a real estate appraiser of property similar in nature to the Hotel Unit, and the three (3) appraisers shall as promptly as possible appraise and determine the fair market value of the Hotel Unit, the Personal Property and the Rental Agreements as of the date the Buy Back Option is exercised, provided; however, that: 1. If either party fails to hire and appoint an appraiser during the twenty (20) day period, then the appraiser appointed shall establish the fair market value of the Hotel Unit, the Personal Property and the Rental Agreements. 2. If the two appraisers appointed by the parties are unable to agree within thirty (30) days upon the appointment of the third appraiser, they shall give written notice of such failure to agree to Purchaser and Option Holder and if Purchaser and Option Holder are unable to agree upon the selection of the third appraiser within twenty (20) days thereafter, then within ten (10) days thereafter either party, upon written notice to the other, may request such appointment by the Director of the Broward County Commercial Arbitration Association. C. Within sixty (60) days after the selection of the third appraiser, each of the three appraisers will independently determine the fair market value of the Hotel Unit, the Personal Property and the Rental Agreements and the average of the three appraisals will be deemed to be the fair market value and be conclusive and binding upon Option Holder and Purchaser; provided, however, that in determining the fair market value, no appraisal will be used which varies from the average of the three appraisals by more than fifteen percent (15%). D. The closing with respect to the Buy Back Option (the “Option Closing”) shall occur within thirty (30) days of the determination of the fair market value of the Hotel Unit, the Personal Property and the Rental Agreements. Purchaser, and its affiliates, as appropriate, shall convey the Hotel Unit, the Personal Property and the Rental Agreements free and clear of all liens and encumbrances, subject only to the Permitted Exceptions and such other exceptions to title arising by, through, or under Seller. The purchase price shall be paid in cash at Closing, subject to customary adjustments and prorations and the payment of customary closing costs. Purchaser shall convey the Hotel Unit by special warranty deed, convey the Personal Property by bill of sale and execute and deliver customary Seller’s affidavit of no liens and FIRPTA affidavit. Purchaser, or its affiliates, as appropriate, and Option Holder shall execute an assignment and assumption of Rental Agreements and the service contracts that the Option Holder elects to assume. Purchaser shall not be required to close on the sale of the Hotel Unit or the Personal Property or assign the Rental Agreements or the service contracts if Purchaser shall have obtained a New License Agreement prior to the Option Closing, in which case the Buy Back Option shall expire. The Purchaser and Option Holder shall each bear an equal share of the cost of the appraisers retained for purposes of this Section 7, provided, however, if the Purchaser obtains a New License Agreement prior to the Option Closing, Purchaser shall pay all of the costs for the appraisers retained for the purposes of this Section 7. This provision shall survive the Closing and be reflected in the special warranty deed to be delivered by Seller at Closing. 8. Pre-Sale Requirement. Article VI of the Agreement is hereby deleted.   3 -------------------------------------------------------------------------------- 9. Sales and Marketing Program. At the request of Purchaser, Franchisor shall have the right to review the sales and marketing materials and the sales and marketing process and procedures implemented by Seller with respect to the Hotel Condominium, but Franchisor shall have no obligation to review same. Franchisor shall have no approval rights with respect to Seller’s sales and marketing process and procedures or approval of Seller’s sales and marketing materials and Seller shall not be required to implement any of Franchisor’s comments. Seller acknowledges that notwithstanding any review of Seller’s sales and marketing process and procedures and the review of Seller’s sales and marketing materials by Franchisor, Franchisor will have no liability whatsoever to Seller or its affiliates, managers or agents if it is ultimately determined that the sales and marketing process and procedures and Seller’s sales and marketing materials do not comply with applicable laws, and such review shall not affect the indemnification obligations of Seller pursuant to the Franchise Indemnity Agreement, as hereinafter defined. Seller agrees that it, and each of its affiliates and each of its and their marketing staffs and agents will conduct all sales and marketing activities relating to the offer and sale of Units in a professional, lawful and ethical manner and refrain from disturbing guests of the Hotel. Seller and Purchaser acknowledge and agree that Seller has not been involved and will not be involved in the marketing of the Rental Program. This Section 9 shall survive the Closing or termination of the Agreement. 10. Use of Trademarks or Tradenames. Seller covenants and agrees that neither Seller nor any of its affiliates, managers, contractors, real estate agents or sales agents involved in the solicitation, promotion, marketing and/or sale of the Units or other aspects of the Project shall use the Crowne Plaza® Resort name or marks (or any other names or marks owned by Franchisor or its affiliates) regarding or in connection with any solicitation, promotion or marketing relating to the offer and/or sale of same or in any materials relating to the offer or sale of same. No materials used by Seller or its affiliates, managers or agents in connection with the marketing and sale of the Units shall state or suggest in any way that they have been approved by Franchisor, that Franchisor has or will participate in the development, construction, operation, marketing and/or sale of the Units or that Franchisor assumes, guarantees or is otherwise responsible in any way for any of the obligations, acts or omissions of Seller or its affiliates, managers or agents. Seller agrees that it and its affiliates and each of their employees, marketing personnel and agents shall not make any written or oral representation that suggests that Franchisor has participated or will participate in the development, construction, operation, marketing and/or sale of any of the Units or that Franchisor assumes, guarantees or is otherwise responsible in any way for any of the obligations, acts or omissions of Seller or any affiliate, manager or agent of Seller or any other person in connection with the Units. In the event Franchisor permits the use of any tradename or trademark owned by Franchisor or its affiliates in connection with the marketing of the Units (which it has no obligation to do), Seller shall conform its use of such marks to the requirements of the License Agreement. This Section 10 shall survive the Closing or termination of this Agreement. 11. Signage. From and after the date Purchaser enters into the License Agreement with Franchisor, Purchaser will be authorized by Seller to install temporary signage on the Property indicating that the building currently being renovated will be operated as a Crowne Plaza® Resort hotel. In addition, Purchaser shall install permanent Crowne Plaza® Resort signage for the Property (the “Hotel Signage”) in compliance with the Design Criteria, at Purchaser’s sole cost and expense, including, without limitation the proposed monument sign and   4 -------------------------------------------------------------------------------- the exterior signage on the Hotel, as soon as permitted pursuant to the License Agreement. Seller has caused the Board of Directors of the Master Association, which Seller controls, to pre-approve the Hotel Signage shown on Exhibit “D” attached hereto, including any modification to the Hotel Signage required to comply with changes in Franchisor’s brand standards system wide. A copy of the resolution of the Master Association approving such signage is set forth in Exhibit “C-1” attached hereto. 12. Franchisor Indemnification. Seller agrees to execute the indemnification agreement in favor of Franchisor in the form of Exhibit “E” attached hereto (the “Franchise Indemnity Agreement”) concurrently with Purchaser’s execution of the License Agreement and cause the principals of Seller simultaneously to deliver to Franchisor the guaranty agreement in favor of Franchisor in the form of Exhibit “F” attached hereto (the “Franchise Indemnity Guaranty”). Concurrently with the execution of the Franchise Indemnity Agreement, Seller and the principals of Seller and Purchaser and MHI Hospitality Corporation shall enter into a contribution agreement in the form of Exhibit “G” attached hereto. 13. Purchaser Indemnification. Section 7.5 of the Agreement is hereby amended to read as follows: Seller agrees to indemnify and hold Purchaser and each of its affiliated entities and each of its and their affiliates, managers, members, officers, directors and employees (each an “Indemnified Party” and collectively, the “Indemnified Parties”) harmless from any and all loss, claim, demand, action and liability (excluding consequential damages and lost profits of the Indemnified Parties), that may arise against any of the Indemnified Parties, Franchisor or its affiliated entities as a result of lawsuits or claims by any party (i) alleging violation of securities laws by Seller, MCZ/Centrum or any of its or their affiliates or agents (collectively the “MCZ Entities” and individually an “MCZ Entity”) or alleging violation of other securities laws by any such person applicable to the offering and sale of the Units, including claims brought by third parties, the Commission, state and securities regulators, the Division or any other regulatory authority, excluding claims arising as a result of actions taken solely by the Indemnified Parties and/or Franchisor or (ii) alleging an untrue statement of material fact contained in any of the Condominium Documents (as hereinafter defined), as the same may be amended or restated or in any of the solicitation, promotion, sales, marketing or other documents used by Seller or its affiliates or any of its or their agents, employees, or other related persons in connection with the solicitation, offer or sale of the Units (or any other portion of the Community) or arising out of or based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; or (iii) the failure of Seller or any of its affiliates or any agents, employees or other related persons to comply with any obligations under any applicable law, regulation or other governmental or court requirement, whether federal, state or local; or (iv) any other matter arising from the development, construction and sale or offering for sale of the Units, the Common Properties or any part thereof. This indemnification and hold harmless shall include reasonable attorneys’ fees and court costs through trial and all appellate levels which any   5 -------------------------------------------------------------------------------- Indemnified Party may incur defending itself against such claims, losses, actions, demands and liabilities and in enforcing the terms of this indemnification and hold harmless provision. This indemnification and hold harmless provision shall survive the Closing or termination of this Agreement; shall be continuing and irrevocable and shall continue in full force and effect until any and all such claims, losses, actions, demands and liabilities against the Indemnified Parties have been satisfied in full and all applicable statutes of limitation have expired. 14. Seller Indemnification. Section 8.5 of the Agreement is hereby amended to read as follows: Purchaser agrees to indemnify and hold Seller and each of its affiliated entities and each of its and their affiliates, managers, members, officers, directors and employees (each a “Seller Indemnified Party” and collectively the “Seller Indemnified Parties”), harmless from any and all loss, claim, damage, action and liability (excluding consequential damages and lost profits of any Seller Indemnified Parties), that may arise against the Seller Indemnified Parties and Franchisor and its affiliated entities as a result of lawsuits or claims by any party alleging violation of securities laws by Purchaser, Franchisor or any of its or their affiliates or agents or alleging violation of other laws applicable to the offering of the Rental Program, including claims brought by third parties, the Commission, state and securities regulators, the Division or any other regulatory authority, excluding claims arising solely as a result of the actions taken by the Seller Indemnified Parties. This indemnification and hold harmless shall include reasonable attorneys’ fees and court costs through all trial and all appellate levels which the Seller Indemnified Parties may incur in defending themselves against any such claims, losses, actions, demands and liabilities and in enforcing the terms of this indemnification and hold harmless provision. This indemnification and hold harmless provision shall survive the Closing or termination of this Agreement, shall be continuing and irrevocable and shall continue in full force and effect until any and all such claims, losses, actions, demands and liabilities against such Seller Indemnified Parties have been satisfied in full and the applicable statutes of limitation have expired. 15. Rental Agreements. The form of Unit Rental Management Agreement (“Rental Agreement”) which has been prepared by Purchaser and approved by Seller is attached hereto as Exhibit “H”. Purchaser represents to Seller that Franchisor has approved the attached form of Rental Agreement. Purchaser and Seller agree that Purchaser may make such changes to the Rental Agreement as may be required from time to time by Franchisor to cause such agreement to comply with applicable law or the License Agreement. Sections 8.1 and 8.2 of the Agreement are hereby deleted. 16. Project. Section 11.1 of the Agreement is hereby deleted in its entirety and replaced by the following: The Project (the “Project”) will be a multi-phased project in accordance with the Site Plan consisting of the following elements: (i) phase I of the Project   6 -------------------------------------------------------------------------------- (“Phase I”) will consist of the Hotel Condominium which will involve the renovation of the existing hotel located on the portion of the Land which when renovated shall consist of approximately 311 hotel rooms and suites, the resort pool located next to the intracoastal waterway (the “Resort Pool”) to be owned by the master association (“Master Association”), beach access and walkways substantially in accordance with the Plans; (ii) phase II of the Project (“Phase II”) if developed, is currently envisioned to consist of a newly constructed 27-story hotel condominium containing approximately 349 hotel rooms and related parking garage including ballroom space, meeting space, outdoor function space, pool, restaurant space and laundry facilities; (iii) phase III of the Project (“Phase III”), if developed, is currently envisioned to consist of either approximately 7,000 square feet of commercial space (the “Commercial Space”) which shall include at least 4000 square feet of meeting space on the first floor (the “Meeting Space”) or 60 townhome units (the “Townhome Units”); (iv) an oceanfront beach club (the “Beach Club”), if developed, is currently envisioned to be owned by Master Association; (v) phase IV of the Project (“Phase IV”) consists of a recently renovated 221 unit residential condominium project and related parking garage with limited commercial space located at 4001 South Ocean Drive, Hollywood, Florida and (vi) phase V of the Project (“Phase V”), if developed, is currently envisioned consisting of a 46-unit residential condominium project with 30 cabana units, a pool and related parking garage. 17. Site Plan. The Site Plan attached to the Agreement as Exhibit “B” is hereby deleted and replaced by Exhibit “I” attached hereto and made a part hereof. The Hotel Condominium, the Resort Pool and the Hotel Operated Common Properties, as hereinafter defined, shall be constructed in accordance with the Site Plan. This Section 17 shall survive the Closing. 18. Meeting Space. All references in the Agreement to the Villa Meeting Space shall be deemed references to the Meeting Space. Section 11.4 of the Agreement is amended to provide that in the event Seller completes Phase III as Commercial Space, Seller shall construct the meeting space on the first floor and shall enter into a lease with Purchaser for the meeting space, at market rates, for a term which is co-terminous with the term of the License Agreement or longer and contains such other terms and conditions as are mutually acceptable to Seller and Purchaser. Seller shall not be required construct the Meeting Space if Seller elects to develop the Townhome Units. This provision shall survive the Closing. 19. Intracoastal Club. All references in the Agreement to the Intracoastal Club are hereby deleted. 20. Master Association Documents. On or before the closing of the first Unit, Seller covenants and agrees to cause MCZ/Centrum to amend the Declaration of Covenants, Conditions, Restrictions and Easements for Sian Ocean Residence & Resort Master Association (the “Master Association Documents”) to incorporate the revisions described on Exhibit “J” attached hereto and made a part hereof (the “Master Association Amendment”). Seller hereby represents to Purchaser that the Hotel Condominium will be a part of a master planned community (the “Community”) that will include the Hotel Condominium and the Sian Ocean   7 -------------------------------------------------------------------------------- Residences Condominium (a residential condominium tower located at 4001 South Ocean Boulevard, across road South Ocean Boulevard from the Hotel Condominium, Phase II, if developed and Phase III, if developed) and that every owner of real property within the Community will be a member of a master homeowners’ association known as the Sian Ocean Residences Resort Master Association (the “Master Association”) created by the Master Association Documents. Seller further represents that the Master Association has responsibility for maintaining the Common Properties of the Community, which include, without limitation, the internal roadways (excluding the public road called South Ocean Boulevard, which is a main thoroughfare that traverses the Community), beach access areas, parking facilities, and the Resort Pool (which Resort Pool will be part of the Hotel Operated Common Properties (as hereinafter defined)). Each Unit owner (including the Hotel Unit) will be a member of the Master Association. This section shall survive the Closing. 21. Management of Resort Pool and Related Common Properties. Article XVI of the Agreement is hereby deleted and replaced with the following: ARTICLE XVI MANAGEMENT OF RESORT POOL AND RELATED COMMON PROPERTIES. 16.1 Seller shall cause the Master Association to enter into a management agreement with Purchaser or its affiliate in the form of Exhibit “K” attached hereto and made a part hereof (the “Management Agreement”) pursuant to which Purchaser, or its affiliate will (a) manage, among other things, the Resort Pool, maintain the service road adjacent to the Hotel Condominium and the outdoor function areas which are located on the Master Association Properties and which could be perceived by hotel guests of Phase I to be part of the Hotel Condominium (the “Hotel Operated Common Properties”) and (b) be entitled to establish reasonable rules and regulations for use thereof consistent with the Master Association Documents, subject to the approval of the board of directors of the Master Association. Subject to termination rights as provided under applicable laws, the Management Agreement shall be for the term of the License Agreement. 16.2 Seller shall cause the Master Association to enter into an exclusive concession agreement with Purchaser or its affiliates in the form of Exhibit “K-l” attached hereto and made a part hereof (the “Concession Agreement”) pursuant to which Purchaser, or its affiliate, will operate the food and beverage operation associated with the Resort Pool.   8 -------------------------------------------------------------------------------- 22. Completion Date. The Completion Date is hereby amended to read November 15, 2006. On or prior to the Completion Date, Seller anticipates, but does not guaranty, completion of the Hotel Unit. Upon completion, the Hotel Condominium and the Hotel Operated Common Properties will comply with the Hotel Plans and Specifications (as hereinafter defined) and the Design Criteria. In addition, Seller anticipates, but does not guaranty, complete construction of Units in the Condominium on a floor-by-floor basis in accordance with the following Schedule:   Hotel Floor And No. Of Units    Completion Date Second Floor–2 Units    November 15, 2006 Third Floor–35 Units    November 15, 2006 Fourth Floor–35 Units    November 15, 2006 Fifth Floor–35 Units    November 15, 2006 Sixth Floor–35 Units    December 15, 2007 Seventh Floor–35 Units    January 15, 2007 Eighth Floor- 35 Units    February 15, 2007 Ninth Floor–35 Units    March 15, 2007 Tenth Floor–35 Units    March 31, 2007 In addition, the valet parking facilities for all of the Units will be available as of the Completion Date and the Temporary Function Space is anticipated to be completed, without guaranty, on or before November 15, 2006. The Common Properties of the Community will include, at a minimum, a walkway from the Hotel to the beach which walkway may be temporary in nature until the construction of Phase V. The walkway to the beach when completed will comply with the Hotel Standards, as defined in the Declaration. The Units and the Temporary Function Space shall be constructed substantially in compliance with the Hotel Plans and Specifications and in compliance with the Design Criteria. This Section 22 shall survive the Closing. 23. Open Date. Purchaser and Seller acknowledge that, in addition to the requirements set forth under the License Agreement granting Franchisor approval rights with respect to when a hotel opens in its system, the hotel will not be opened for business until the Resort Pool is completed, pedestrian beach access is provided to the Hotel Condominium, there is sufficient parking available to the Hotel Condominium as contemplated by Section 12.2 of the Agreement and the Temporary Function Space is completed and available to the hotel (the Hotel Unit, the Units participating in the Rental Program, Hotel Operated Common Properties and the Temporary Function Space is herein after referred to as the “Hotel”). Seller further acknowledges that the Franchisor shall have the right to terminate the License Agreement if the Hotel does not open on or before June 30, 2007. Seller shall use commercially reasonable efforts to complete the Hotel, including the Resort Pool, the Temporary Function Space and pedestrian beach access (which may be a temporary walkway pending commencement of Phase V construction) and parking prior to March 31, 2007. Seller shall not have any liability to Purchaser for the failure of Seller to comply with the estimated completion dates set forth in Section 22 or for failure to use commercially reasonable efforts to complete the Hotel prior to March 31, 2007 unless Seller takes actions or fails to take action with the intent of delaying the opening of the Hotel past March 31, 2007 or otherwise causing Purchaser to breach the License Agreement. This Section 23 shall survive the Closing. 24. Unsold Units. In the event that on March 31, 2007, owners of fewer than 200 Units have entered into Rental Agreements and Seller owns Units that have not been conveyed to unaffiliated third parties, Seller agrees to make any such Units available for use by Purchaser or Purchaser’s affiliate as Hotel guest rooms in accordance with the terms of Exhibit “L,” for so long as Seller or any of Seller’s affiliates own any such Units and fewer than 200 Units are in the Rental Program. Thereafter, Seller, in Seller’s sole discretion, may continue to make unsold   9 -------------------------------------------------------------------------------- Units available to Purchaser or its affiliate for use in accordance with Exhibit “L.” This provision shall survive the Closing. 25. Beach Club. To the extent that Seller or an MCZ Entity or a successor in interest to such entity allows the Beach Club to be used by persons that are not members of the Master Association such parties shall not be permitted to utilize the Hotel Operated Common Properties without the consent of Purchaser or its affiliate that operates such facilities, which consent shall not be unreasonably withheld or delayed. This Section 25 shall survive the Closing. 26. Declaration of Condominium. The Declaration of Condominium which has been approved by the Division together with the condominium prospectus, condominium association articles of incorporation, bylaws, rules and regulations (collectively the “Condominium Documents”) is attached hereto as Exhibit “M.” Prior to conveying the first Unit, Seller covenants and agrees to amend the Declaration of Condominium by recording the Declaration of Condominium which incorporates the revisions described on Exhibit “N” attached hereto and made a part hereof. Seller agrees to provide Purchaser with any amendments to the Condominium Documents prior to the Closing. This Section 26 shall survive the Closing. 27. Management Agreement. The Management Agreement to be entered into between the Condominium Association and Purchaser as contemplated by Section 20.1 of the Agreement shall be in the form of Exhibit “O” attached hereto and made a part hereof. 28. Phase I Plans and Specifications. Purchaser acknowledges that Purchaser has reviewed the Plans and Specifications for the Hotel Condominium and the plans and specifications for the Resort Pool, which are collectively identified on Exhibit “P” attached hereto and made a part hereof (collectively, the “Hotel Plans and Specifications”). Seller has submitted the Hotel Plans and Specifications to Franchisor and, to the extent Franchisor has elected to review the Hotel Plans and Specifications, Franchisor’s comments on the Plans and Specifications are noted on Exhibit B. Seller covenants and agrees not to modify the Hotel Plans and Specifications in any material respect without first obtaining the prior written consent of Purchaser, which consent shall not be unreasonably withheld or delayed and which shall be granted provided the modifications comply with the Design Criteria. The failure of the Purchaser to respond to any request for approval of any material modification to the Hotel Plans and Specifications within five (5) business days shall be deemed approval; provided that any material modification which requires approval of Franchisor pursuant to the License Agreement shall not be deemed approved until such approval is actually received by Seller from Franchisor and Purchaser. Seller covenants and agrees that the Hotel Condominium and the Hotel Operated Common Properties will be constructed in accordance with the Hotel Plans and Specifications and Design Criteria, subject to any material modifications to the Hotel Plans and Specifications approved, or deemed approved, by Purchaser, and Franchisor, where such approval is required and, if constructed, the Meeting Space will be constructed in accordance with the Design Criteria. Seller agrees to submit to Purchaser and Franchisor for prior review and approval the specifications for the interior design and finishes for all parts of the Hotel as well as any proposed material changes to such specifications. The same approval process that applies to the Hotel Plans and Specifications shall apply with respect to the plans and specifications for the interior designs and finishes and any material changes thereto. This Section 28, shall survive   10 -------------------------------------------------------------------------------- Closing until completion of the construction of the Hotel Condominium, the Hotel Operated Common Properties and the Meeting Space. 29. Certificates from Purchasers. Within five (5) business days of Seller’s receipt of written notice from Purchaser that the License Agreement has been fully executed and delivered by Franchisor, Seller shall request that all purchasers who execute a purchase and sale agreement subsequent to such date execute a certificate in the form of Exhibit “Q” attached hereto (the “Crowne Plaza® Certificate”). If a purchaser refuses to execute the Crowne Plaza® Certificate, Seller shall utilize commercially reasonable efforts to cause such purchaser to execute the Alternative Crowne Plaza® Certificate, as hereinafter defined, but will not force any purchasers to sign the Alternative Crowne Plaza® Certificate who refuses to execute same. With respect to purchasers of Units who previously executed purchase and sale agreements, Seller covenants and agrees to use commercially reasonable efforts to cause, these purchasers to execute at closing the Crowne Plaza® Certificate; however, if the purchaser refuses to sign the Crowne Plaza® Certificate at closing Seller shall use commercially reasonable efforts to obtain from such purchaser an executed certificate in the form attached hereto as Exhibit “R-l” (the “Alternative Crowne Plaza® Certificate”). Purchaser shall be required to use commercially reasonable efforts but will not be required to force any purchasers to sign a certificate. Seller shall not amend the Crowne Plaza® Certificate or the Alternative Crowne Plaza® Certificate (other than insertion of the name of the purchaser(s), the unit number and the date of execution) without the prior written consent of Purchaser and Franchisor. Seller shall promptly deliver all signed certificates to Purchaser. Further, Seller covenants and agrees that if Seller receives written notice that the License Agreement has been terminated during the sales process for any reason, then Seller will utilize commercially reasonable efforts to notify all purchasers of the fact that the License Agreement with Franchisor has been terminated. As of the date of this Third Amendment, Seller has entered into binding sales contracts for 193 of the Units and one signed Reservation Agreement. This Section 29 shall survive Closing. 30. Restrictive Covenant. At Closing and following the recording of the amended Declaration of Condominium and the amendments to the Master Association Documents contemplated by this Agreement, Seller, MCZ/Centrum and Purchaser shall execute a restrictive covenant in the from of Exhibit “S” attached hereto and made a part hereof (the “Restrictive Covenant”). Seller shall cause each of its affiliates that owns or controls an interest in the Project to enter into the Restrictive Covenant such that the terms thereof apply to all of the real property in the Project located west of South Ocean Drive. Execution and delivery by Seller and MCZ/Centrum of the Restrictive Covenant shall be a condition to Purchaser’s obligation to close pursuant to Article XXVII. 31. ADA Compliance. Seller and Purchaser acknowledge that the Hotel Plans and Specifications currently include twelve (12) Units that comply with the Americans with Disabilities Act. Seller agrees to amend the Hotel Plans and Specifications with respect to the Hotel Unit to create two (2) additional Units that comply with the Americans with Disabilities Act out of that portion of the Hotel Unit shown on Exhibit “T” attached hereto (the “New ADA Units”). At Closing, Purchaser shall reimburse Seller for all third party costs and expenses incurred by Seller in creating the New ADA Units (excluding any overhead allocation or mark-up by Seller or any of its affiliates), which cost is estimated to be approximately $100,000.00 for the two Units.   11 -------------------------------------------------------------------------------- 32. Representations and Warranties. Section 24.1 of the Agreement is hereby amended to add the following additional item: 24.1.4 To the best of Seller’s knowledge, Seller and MCZ/Centrum and each of their employees, managers, agents and affiliates have complied with Applicable Law applicable to the offering for sale of the Units and Seller has no knowledge of any violation of Applicable Law by any other person or entity in each case, pertaining to the offering for sale of the Units and/or the Rental Program. For purposes of this section, to the Seller’s knowledge shall be deemed to be the actual knowledge of Arthur Slaven, John McLinden and Michael Lerner, the principals of Seller. 33. Conflict. In the event of conflict between the terms and provisions of the Agreement and this Third Amendment, the terms and provisions of this Third Amendment shall control. This provision shall survive the Closing. 34. Closing Certificate. At Closing, Seller shall provide Purchaser an estoppel certificate from the Master Association certifying that the Hotel Condominium is in compliance with the Master Association Documents as of the Closing Date. 35. Ratification. Except as hereby modified, Seller and Purchaser hereby ratify and reaffirm all of the terms and provisions of the Agreement. 36. Counterparts. This Third Amendment may be executed in counterparts, each of which, or any combination thereof, and combination of which, when signed by all parties, shall be deemed an original but all of which taken together shall constitute one Third Amendment. 37. Third Party Beneficiary. Franchisor shall be third party beneficiary of each and every provision set forth in the Agreement that benefits Franchisor, directly or indirectly, or that provides Purchaser with rights needed to comply with its obligations (or those of its affiliates executing the License Agreement) under the License Agreement. This Section 37 shall survive the Closing. 38. Confirmation. Seller acknowledges and confirms that it shall undertake and perform all obligations of MCZ/Centrum set forth in the Agreement. This Section 38 shall survive the Closing. 39. Competing Brand. Seller and each of its affiliates agree that it and they will not take any action that would result in the Units which they own that do not participate in the Rental Program affiliating with any other hotel brand. This Section 39 shall survive the Closing. 40. Further Agreements of Seller. Seller further agrees to comply with all applicable laws, rules and regulations regarding the construction of the Hotel Condominium and Common Properties and shall obtain in a timely manner all permits, certificates and licenses necessary for the offer and sale of the Units and shall provide Purchaser with a copy of any inspection report, notice, warning, certification or rating issued by any governmental entity that indicates a failure to meet or maintain governmental standards or less than full compliance with any applicable law,   12 -------------------------------------------------------------------------------- rule or regulation in respect of the construction of the Hotel Condominium or the Common Properties or the offer and sale of the Units received by Seller. 41. Publicity. Seller agrees to comply with the provisions of Section 17 of the Addendum regarding publicity. 42. Shared Expenses. Seller and Purchaser acknowledge and agree that electric services to the restaurant and kitchen which comprise part of the Hotel Unit shall be paid by the Purchaser and not be included in the Shared Costs, as defined in the Condominium Declaration. In the event that the restaurant and kitchen cannot be separately metered Seller and Purchaser shall jointly retain an electrical consultant who will estimated the electrical consumption of the restaurant and kitchen and the estimated cost for such electrical consumption which shall be paid by Purchaser and not be included in the Shared Costs. This provision shall survive Closing. 43. Master Association Assessments. Seller and Purchaser acknowledge and agree that the Master Association Amendment amends the Master Association Documents to increase the Master Association assessments payable by the owner of the Hotel Unit to twenty (20) times the assessment charged to the owner of a residential unit and Purchaser hereby consents to such amendment. 44. Name of Hotel. Section 13.1 of the Agreement is hereby amended by deleting the words “the Hotel Condominium and the other aspects of” and inserting after the word “Project” the following parenthetical “(other than the Hotel”).” [SIGNATURE PAGE FOLLOWS]   13 -------------------------------------------------------------------------------- IN WITNESS HEREOF, the parties have executed this Third Amendment as of the date first above written.   SELLER: MCZ/CENTRUM FLORIDA XIX, L.L.C., a Delaware limited liability company By:   /s/ Brian Niven   Brian Niven, a Manager   PURCHASER: MHI HOLLYWOOD, LLC, a Delaware limited liability company By:   /s/ Andrew M. Sims   Andrew M. Sims, Manager   14 -------------------------------------------------------------------------------- SELLER JOINDER The undersigned join in the execution of this Third Amendment (a) to agree to provide the Franchise Indemnity Guaranty pursuant to Section 12 of this Third Amendment and (b) to guarantee the indemnification obligations of the Seller pursuant to Section 13 of this Third Amendment, and for the purpose of committing on behalf of MCZ/Centrum and its and their affiliates to comply (or cause or enable Seller to comply) with the provisions of Sections 10, 20, 21, 22, 25 and 30 of this Third Amendment, provided, however, that under no circumstances shall the liability of the undersigned hereunder or under the Franchise Indemnity Guaranty exceed $5,000,000.00 in the aggregate.       Arthur Slaven     John McLinden     Michael Lerner   15 -------------------------------------------------------------------------------- MCZ/CENTRUM JOINDER MCZ/Centrum joins in the execution of this Third Amendment to agree to be bound by the provisions of Sections 17, 20, 21, 22 and 30 of this Third Amendment.   MCZ/CENTRUM FLORIDA VI OWNER, L.L.C., an Illinois limited liability company By:        Name:    Brian Niven   Title:      a Manager   16 -------------------------------------------------------------------------------- PURCHASER JOINDER The undersigned joins in the execution of this Third Amendment for the purpose of guaranteeing Purchaser’s indemnification obligations pursuant to Section 14 of this Third Amendment, provided, however, that the undersigned’s liability under this guarantee shall be limited to $5,000,000.00.   MHI HOSPITALITY CORPORATION, a Maryland corporation By:        Andrew M. Sims, President   17 -------------------------------------------------------------------------------- EXHIBIT A License Agreement and Addendum   18 --------------------------------------------------------------------------------   LOCATION:    4000 South Ocean Drive      Hollywood, FL 33019   LOCATION #:    6336   DATE:    September     , 2006 HOLIDAY HOSPITALITY FRANCHISING, INC. CROWNE PLAZA® LICENSE AGREEMENT WITH MHI HOSPITALITY TRS, LLC LICENSEE -------------------------------------------------------------------------------- HOLIDAY HOSPITALITY FRANCHISING, INC. CROWNE PLAZA LICENSE AGREEMENT TABLE OF CONTENTS   1.    THE LICENSE:    1    A.    The Hotel:    1    B.    The System:    1 2.    GRANT OF LICENSE:    2 3.    LICENSEE’S RESPONSIBILITIES:    2    A.    Operational and Other Requirements:    2    B.    Upgrading of the Hotel:    4    C.    Fees:    5 4.    LICENSOR’S RESPONSIBILITIES:    7    A.    Training:    7    B.    Reservation Services:    7    C.    Consultation on Operations, Facilities and Marketing:    7    D.    Maintenance of Standards:    7    E.    Application of Manual:    8    F.    Other Arrangements for Marketing, Etc.:    8    G.    Licensor’s Use of Other Advertising/Promotional Support Funds:    8    H.    Use of Services Contribution:    8    I .    Performance of Licensor’s Obligations:    8 5.    APPEALS, CHANGES IN THE MANUAL:    9    A.    Appeals:    9    B.    Changes in the Manual:    9    C.    Decisions on Appeal:    9    D.    Limitation on Appeal Rights:    9 6.    IAHI:    10    A.    Membership:    10    B.    Function of Committees:    10 7.    PROPRIETARY RIGHTS:    10    A.    Ownership of System:    10    B.    Trademark Disputes:    11    C.    Protection of Name and Marks:    11    D.    Modification or Discontinuation of Marks:    11   i -------------------------------------------------------------------------------- 8.    RECORDS AND AUDITS:    11    A.    Monthly Statements:    11    B.    Preparation and Maintenance of Records:    12    C.    Audit:    12    D.    Annual Financial Statements:    12 9.    INDEMNITY AND INSURANCE:    12    A.    Indemnity:    12    B.    Insurance:    13    C.    Evidence of Insurance:    14 10.    TRANSFER:    14    A.    Transfer by Licensor:    14    B.    Transfer by Licensee:    14    C.    Transfer of Equity Interests That Are Not Publicly Traded:    15    D.    Transfers of Publicly-Traded Equity Interests:    15    E.    Transfer of the License:    16    F.    Transfers of Equity Interest in the License Upon Death or To Family Members:    17    G.    Registration of a Proposed Transfer of Equity Interests:    17    H.    Change of Ownership:    18    I.    Transfer of Real Estate:    18    J.    Management of the Hotel:    19 11.    CONDEMNATION AND CASUALTY:    19    A.    Condemnation:    19    B.    Casualty:    19    C.    No Extensions of Term:    20 12.    TERMINATION:    20    A.    Expiration of Term:    20    B.    Termination by Licensee on Advance Notice:    20    C.    Termination by Licensor on Advance Notice:    20    D.    Immediate Termination by Licensor:    21    E.    De-Identification of Hotel Upon Termination:    22    F.    Payment of Liquidated Damages:    23 13.    RELATIONSHIP OF PARTIES:    23    A.    No Agency Relationship:    23    B.    Licensee’s Notices to Public Concerning Independent Status:    23   ii -------------------------------------------------------------------------------- 14.    MISCELLANEOUS:    24    A.    Severability and Interpretation:    24    B.    Binding Effect:    24    C.    Exclusive Benefit:    24    D.    Entire Agreement:    24    E.    Licensor Withholding Consent:    25    F.    Notices:    25    G.    Authority:    25    H.    General Release and Covenant Not to Sue:    25    I.    Performance of the Work:    26    J.    Reimbursement of Expenses:    26    K.    Descriptive Headings:    26    L.    Capital Reserve:    27    M.    Terrorism:    27    N.    Business Judgment:    27    O.    Right of First Refusal:    27 ATTACHMENT “A”    29 ATTACHMENT “B”    33   iii -------------------------------------------------------------------------------- Holiday Hospitality Franchising, Inc. Three Ravinia Drive, Atlanta, Georgia 30346 Crowne Plaza Resort License Agreement This License dated September         , 2006 (the “Term Commencement Date”), between Holiday Hospitality Franchising, Inc., a Delaware corporation (“Licensor”), and MHI Hospitality TRS, LLC, a Delaware limited liability company (“Licensee”) whose address is 814 Capitol Landing Road, Williamsburg, VA 21385. The Parties Agree As Follows:   1. THE LICENSE: Licensor operates and licenses a system designed to provide a distinctive, high quality hotel service to the public under the name “Crowne Plaza®” (the “System” as defined in paragraph l.B below). High standards established by Licensor are the essence of the System. Future investments may be required of Licensee under this License Agreement (“License”). Licensee has independently investigated the risks of the business to be operated hereunder, including current and potential market conditions, competitive factors and risks; has read Licensor’s Uniform Franchise Offering Circular for prospective Crowne Plaza brand group franchisees (“UFOC”); and has made an independent evaluation of all such facts. Neither Licensor nor any other person on Licensor’s behalf has made any representation to Licensee concerning this License not fully set forth herein. Aware of the relevant facts, Licensee desires to enter into this License in order to obtain a license to use the System in the operation of a Crowne Plaza Resort branded hotel located at 4000 South Ocean Drive, Hollywood, FL 33019 (the “Hotel”).     A. The Hotel: The Hotel comprises all structures, facilities, appurtenances, furniture, fixtures, equipment, and entry, exit, parking and other areas from time to time located on the land identified by Licensee to Licensor in anticipation of this License, or located on any land from time to time approved by Licensor for additions, signs or other facilities. The Hotel now includes the facilities listed on Attachment “A” hereto. No change in the number of approved guest rooms or suites and no other significant change in the Hotel or in the manner in which the Hotel rooms and services are offered to the public (including timesharing and condominium hotel projects not involving short term stays by transient guests) may be made without Licensor’s approval. Licensee represents that it is entitled to possession of the Hotel during the entire license term without restrictions that would interfere with anything contemplated in this License. Throughout this License, the words “room” and “guest room” are intended to include the word “suites” unless otherwise indicated.     B. The System: The System is composed of all elements which are designed to identify Crowne Plaza hotels to the consuming public or are designed to be associated with those hotels or to contribute to such identification or association and all elements which identify or reflect the quality -------------------------------------------------------------------------------- standards and business practices of such hotels, all as specified in this License or as designated from time to time by Licensor. The System at present includes, but is not limited to, the principal trade and/or service marks Crowne Plaza®, Crowne Plaza® Suites and Crowne Plaza® Resort (as appropriate to the specific hotel operation to which it pertains), Holidex® and the other Marks, as defined in paragraph 7.B below, and intellectual property rights made available to licensees of the System by reason of a license; all rights to domain names and other identifications or elements used in electronic commerce as may be designated from time to time by Licensor in accordance with Licensor’s specifications to be part of the System; access to a reservation service operated in accordance with specifications established by Licensor from time to time; distribution of advertising, publicity and other marketing programs and materials; the furnishing of training programs and materials; confidential or proprietary information standards, specifications and policies for construction, furnishing, operation, appearance and service of the Hotel, and other requirements as stated or referred to in this License and from time to time in Licensor’s Standards Manual (the “Manual”) or in other communications to Licensee; and programs for inspecting the Hotel, measuring and assessing service, quality and consumer opinion and consulting with Licensee. Licensor may add elements to the System or modify, alter or delete elements of the System in its sole discretion from time to time.   2. GRANT OF LICENSE: Licensor hereby grants to Licensee a non-exclusive license to use the System only at the Hotel, but only in accordance with this License and only during the “License Term” beginning with the Term Commencement Date and terminating as provided under paragraph 12 hereof. The License applies to the location specified herein and to no other location. Licensee acknowledges that Licensor, its divisions, subsidiaries, affiliates and parents are and may in the future be engaged in other business activities including lodging and related activities, and that Licensee is acquiring no rights hereunder other than the right to use the System as specifically defined herein in accordance with the terms of this License. This License does not limit Licensor’s right or the rights of any parent, subsidiary or affiliate of Licensor, to use or license the System or any part thereof or to engage in or license any business activity at any other location, including, without limitation, the licensing, franchising, ownership, operation and/or management of lodging facilities and related activities under the names and marks associated with the System and/or any other names and marks. Licensee acknowledges that Licensor’s rights to use and/or license the System, referenced immediately above, pre-date this License and are not limited or changed by the terms of this License. Licensee agrees that by acknowledging those rights, the parties do not intend to make Licensor’s exercise of such rights subject to rules applicable to contractual performance or the exercise of contractual discretion under this License.   3. LICENSEE’S RESPONSIBILITIES:     A. Operational and Other Requirements: During the License Term, Licensee will:     (1) maintain a high moral and ethical standard and atmosphere at the Hotel;   2 --------------------------------------------------------------------------------   (2) maintain the Hotel in a clean, safe and orderly manner and in first class condition;     (3) provide efficient, courteous and high-quality service to the public;     (4) operate the Hotel 24 hours a day every day except as otherwise permitted by Licensor based on special circumstances;     (5) strictly comply in all respects with the Manual (as it may from time to time be modified or revised by Licensor) and with all other policies, procedures and requirements of Licensor which may be from time to time communicated to Licensee (which communication may be, at Licensor’s option, in hard paper copy or digital, electronic or computerized form and Licensee must pay any costs to retrieve, review, use or access such digital, electronic or computerized communication);     (6) strictly comply with all of Licensor’s standards and specifications for goods and services used in the operation of the Hotel and other reasonable requirements to protect the System and the Hotel from unreliable sources of supply;     (7) strictly comply with Licensor’s requirements as to:     (a) the types of services and products that may be used, promoted or offered at the Hotel;     (b) the types and quality of services and products that, to supplement services listed on Attachment A, must be used, promoted or offered at the Hotel;     (c) the use, display, style and type of signage and of all other forms of identification at or pertaining to the Hotel, including but not limited to any use of the Holiday Inn or Crowne Plaza name or any other of Licensor’s service marks, trademarks or copyrights (in all formats, including but not limited to print, electronic or other media), which are seen by members of the consuming public or used to identify the Hotel to actual or prospective consumers;     (d) directory and reservation service listings of the Hotel;     (e) training of persons to be involved in the operation of the Hotel;     (f) participation in all marketing, reservation service, advertising, training and operating programs designated by Licensor as Systemwide (or area-wide) programs in the best interests of hotels using the System; provided that with regard to area-wide programs, Licensee may request Licensor’s approval that Licensee need not participate, reasonable approval not to be withheld;     (g) maintenance, appearance and condition of the Hotel; and     (h) quality and types of services offered to customers at the Hotel.     (8) use such automated guest service and/or hotel management and/or telephone or telecommunication system(s) which Licensor deems to be in the best interests of the System, including any additions, enhancements, supplements, or variants thereof which may be developed during the term hereof;     (9) participate in and use those reservation services which Licensor deems to be in the best interests of the System, including any additions,   3 --------------------------------------------------------------------------------   enhancements, supplements or variants thereof which may be developed during the term hereof;     (10) adopt all improvements or changes to the System as may be from time to time designated by Licensor;     (11) strictly comply with all governmental requirements, pay all taxes, and maintain all governmental licenses and permits necessary to operate the Hotel in accordance with the System;     (12) permit inspection of the Hotel by Licensor’s representatives at any time and give them free lodging for such time as may be reasonably necessary to complete their inspections;     (13) promote the Hotel on a local or regional basis subject to Licensor’s requirements as to form, content and prior approvals;     (14) insure that no part of the Hotel or the System is used to further or promote a competing business or other lodging facility, except as Licensor may approve for businesses or lodging facilities owned, licensed, operated or otherwise approved by Licensor or its parents, divisions, subsidiaries, and affiliates;     (15) use every reasonable means to encourage use of Holiday Inn and Crowne Plaza facilities everywhere by the public;     (16) in all respects use Licensee’s best efforts to reflect credit upon and create favorable public response to the name “Crowne Plaza”;     (17) promptly pay to Licensor all amounts due Licensor, its parents, subsidiaries and affiliates as royalties or fees, whether or not arising out of this License, or for goods or services purchased by Licensee for use at the Hotel; and     (18) comply with Licensor’s reasonable requirements concerning confidentiality of information, and in particular Licensee shall not disclose without Licensor’s written permission, information pertaining to Licensor’s marketing and reservations programs that have not been disclosed to the public.     B. Upgrading of the Hotel: Using the same requirements applicable generally to hotels under the System operated by Licensor and its licensees in the same category as the Hotel, Licensor may at any time during the term hereof require substantial modernization, renovation and other upgrading of the Hotel. Limited exceptions from those requirements may be made by Licensor based on local conditions or special circumstances. If the upgrading requirements contained in this paragraph 3.B cause Licensee undue hardship, Licensee may terminate the License by complying with paragraph 12.B. The provisions of this paragraph and of paragraph 12.B are not applicable to the Work as defined in this License or to future upgrading requirements due to conversions, relicensing, product quality inspections of the Hotel, Standards Manual requirements or a request for change of ownership by Licensee.   4 --------------------------------------------------------------------------------   C. Fees:     (1) For each month (or part of a month) during the License Term, Licensee will pay to Licensor by the 15th of the following month, except in the case of the Technology Fee in paragraph 3.C(l)(c) and the Crowne Plaza Hotel Marketing Association fee in paragraph 3.C(l)(f) below, which are payable monthly in advance:     (a) a royalty of 5% of the Gross Rooms Revenue attributable to or payable for rental of guest rooms at the Hotel with no deduction for any item including but not limited to no adjustment for the cost of any food and beverage items provided or made available to a guest as an incident of a guest room rental, however with deductions for sales and room taxes only (“Gross Rooms Revenue”); and     (b) a “Services Contribution” equal to three percent (3%) of Gross Rooms Revenue, to be used by Licensor for marketing, reservations, and other related activities which, in Licensor’s sole business judgment as to the long-term interests of the System, support marketing, reservations and other related functions. Costs which a Licensee incurs in the acquisition, installation or maintenance of reservations services, equipment or training, or in its own marketing activities, do not constitute payment of the “Services Contribution”. The Services Contribution is subject to change by Licensor from time to time if either approved by: (i) a majority of members (which shall be counted on the basis of one hotel, one vote) of the System who represent a majority of the hotels to be subject to the increase; or (ii) approved by a majority of the members of the System or the “IAHI” (the franchisee association or successor sanctioned as such by Licensor) at a meeting of System licensees or at an annual IAHI meeting either as may be convened by Licensor upon no less than 45 days’ advance notice. Licensor may, in its sole discretion, upon 30 days’ prior written notice, increase this Contribution by an amount not to exceed 1% of Gross Rooms Revenue and such increase shall be effective for a period no longer than 12 months; provided that, in the event of such increase, Licensor shall not make such a discretionary increase again for a period of 24 months after the expiration of any such increase; and     (c) a monthly Technology Fee of $11.34 for each guest room at the Hotel to be used by Licensor for provision of technology services, such as, but not limited to satellite communications services to the Hotel, plus such increases as Licensor may judge reasonable, but in no case exceeding in any calendar year 10% of the fee in effect at the beginning of that year (the Technology Fee does not include the cost of installation of any equipment at the Hotel); and   5 --------------------------------------------------------------------------------   (d) all fees due for travel agent commission programs, including Electronic Commission Services and Field Marketing Co-op programs attributable to the Hotel; and     (e) an amount equal to any sales, gross receipts or similar tax imposed on Licensor and calculated solely on payments required hereunder, unless the tax is an optional alternative to an income tax otherwise payable by Licensor.     (f) a fee in an amount equal to $3.00 per room, per month for mandatory participation in the Crowne Plaza Hotel Marketing Association. This amount is subject to change from time to time by the Hotel Marketing Association. Said fees shall be invoiced in advance, but paid in arrears along with all invoiced fees. Licensor may, at its election, require Licensee to pay all outstanding fees by electronic funds transfer/direct debit of account or other similar technology designed to accomplish the same purposes. Licensee will operate the Hotel so as to maximize gross rooms revenue of the Hotel consistent with sound marketing and industry practice and will not engage in any conduct which reduces gross rooms revenue of the Hotel in order to further other business activities.     (2) A standard application fee for additional rooms as set forth in Licensor’s then current Crowne Plaza UFOC will be charged upon application for any additional guest rooms to be added to the Hotel.     (3) Additional royalties may be charged on revenues (or upon any other basis, if so determined by Licensor) from any activity if it is added at the Hotel by mutual agreement and:     (a) it is not now offered at System hotels generally and is likely to benefit significantly from or be identified significantly with the Crowne Plaza name or other aspects of the System; or     (b) it is designed or developed by or for Licensor.     (4) Charges may be made for optional products or services accepted by Licensee from Licensor, either in accordance with current practice or as developed in the future.     (5) Each payment under this paragraph 3.C, except the standard Additional Room Application Fee, shall be accompanied by the monthly statement referred to in paragraph 8.A. Licensor may apply any amounts received under this paragraph 3.C to any amounts due under this License. If any amounts are not paid when due, such non-payment shall constitute a breach of this License and, in addition, such unpaid amounts will accrue interest beginning on the first day of the month following the due date at 1 1/2% per month or the maximum interest permitted by applicable law, whichever is less.     (6) Local and regional marketing programs and related activities may be conducted by Licensee, but only at Licensee’s expense and subject to Licensor’s requirements. Reasonable charges may be made for optional   6 --------------------------------------------------------------------------------   advertising materials ordered or supplied by Licensor to Licensee for such programs and activities.     (7) Licensor has the right, in its sole discretion, to require Licensee to tender any payments due to Licensor under this License to Licensor’s parents, affiliates, subsidiaries or other designees.     (8) Licensor shall comply with Licensee’s reasonable requirements concerning confidentiality of information.   4. LICENSOR’S RESPONSIBILITIES:     A. Training: During the License Term, Licensor will continue to specify and provide required and optional training services and programs at various locations. A fee may be charged for certain required and optional training services. Travel, lodging and other expenses of Licensee and its employees will be borne by Licensee. Reasonable charges also may be assessed for training materials.     B. Reservation Services: During the License Term, so long as Licensee is in full compliance with its material obligations hereunder, Licensor will afford Licensee access to reservation service for the Hotel on terms consistent with this License.     C. Consultation on Operations, Facilities and Marketing: During the License Term, Licensor will, from time to time at Licensor’s discretion, make available to Licensee consultation and advice in connection with operations, facilities and marketing. Licensor may from time to time furnish to Licensee names of suppliers or recommend to Licensee suppliers of goods and services required or useful in the operation of the Hotel; however, Licensor is not obligated to furnish any such names or to continue doing so, and Licensee is under no obligation to use any such supplier, unless expressly required to do so by the terms of this License, the Manual or otherwise. In identifying or recommending suppliers, Licensor exercises its business judgment based on its information as of that date and its sense of the long-term interests of the System. Licensor’s identification or recommendation of a supplier is not a warranty of the financial condition or performance of any supplier or of any other factor, and Licensee’s use of an identified or recommended supplier that sells products or services meeting Licensor’s standards and specifications may facilitate compliance with those standards and specifications, but it is not a substitute for such compliance.     D. Maintenance of Standards: Licensor will conscientiously seek to maintain high standards of quality, cleanliness, appearance and service at all hotels using the System so as to promote, protect and enhance the public image and reputation of the Holiday Inn and Crowne Plaza names and to increase the demand for services offered by the System. Licensor’s judgment in such matters shall be controlling in all respects, and it shall have wide latitude in making such judgments.   7 --------------------------------------------------------------------------------   E. Application of Manual: Licensee’s Hotel and all other hotels operated under the System will be subject to the Manual, as it may from time to time be modified or revised by Licensor, including limited exceptions from compliance which may be made based on local conditions, type of hotel or special circumstances. The Manual and any modification to it can be delivered by Licensor to Licensee in hard paper copy or, at Licensor’s option, be made available to Licensee in digital, electronic or computerized form. If communicated in digital, electronic or computerized form, Licensee must pay any costs to retrieve, review, use or access the Manual. The Manual is confidential and remains the property of Licensor.     F. Other Arrangements for Marketing, Etc.: Licensor may enter into arrangements for development, reservation services, marketing, operations, administrative, technical and support functions, facilities, programs, services and/or personnel with any other entity, and may use any facilities, programs, services or personnel used in connection with the System, in connection with any business activities of its parents, subsidiaries, divisions or affiliates.     G. Licensor’s Use of Other Advertising/Promotional Support Funds: To the extent that advertising and/or promotional support and/or funding may become available to Licensor’s parents, affiliates or subsidiaries and/or Licensor from third parties on account of the totality of the activities of Licensor’s parents, affiliates and subsidiaries, including hotels operated under the System, such support and/or funding may be used or designated by Licensor’s parents, affiliates or subsidiaries, or Licensor, to benefit such enterprises in the aggregate, in such proportion and manner as Licensor’s parents, affiliates or subsidiaries, or Licensor determines reasonably promotes the totality of such enterprises, exercising reasonable good faith business judgment with respect to such determination, provided that any such support or funding coming from activities of the System shall be used for the benefit of the System.     H. Use of Services Contribution: Licensor will make available and use Services Contribution funds computed on the basis generally applicable to licensees of the System. Licensor is not obligated to expend funds for marketing, reservations or related services in excess of the amounts received from licensees using the System and those funds made available by Licensor as set forth above. Local and regional marketing programs and related activities may be conducted by Licensee but only at Licensee’s expense and subject to Licensor’s requirements. Reasonable charges may be made for optional advertising materials ordered or used by Licensee for such programs and activities.     I. Performance of Licensor’s Obligations: Licensee understands and agrees that Licensor, in its sole discretion, may perform any or all of its obligations under this License directly or through Licensor’s parents, affiliates, subsidiaries or other designees.   8 -------------------------------------------------------------------------------- 5. APPEALS, CHANGES IN THE MANUAL:     A. Appeals: Decisions, other than termination notices or decisions of Licensor’s Franchise Committee, made on behalf of Licensor specifically with reference to the Hotel may be appealed to Licensor’s Franchise Committee if done promptly after Licensee has diligently sought relief through Licensor’s normal channels of authority. With the approval in writing of any member of the Franchise Committee, the decision may be further appealed to the Executive Committee of Licensor’s Board of Directors.     B. Changes in the Manual: Each change in the Manual shall be communicated in writing to Licensee at least 30 days before it goes into effect (which communication may be in hard paper copy or, at Licensor’s option, in digital, electronic or computerized form, and if such communication is in digital, electronic or computerized form, Licensee must pay any costs to retrieve, review, use or access same). Licensor’s Franchise Committee or its equivalent, or designee subcommittee, must approve any such change and must determine that the change was formulated in good faith in the best interests of the System, after seeking the advice and counsel of the Rules of Operation Committee of the IAHI.     C. Decisions on Appeal: Licensor shall have the right to decide appeals under this paragraph 5, solely on the basis of written submissions. No appeal will suspend a decision or change, until and unless the appeal is successful. Any action taken by Licensor in the enforcement of this License that is shown to be arbitrary or capricious will be rescinded by Licensor to the extent feasible, but wide discretion and latitude will be allowed to the judgment of Licensor in the discharge of its overriding responsibility to maintain and improve the standards, performance and facilities of the hotels using the Holiday Inn, Holiday Inn Hotel & Suites, Crowne Plaza, Holiday Inn Express, Holiday Inn Express Hotel & Suites, Holiday Inn Garden Court, Holiday Inn SunSpree Resort, Holiday Inn Resort, Holiday Inn Family Suites Resort, Crowne Plaza Resort, Crowne Plaza Suites, Holiday Inn Select, Staybridge Suites, or any other Holiday Inn or Crowne Plaza hotel brand or Holiday Inn or Crowne Plaza name. Licensor will conscientiously seek to maintain high standards of quality, cleanliness, appearance and service at all hotels using the System so as to promote, protect and enhance the public image and reputation of all Holiday Inn and Crowne Plaza hotel brand names or any other Holiday Inn or Crowne Plaza name, and to increase the demand for services offered by the System. The Manual will apply to all hotels operated under the System by Licensor and its licensees. Limited exceptions from compliance may be made based on local conditions or special circumstances.     D. Limitation on Appeal Rights: Licensee will not be arbitrary, capricious or unreasonable in exercising its appeal (or any other) rights under this License, and will use them only for the purpose for which intended.   9 -------------------------------------------------------------------------------- 6. IAHI:     A. Membership: Licensee, other licensees of the System, and Licensor are eligible for membership in the IAHI and are entitled to vote at its meetings on the basis of one hotel, one vote, provided that Licensee or Licensor, as the case may be, has paid all its dues and fees owing to the IAHI. The purposes of the IAHI will be to consider and discuss, and make recommendations on common problems relating to the operation of System hotels. Licensor will seek the advice and counsel of the IAHI Board of Directors and its Rules of Operation, Advertising and Reservation Committees, or their successor committees.     B. Function of Committees: IAHI committees, their functions and their members will be subject to approval in writing by Licensor, which approval will not be unreasonably withheld. Recognizing that the IAHI must function in a manner consistent with the best interests of all persons using the System, the Licensee and Licensor will use their best efforts to cause the governing rules of the IAHI to be consistent with this License.   7. PROPRIETARY RIGHTS:     A. Ownership of System: The Licensee acknowledges and will not contest, either directly or indirectly, Licensor’s unrestricted and exclusive ownership of the System and any element(s) or component(s) thereof, or that Licensor has the sole right to grant licenses to use all or any element(s) or component(s) of the System. Licensee specifically agrees and acknowledges that Licensor is the owner of all right, title and interest in and to the marks Holiday Inn, Holiday Inn Hotel & Suites, Crowne Plaza, Holiday Inn Express, Holiday Inn Express Hotel & Suites, Holiday Inn SunSpree Resort, Holiday Inn Resort, Holiday Inn Family Suites Resort, Crowne Plaza Suites, Crowne Plaza Resort, Holiday Inn Select, Staybridge Suites, Candlewood Suites, Hotel Indigo and Intercontinental Hotels and Resorts and all other marks, names or other elements associated with the System, as defined in Section 1(B) of this License, or derived therefrom (including but not limited to domain names or other identifications or elements used in electronic commerce), together with the goodwill symbolized thereby, and that Licensee will not contest directly or indirectly the validity or ownership of the marks either during the term of this License or after its termination. All improvements and additions whenever made to or associated with the System by the parties hereto or anyone else, and all service marks, trademarks, copyrights, and service mark, trademark, domain name or similar registrations at any time used, applied for or granted in connection with the System, and all goodwill arising from Licensee’s use of Licensor’s marks shall inure to the benefit of and become the property of Licensor. Upon expiration or termination of this License, no monetary amount shall be assigned as attributable to any goodwill associated with Licensee’s use of the System or any element(s) or component(s) of the System including any trademarks or service marks licensed hereunder.   10 --------------------------------------------------------------------------------   B. Trademark Disputes: The “Marks” means the names and marks Crowne Plaza, Crowne Plaza Suites, Crowne Plaza Resort, Holidex, and their distinguishing characteristics and the other service marks, trademarks, tradenames, slogans, commercial symbols, logos, trade dress, copyrighted material and intellectual property associated with the System, including (without limitation) those which Licensor may designate in the future for use and those which Licensor does not designate as withdrawn from use. Licensor will have the sole right and responsibility to handle disputes with third parties concerning use of all or any part of the Marks or System, and Licensee will, at its reasonable expense, extend its full cooperation to Licensor in all such matters. All recoveries made as a result of disputes with third parties regarding use of the Marks or System or any part thereof shall be for the account of Licensor. Licensor need not initiate suit against alleged imitators or infringers, and may settle any dispute by grant of a license or otherwise. Licensee will not initiate any suit or proceeding against alleged imitators or infringers or any other suit or proceeding to enforce or protect the Marks or System.     C. Protection of Name and Marks: Both parties will make every effort consistent with the foregoing to protect and maintain the Marks. Licensee agrees to execute any documents deemed necessary by Licensor or its counsel to obtain protection for the Marks or to maintain their continued validity and enforceability. Licensee agrees to use the Marks associated with the System only in the manner authorized by Licensor and acknowledges that any unauthorized use thereof shall constitute infringement of Licensor’s rights.     D. Modification or Discontinuation of Marks: If Licensor modifies or discontinues use of any of the Marks licensed under this License as a result of any proceeding or settlement, then Licensee agrees to comply with Licensor’s instructions in order to implement such modification or discontinuation. Licensee further agrees that it will have no right to any compensation or other remedies from Licensor or any of its subsidiaries, affiliates or parents as a consequence of any such modification or discontinuation.   8. RECORDS AND AUDITS:     A. Monthly Statements: At least monthly, Licensee shall prepare a statement which will include all information concerning Gross Rooms Revenue, other revenues generated at the Hotel, room occupancy rates, reservation data and other information required by Licensor that may be useful (in Licensor’s sole business judgment) in connection with marketing and other functions of Licensor, its parents, subsidiaries, divisions or affiliates (the “Data”). The Data shall be the property of Licensor; however, nothing herein shall prevent the reasonable use of the Data by Licensee during the License Term and, with respect to financial Data, for up to three (3) years after expiration of the License Term. The Data will be permanently recorded and retained by Licensee as may be reasonably required by Licensor. By the third of each month, Licensee will submit to Licensor a statement setting forth the Data and reflecting the computation of the   11 -------------------------------------------------------------------------------- amounts then due under paragraph 3.C. The statement will be in such form (including but not limited to electronic transmission or automatic capture) and detail as Licensor may reasonably request from time to time, and may be used by Licensor for its reasonable purposes.     B. Preparation and Maintenance of Records: Licensee will, in a manner and form satisfactory to Licensor and utilizing accounting and reporting standards as reasonably required by Licensor, prepare on a current basis (and preserve for no less than 4 years or Licensor’s record retention requirements, whichever is longer), complete and accurate records concerning Gross Rooms Revenue and all financial, operating, marketing and other aspects of the Hotel, and maintain an accounting system which fully and accurately reflects all financial aspects of the Hotel and its business. Such records shall include but not be limited to books of account, tax returns, governmental reports, register tapes, daily reports, and complete quarterly and annual financial statements (profit and loss statements, balance sheets and cash flow statements).     C. Audit: Licensor may require Licensee to have Licensee’s Gross Rooms Revenue and/or monies due hereunder computed and certified as accurate by a certified public accountant. During the License Term and for two years afterward, Licensor and its authorized agents will have the right to verify information required under this License by requesting, receiving, inspecting and auditing, at all reasonable times, any and all records referred to above wherever they may be located (or elsewhere if reasonably requested by Licensor). If any such inspection or audit discloses a deficiency in any payments due hereunder, and the deficiency in any payment is not offset by overpayment, Licensee shall immediately pay to Licensor the deficiency and interest thereon as provided in paragraph 3.C(5). Licensee shall also immediately pay to Licensor an audit fee of $3,000. If the audit does not result in a deficiency being assessed, then no audit fee will be assessed. If the audit discloses an overpayment, Licensor will immediately refund it to Licensee.     D. Annual Financial Statements: Licensee will submit to Licensor as soon as available but not later than 90 days after the end of Licensee’s fiscal year, and in a format as reasonably required by Licensor, complete financial statements for such year. Licensee will certify them to be true and correct and to have been prepared in accordance with generally accepted accounting principles consistently applied, and any false certification will be a breach of this License.   9. INDEMNITY AND INSURANCE:     A. Indemnity: Licensee will indemnify Licensor, its parents, and its subsidiaries and affiliates and their officers, directors, employees, agents, successors and assigns against, hold them harmless from, and promptly reimburse them for all payments of money (fines, damages, legal fees, expenses, etc.) by reason of any claim, demand, tax, penalty, or judicial or administrative investigation or proceeding whenever asserted or filed (even where negligence of Licensor   12 -------------------------------------------------------------------------------- and/or its parents, subsidiaries and affiliates is alleged) arising from any claimed occurrence at the Hotel or any act, omission or obligation of Licensee or anyone associated or affiliated with Licensee or the Hotel. At the election of Licensor, Licensee will also defend Licensor and/or its parents, subsidiaries and affiliates and their officers, directors, employees, agents, successors and assigns against same. In any event, Licensor will have the right, through counsel of its choice, to control any matter to the extent it could directly or indirectly affect Licensor and/or its parents, subsidiaries or affiliates or their officers, directors, employees, agents, successors or assigns. Licensee agrees to pay Licensor all expenses including attorney’s fees and court costs, incurred by Licensor, its parents, subsidiaries or affiliates, and their successors and assigns to remedy any defaults of or enforce any rights under the License, effect termination of the License or collect any amounts due under the License.     B. Insurance: During the License Term, Licensee will comply with all insurance requirements of any lease or mortgage covering the Hotel, and Licensor’s specifications for insurance as to the amount and type of coverage as may be reasonably specified by Licensor from time to time in writing, and will in any event maintain on the Hotel as a minimum, the following insurance underwritten by an insurer approved by Licensor:     (1) employer’s liability with minimum limits of $10,000,000 per occurrence; and     (2) worker’s compensation insurance; and     (3) employment practices liability insurance (including coverage for harassment, discrimination and wrongful termination, and covering defense and indemnity costs) with a limit of $1,000,000 per loss; and     (4) the holder of the liquor license will maintain liquor liability insurance with single limit coverage for personal and bodily injury and property damage of at least $10,000,000 for each occurrence naming Licensor and its parents, subsidiaries and affiliates, (and Licensee if applicable) as additional insureds; and     (5) commercial general liability insurance, (including coverage for product liability, completed operations, contractual liability, host liquor liability and fire legal liability) and comprehensive automobile liability insurance (including hired and non-owned liability) with single-limit coverage for personal and bodily injury and property damage of at least $10,000,000 per occurrence, naming Licensor and its parents, subsidiaries and affiliates as additional insureds. In connection with all construction at the Hotel during the License Term, Licensee will cause the general contractor to maintain comprehensive general liability insurance (including coverage for product liability, completed operations and contractual liability) and comprehensive automobile liability insurance (including hired and non-owned liability) with limits of at least $10,000,000 per occurrence for personal and bodily injury and property damage underwritten with insurers approved by Licensor. Licensor and its parents, subsidiaries and affiliates will be named as additional insureds.   13 --------------------------------------------------------------------------------   (6) If multiple locations are insured on policies containing an aggregate limit, then the aggregate limit must apply on a per location aggregate basis. All policies must be written on a fully insured basis. Deductibles or self-insured retentions are subject to approval on an individual basis.     C. Evidence of Insurance: At all times during the License Term, Licensee will furnish to Licensor certificates of insurance evidencing the term and limits of coverage in force, names of applicable insurers and persons insured, and a statement that coverage may not be canceled, altered or permitted to lapse or expire without 30 days’ advance written notice to Licensor. Revised certificates of insurance shall be forwarded to Licensor each time a change in coverage or insurance carrier is made by Licensee, and/or upon renewal of expired coverages. At Licensor’s option, Licensee may be required to provide certified insurance policy copies.   10. TRANSFER:     A. Transfer by Licensor: Licensor shall have the right to transfer or assign this License or any of Licensor’s rights or obligations hereunder to any person or legal entity.     B. Transfer by Licensee: Licensee understands and acknowledges that the rights and duties set forth in this License are personal to Licensee, and that Licensor has granted this License in reliance on the business skill, financial status, and personal character of Licensee (if Licensee is an individual), and upon the owners, members, partners or stockholders of Licensee (if Licensee is an entity, such as a partnership, company or corporation (“Entity”)). Accordingly, neither Licensee nor any immediate or remote successor to any part of Licensee’s interest in the License, nor any individual or entity which directly or indirectly owns an Equity Interest (as that term is defined herein) in Licensee or the License, shall sell, assign, transfer, convey, pledge, mortgage, encumber, or give away, any direct or indirect interest in the License or Equity Interest in Licensee, except as provided in this License. Any purported sale, assignment, transfer, conveyance, pledge, mortgage, or encumbrance by operation of law or otherwise, of any interest in the License or any Equity Interest in Licensee not in accordance with the provisions of this License, shall be null and void and shall constitute a material breach of this License, for which Licensor may terminate without opportunity to cure pursuant to paragraph 12.D of this License.     (1) For the purposes of this paragraph 10, the term “Equity Interests” shall mean any ownership, membership, stock or partnership interests in Licensee and the interests of any partner, whether general or limited, in any partnership, with respect to such partnership, and of any stockholder, member or owner of any corporation or company with respect to such corporation or company, which partnership, corporation or company is the Licensee hereunder or which partnership, corporation or company owns a direct or indirect beneficial interest in Licensee. References in this   14 --------------------------------------------------------------------------------   License to “publicly-traded Equity Interests” shall mean any Equity Interests which are traded on any securities exchange or are quoted in any publication or electronic reporting service maintained by the National Association of Securities Dealers, Inc. or any of its successors.     (2) If Licensee is an Entity, Licensee represents that the Equity Interests in Licensee are directly and (if applicable) indirectly owned, as shown in Attachment “A.”     (3) In computing changes of Equity Interest, limited partners will not be distinguished from general partners, and Licensor’s judgment will be final if there is any question as to the definition of Equity Interest or as to the computation of relative Equity Interests, including transfers of Equity Interests, the principal considerations being:     (a) direct and indirect power to exercise control over the affairs of the Licensee;     (b) direct and indirect right to share in Licensee’s profits; and     (c) amounts directly or indirectly exposed at risk in the Licensee’s business.     C. Transfer of Equity Interests That Are Not Publicly Traded:     (1) Except where otherwise provided in this License, Equity Interests in the Licensee that are not publicly-traded may be transferred, issued, or eliminated with Licensor’s prior written consent, which will not be unreasonably withheld, provided that after the transaction:     (a) 50% or less of all Equity Interests in Licensee will have changed hands since Licensee first became a party to this License, or     (b) 80% or less of all Equity Interests in Licensee will have changed hands since Licensee first became a party to this License, and no Equity Interest(s) will be held by other than those who held them when Licensee first became a party to this License.     (2) In computing the percentages referred to in paragraph 10.C(1) above, limited partners will not be distinguished from general partners, and Licensor’s judgment will be final if there is any question as to the definition of “Equity Interests” or as to the computation of relative Equity Interests, the principal considerations being:     (a) direct and indirect power to exercise control over the affairs of     (b) Licensee;     (c) direct and indirect right to share in Licensee’s profits; and     (d) amounts directly or indirectly exposed at risk in the Licensee’s business.     D. Transfers of Publicly-Traded Equity Interests:     (1) Except as otherwise provided in this License, publicly-traded Equity Interests in the Licensee may be transferred without Licensor’s consent but only if:     (a) immediately before the proposed transfer, the transferor owns less than 25% of the Equity Interest of Licensee; and   15 --------------------------------------------------------------------------------   (b) immediately after the transfer, the transferee will own less than 25% of the Equity Interest of Licensee; and     (c) the transfer is exempt from registration under federal securities law.     (2) Publicly-traded Equity Interests may be transferred with Licensor’s written consent, which may not be unreasonably withheld, if the transfer is exempt from registration under federal securities law.     (3) The chief financial officer of Licensee shall certify annually to Licensor that Licensee is in compliance with the provisions of this paragraph 10.D. Such certification shall be delivered to Licensor with the Annual Financial Statements referred to in paragraph 8.D.     E. Transfer of the License:     (1) Licensee, if a natural person, may with Licensor’s consent, which will not be unreasonably withheld, transfer the License to Licensee’s spouse, parent, sibling, niece, nephew, descendant, or spouse’s descendant, provided that:     (a) adequate provision is made for the management of the Hotel; and     (b) the transferee executes a new license agreement for the unexpired term of this License, on the standard form then being used to license new Hotels under the System, except the fees charged thereunder shall be the same as those contained herein including any adjustments to such fees as may have been implemented from time to time in accordance with the terms of this License; and     (c) Licensee guarantees, in Licensor’s usual form, the performance of the transferee’s obligations under the newly executed license agreement.     (2) If Licensee is a natural person, he may, without the consent of Licensor, upon 30 days’ prior written notice to Licensor, transfer the License to a corporation entirely owned by him, provided that:     (a) adequate provision is made for the management of the Hotel; and     (b) the transferee executes a new license agreement for the unexpired term of this License on the standard form then being used to license new Hotels under the System, except the fees charged then shall be the same as those contained herein including any adjustments to such fees as may have been implemented from time to time in accordance with the terms of this License; and     (c) the Licensee guarantees, in Licensor’s usual form, the performance of the new licensee’s obligations under the newly executed license agreement.     (3) If Licensee is a natural person, upon Licensee’s death, the License will pass in accordance with Licensee’s will, or, if Licensee dies intestate, in accordance with the laws of intestacy governing the distribution of Licensee’s estate, provided that:     (a) adequate provision has been made for management of the Hotel; and   16 --------------------------------------------------------------------------------   (b) Licensor gives written consent, which consent will not be unreasonably withheld; and     (c) the transferee is one or more of the decedent’s spouse, parents, siblings, nieces, nephews, descendants, or spouse’s descendants and;     (d) Licensee’s heirs or legatees promptly advise Licensor and the transferee promptly executes a new license agreement for the unexpired term of this License, on the standard form then being used to license new Hotels under the System, except the fees charged thereunder shall be the same as contained herein including any adjustments to such fees as may have been implemented from time to time in accordance with the terms of this License.     F. Transfers of Equity Interest in the License Upon Death or To Family Members:     (1) If an Equity Interest is owned by a natural person, the Equity Interest will pass upon such person’s death, in accordance with such person’s will or, if such person dies intestate, in accordance with the laws of intestacy governing the distribution of such person’s estate, provided that:     (a) adequate provision is made for management of the Hotel; and     (b) Licensor gives written consent, which consent will not be unreasonably withheld; and     (c) the transferee is one or more of the decedent’s spouse, parents, siblings, nieces, nephews, descendants, or spouse’s descendants and;     (d) transferee assumes, in writing, on a continuing basis, the decedent’s guarantee, if any, of the Licensee’s obligations hereunder.     G. Registration of a Proposed Transfer of Equity Interests:     (1) If a proposed transfer of an Equity Interest in the Licensee requires registration under any federal or state securities law and reference to this License, Licensor or its affiliates or the Marks or any other trademarks, service marks or other intellectual property owned or licensed by Licensor or any of its affiliates is included in the prospectus forming part of such registration statement, Licensee shall:     (a) Request Licensor’s consent at least 45 days before the proposed effective date of the registration; and     (b) Accompany such request with one payment of a non-refundable fee of $25,000.     (2) Licensee hereby agrees to fully indemnify Licensor in connection with any registration made under any federal or state securities law; to furnish the Licensor all information requested by Licensor; to avoid any implication   17 --------------------------------------------------------------------------------   of Licensor’s participation in, or endorsing the offering; and to use Licensor’s service marks and trademarks only as authorized by Licensor.     H. Change of Ownership:     (1) This License is not transferable. If Licensee (i) receives an offer to purchase or lease the Hotel or any portion thereof, (ii) desires to sell or lease the Hotel or any portion thereof, (iii) wishes to convey the Hotel, Hotel site, or any Equity Interest in the Hotel, Licensee shall give prompt written notice thereof to Licensor, stating the identity of the prospective transferee, purchaser or lessee and the terms and conditions of the conveyance, including a copy of any proposed agreement and all other information with respect thereto, which Licensor may reasonably require.     (2) Under the provisions of this License, (i) any Transfer of Equity Interests (other than a permitted Transfer) or (ii) Transfer of all or a substantial part of the Hotel or Hotel site (if the Hotel or Hotel site is owned directly or indirectly by Licensee or by an individual or Entity that owns any Equity Interest in Licensee), to a new owner who desires to continue to operate the Hotel as a Holiday Inn or Crowne Plaza hotel brand, shall constitute a change of ownership requiring submittal of an application for a new license.     (3) Licensor shall process such change of ownership application in accordance with Licensor’s then current procedures, criteria and requirements regarding fees, upgrading of the Hotel, credit, operational abilities and capabilities, prior business dealings, market feasibility and other factors deemed relevant by Licensor. If such change of ownership application is approved, Licensor and the new owner shall, upon surrender of the License, enter into a new license agreement. The new license agreement shall be on Licensor’s then current form and contain Licensor’s then current terms (except for duration), and if applicable, the new license agreement will contain specified upgrading and other requirements.     (4) If a change of ownership application for the proposed new owner is not approved by Licensor and the conveyance of the Hotel, Hotel site, or any Equity Interest in the Hotel or Licensee to the proposed new owner occurs, then this License shall terminate pursuant to paragraph 12.D hereof and Licensor shall be entitled to all of its remedies.     I. Transfer of Real Estate: If the real property used in the operation of the Hotel is owned directly or indirectly by Licensee or by an individual or Entity that owns any Equity Interest in Licensee and Licensee, or that individual or Entity proposes to transfer all or a substantial part of such property to a third party, such transfer shall constitute a transfer under the provisions of this License requiring an application for a new license agreement, unless Licensee receives Licensor’s prior written consent for the transaction.   18 --------------------------------------------------------------------------------   J. Management of the Hotel: Licensee must at all times retain and exercise direct management control over the Hotel’s business. Licensee shall not enter into any lease, management agreement, or other similar arrangement for the operation of the Hotel or any part thereof (including without limitation, food and/or beverage service facilities) with any individual or Entity other than Licensee, without the prior written consent of Licensor.   11. CONDEMNATION AND CASUALTY:     A. Condemnation: Licensee shall, at the earliest possible time, give Licensor full notice of any proposed taking by eminent domain. If Licensor acknowledges that the Hotel or a substantial part thereof is to be taken, Licensor will give due and prompt consideration, without any obligation, to transferring the License to a nearby location selected by Licensee and approved by Licensor as promptly as reasonably possible and in any event within four months of the taking, provided that Licensee has promptly filed an application to transfer the License to such new location. If the new location is approved by Licensor, and the transfer authorized by Licensor, and if Licensee opens a new hotel at the new location in accordance with Licensor’s specifications within two years of the closing of the Hotel, the new hotel will thenceforth be deemed to be the Hotel licensed under this License. If a condemnation takes place and a new hotel does not, for whatever reason, become the Hotel under this License in strict accordance with this paragraph (or if it is reasonably evident to Licensor that such will be the case), the License will terminate forthwith upon notice thereof by Licensor to Licensee.     B. Casualty: If the Hotel is damaged by fire or other casualty, Licensee will expeditiously repair the damage. If the damage or repair requires closing the Hotel, Licensee will immediately notify Licensor; will repair or rebuild the Hotel in accordance with Licensor’s standards; will commence reconstruction within four months after closing; will expeditiously continue on an uninterrupted basis with such reconstruction and will reopen the Hotel for continuous business operations as soon as practicable (but in any event within 24 months after closing of the Hotel), giving Licensor ample advance notice of the date of reopening. If the Hotel is not reopened in accordance with this paragraph, the License will forthwith terminate upon notice thereof by Licensor to Licensee. Notwithstanding anything else herein to the contrary, during the time the Hotel is closed, Licensee shall pay Licensor a monthly royalty of 2% of Gross Rooms Revenue based on the average monthly Gross Rooms Revenue for the preceding 12 months prior to the date of closing or if the Hotel has not been in the System for 12 months, based on the average monthly Gross Rooms Revenue for the period during which the Hotel has been in operation in the System. Said payment shall be in lieu of all other System fees under paragraph 3.C of this License, but shall only be payable if Licensee receives insurance proceeds for such business interruption, which coverage Licensee agrees to obtain.   19 -------------------------------------------------------------------------------- The License may be replaced by a new license agreement as provided in paragraph 10 and the License may terminate as provided in this paragraph 11 without liquidated damages.     C. No Extensions of Term: Nothing in this paragraph 11 will extend the License Term but Licensee shall not be required to make any payments pursuant to paragraphs 3.C(1) and (3), except as provided in paragraph 11.B above, for periods during which the Hotel is closed by reason of condemnation or casualty.   12. TERMINATION:     A. Expiration of Term: This License will expire without notice ten (10) years from the date of the opening of the Hotel, subject to earlier termination as set forth herein. This License is not renewable, and Licensee acknowledges and agrees that this License confers upon Licensee absolutely no rights of license renewal following the expiration of the License Term. The parties recognize the difficulty of ascertaining damages to Licensor resulting from premature termination of the License, and have provided for liquidated damages which represent their best estimate as to the damages arising from the circumstances in which they are provided.     B. Termination by Licensee on Advance Notice: Licensee may terminate the License as provided in paragraph 3.B, by giving at least 12 but less than 15 months’ advance notice to Licensor accompanied by a lump sum payment as an early termination fee, and not as a penalty or in lieu of any other payments required under this License, equal to the total of all amounts required under paragraph 3.C for the 12 calendar months of operation preceding the notice or if the Hotel has been in operation in the System for less than 12 months, the greater of (i) 12 times the monthly average of such amounts for the period during which the Hotel has been in operation in the System, or (ii) 12 times such amounts as are due for the one month preceding the termination.     C. Termination by Licensor on Advance Notice:     (1) In accordance with notice from Licensor to Licensee, this License will terminate (without any further notice unless required by law), provided that:     (a) the notice is mailed at least 30 days (or longer, if required by law) in advance of the termination date; and     (b) the notice reasonably identifies one or more breaches of the Licensee’s obligations; and     (c) the breach(es) are not fully remedied within the time period specified in the notice.     (2) If Licensee shall have engaged in a violation of this License, for which a notice of termination was given and termination failed to take effect because the default was remedied during the then preceding 12 months,   20 --------------------------------------------------------------------------------   the period given to remedy defaults will, if and to the extent permitted by applicable law, thereafter be 10 days instead of 30 (provided, however, if there have been two or more violations of the License in the preceding twelve months for which notices of termination were given, upon the next violation, if and to the extent permitted by applicable law, the License may be terminated by Licensor immediately upon notice).     (3) In any judicial proceeding in which the validity of termination is at issue, Licensor will not be limited to the reasons set forth in any notice sent under this paragraph.     (4) Licensor’s notice of termination or suspension of services shall not relieve Licensee of its obligations under this License.     D. Immediate Termination by Licensor: This License may be terminated by Licensor immediately (or at the earliest time permitted by applicable law) if:     (1)      (a) Licensee or any guarantor of Licensee’s obligations hereunder shall generally not pay its debts as they become due, or shall admit in writing its inability to pay its debts, or shall make a general assignment for the benefit of creditors; or     (b) Licensee or any such guarantor shall commence any case, proceeding or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property; or     (c) Licensee or any such guarantor shall take any corporate or other action to authorize any of the actions set forth above in paragraphs (a) or (b); or     (d) any case, proceeding or other action against Licensee or any such guarantor shall be commenced seeking to have an order for relief entered against it as debtor, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property, and such case, proceeding or other action: (i) results in the entry of any order for relief against it which is not fully stayed within seven business days after the entry thereof, or (ii) remains undismissed for a period of 45 days; or     (e) an attachment remains on all or a substantial part of the Hotel or of Licensee’s or any such guarantor’s assets for 30 days; or     (f) Licensee or any such guarantor fails, within 60 days of the entry of a final judgment against Licensee in any amount exceeding $50,000, to discharge, vacate or reverse the judgment, or to stay   21 --------------------------------------------------------------------------------   execution of it, or if appealed, to discharge the judgment within 30 days after a final adverse decision in the appeal; or     (2) Licensee voluntarily or involuntarily loses possession or the right to possession of all or a significant part of the Hotel, except as otherwise provided in paragraph 11; or     (3) Licensee, or any entity or individual having a direct or indirect ownership interest in it, contests in any court or proceeding Licensor’s ownership of the System or any part of it, or the validity of the Marks or other service marks or trademarks or intellectual property associated with any of Licensor’s businesses; or     (4) A breach of paragraph 9B or paragraph 10 occurs; or     (5) Licensee fails to continue to identify the Hotel to the public as a System hotel, engages in any action that violates Licensor’s proprietary rights under paragraph 7 or ceases to operate the Hotel as a System hotel; or     (6) Any action is taken toward dissolving or liquidating Licensee or any guarantor hereunder, if it is an Entity, except for any such actions resulting from the death of a partner; or     (7) Licensee (or any principal stockholder, owner, member or partner of Licensee as the case may be) is, or is discovered to have been, convicted of a felony (or any other offense if it is likely to adversely reflect upon or affect the Hotel, the System or Licensor in any way); or     (8) Licensee maintains false books and records of account or submits false reports or information to Licensor; or     (9) Licensee knowingly fails to comply with the requirements of the License and/or the Manual on safety, security, or privacy for its guests at the Hotel, or on the reputation of the management, employees or operation of the Hotel, and such failure may significantly adversely reflect upon or affect the Hotel, the System or Licensor, its parents, subsidiaries and affiliates in any way; or     (10) A breach of paragraph 14.M occurs.     E. De-Identification of Hotel Upon Termination: Licensee will take whatever action is necessary to assure that no use is made of any part of the System at or in connection with the Hotel after the License Term ends. This will involve, among other things, returning to Licensor the Manual and all other materials proprietary to Licensor, ceasing the use of any of Licensor’s trademarks or service marks, physical changes of distinctive System features of the Hotel, including removal of the primary freestanding sign down to the structural steel, and all other actions required to preclude any possibility of confusion on the part of the public and to ensure that the Hotel is no longer using all or any part of the System or otherwise holding itself out to the public as a Crowne Plaza hotel. Anything not done by Licensee in this regard within 30 days after termination, may be done at Licensee’s expense by Licensor or its agents who may enter upon the premises of the Hotel for that purpose.   22 --------------------------------------------------------------------------------   F. Payment of Liquidated Damages: If the License terminates pursuant to paragraph 12.C or 12.D above, Licensee will promptly pay Licensor (as liquidated damages for the premature termination only, and not as a penalty nor as damages for breaching the License nor in lieu of any other payment) a lump sum equal to the total amounts required under paragraphs 3.C(1), (3) and (4) during the 36 calendar months of operation preceding the termination or such shorter period as equals the unexpired License Term at the time of termination; or if the Hotel has not been in operation in the System for 36 months, the greater of:     (1) 36 times the monthly average of such amounts for the period during which the Hotel has been in operation in the System, or     (2) 36 times such amounts as are due for the one month preceding such termination.   13. RELATIONSHIP OF PARTIES:     A. No Agency Relationship: Licensee is an independent contractor. Neither party is the legal representative nor agent of, or has the power to obligate (or has the right to direct or supervise the daily affairs of) the other for any purpose whatsoever. Licensor and Licensee expressly acknowledge that the relationship intended by them is a business relationship based entirely on and circumscribed by the express provisions of this License and that no partnership, joint venture, agency, fiduciary or employment relationship is intended or created by reason of this License.     B. Licensee’s Notices to Public Concerning Independent Status: Licensee will take such steps as are necessary and such steps as Licensor may from time to time reasonably request to minimize the chance of a claim being made against Licensor for anything that occurs at the Hotel or for acts, omissions or obligations of Licensee or anyone associated or affiliated with Licensee or the Hotel. Such steps may, for example, include giving notice in guest rooms, public rooms and advertisements and on business forms and stationery, etc., making clear to the public that Licensor is not the owner or operator of the Hotel and is not accountable for what happens at the Hotel. Unless required by law, Licensee will not use Licensor’s name, the Marks or any other trademarks, service marks or other intellectual property owned or licensed by Licensor or any of its affiliates, or any similar word in its corporate, partnership or trade name, nor authorize or permit such use by anyone else. Licensee will not use Licensor’s name, the Marks or any other trademarks, service marks or other intellectual property owned or licensed by Licensor or any of its affiliates, to incur any obligation or indebtedness on behalf of Licensor. Licensee shall not register Licensor’s name, the Marks or any other trademarks, service marks or other intellectual property owned or licensed by Licensor or any of its affiliates, as part of any internet domain name or Uniform Resource Locator (URL), and may not display or use any of the Marks or other intellectual property rights related to the System in connection with any web site and may not promote, maintain, implement or be responsible for any web site in connection with the licensed Hotel without the prior written approval of Licensor, and if   23 -------------------------------------------------------------------------------- approved by Licensor, any such web site shall comply with all of Licensor’s web site requirements as set forth in the Manual or otherwise.   14. MISCELLANEOUS:     A. Severability and Interpretation: The remedies provided in this License are not exclusive. In the event any provision of this License is held to be unenforceable, void or voidable as being contrary to the law or public policy of the United States or any other jurisdiction entitled to exercise authority hereunder, all remaining provisions shall nevertheless continue in full force and effect, unless deletion of the provision(s) deemed unenforceable, void or voidable impairs the consideration for this License in a manner which frustrates the purpose of the parties or makes performance commercially impracticable. In the event any provision of this License requires interpretation, such interpretation shall be based on the reasonable intention of the parties in the context of this transaction without interpreting any provision in favor of, or against, any party hereto by reason of the draftsmanship of the party or its position relative to the other party.     B. Binding Effect: This License shall become valid when executed and accepted by Licensor at Atlanta, Georgia. It shall be deemed made and entered into in the State of Georgia, and shall be governed and construed under, and in accordance with, the laws and decisions (except any conflicts of law provisions) of the State of Georgia. In entering into this License, Licensee acknowledges that it has sought, voluntarily accepted and become associated with Licensor who is headquartered in Atlanta, Georgia. The choice of law designation permits, but does not require, that all suits concerning this License may be filed in the State of Georgia.     C. Exclusive Benefit: This License is exclusively for the benefit of the parties hereto, and it may not give rise to liability to a third party. No agreement between Licensor and anyone else is for the benefit of Licensee.     D. Entire Agreement: This is the entire agreement between the parties pertaining to the licensing of the Hotel and supersedes all previous negotiations and agreements between the parties pertaining to the licensing of the Hotel as a Crowne Plaza brand hotel. That certain “Addendum to Holiday Hospitality Franchising, Inc. License Agreement for a Condominium Hotel” executed by and between Licensor and Licensee (the “Addendum”) is deemed part of the License and is hereby incorporated by this reference. No change in this License will be valid unless in writing signed by both parties. No failure to require strict performance or to exercise any right or remedy hereunder will preclude requiring strict performance or exercising any right or remedy in the future.   24 --------------------------------------------------------------------------------   E. Licensor Withholding Consent: Licensor’s consent, whenever required, may be withheld if any breach by Licensee exists under this License. Approvals and consents by Licensor will not be effective unless evidenced by a writing duly executed on behalf of Licensor.     F. Notices: Notices will be effective hereunder when and only when they are reduced to writing and delivered personally or mailed by Federal Express or comparable overnight or express delivery service, by documented facsimile transmission or by certified mail to the appropriate party at its address, hereinafter set forth, or to such person and at such address as may subsequently be designated by one party to the other.   Licensor:    Holiday Hospitality Franchising, Inc.    Three Ravinia Drive, Suite 100    Atlanta, Georgia 30346 Attn:    Vice President, Franchise Administration Licensee:    MHI Hospitality TRS, LLC    c/o: Andrew M. Sims    4801 Courthouse Street, Suite 201    Williamsburg, VA 21388     G. Authority: Licensee represents and warrants to Licensor that the entities and persons signing this License on behalf of Licensee are duly authorized to do so and to bind Licensee to enter into and perform this License. Licensee further represents and warrants to Licensor that Licensee and the entities and persons signing this License on behalf of Licensee have obtained all necessary approvals and that their execution, delivery and performance of this License will not violate, create a default under or breach any charter, bylaws, agreement or other contract, license, permit, order or decree to which they are a party or to which they are subject or to which the Hotel is subject. If Licensee has not already done so prior to the execution of this License, Licensee agrees to submit to Licensor by the date specified by Licensor all of the documents and information that Licensor required or requested in the license application and in connection with the licensing process. Licensee acknowledges that its breach of the representations and warranties in this paragraph, its failure to comply with Licensor’s requirements for the submission of information and documents, or any omission or misrepresentation of any material fact in the information or documents submitted to Licensor in connection with the license application and/or the licensing process will constitute a material breach of Licensee’s obligations under this License.     H. General Release and Covenant Not to Sue: Licensee and its respective heirs, representatives, successors and assigns, hereby release, remise and forever discharge Licensor and its parents, subsidiaries and affiliates and their directors, employees, agents, successors and assigns from any and all claims, whether   25 -------------------------------------------------------------------------------- known or unknown, of any kind or nature, absolute or contingent, if any there be, at law or in equity, from the beginning of time to and including, the date of Licensor’s execution of this License, and Licensee and its respective heirs, representatives, successors and assigns do hereby covenant and agree that they will not institute any suit or action at law or otherwise against Licensor, directly or indirectly relating to any claim released hereby by Licensee. This release and covenant not to sue shall survive the termination of this License. Licensee shall take whatever steps are necessary or appropriate to carry out the terms of this release and covenant not to sue upon Licensor’s request.     I. Performance of the Work: Licensee agrees to perform the construction and renovation work including, without limitation, the purchase of furniture, fixtures and equipment set forth on Attachment B attached hereto and incorporated herein by reference (“the Work”). Licensee acknowledges that its agreement to perform the Work is an essential element of the consideration relied upon by Licensor in entering into the License and agrees that, Licensee may be authorized, in Licensor’s sole discretion, to use the System at the Hotel prior to completion of the Work, but only during such time as Licensee is actively meeting its performance obligations in full compliance with the requirements of Attachment “B”. Licensee’s failure to perform the Work in accordance with Licensor’s requirements and specifications (including the progress, milestone, completion and other dates specified in Attachment “B”) shall constitute a material breach of Licensee’s obligations under the License. In the event Licensor terminates this License due to Licensee’s breach of any of its obligations under the License prior to the time that Licensee is authorized to use the System at the Hotel or all conditions set forth in Paragraph 24 of the Addendum are not fulfilled by the dates set forth therein (other than by reason of a default of the seller under the Purchase Agreement (as defined in the Addendum), Licensee shall pay the Licensor (as liquidated damages for the premature termination only, and not as a penalty nor as damages for breaching the license or in lieu of any other payment), a lump sum equal to 2 1/2 times the full amount of application fees that would be due and owing for the Hotel, based upon the proposed number of rooms for the Hotel or the minimum Application Fee required (whichever is applicable), as disclosed in Item 5 of the Crowne Plaza UFOC, and irrespective of whether any application fees have been paid or assessed for the Hotel.     J. Reimbursement of Expenses: Licensee agrees to pay Licensor all expenses, including reasonable attorney’s fees and court costs, incurred by Licensor, its parents, subsidiaries, affiliates, and their successors and assigns, to remedy any defaults of or enforce any rights under the License, effect termination of the License or collect any amounts due under the License.     K. Descriptive Headings: The descriptive headings in this License are for convenience only and shall not control or affect the meaning or construction of any provision in this License.   26 --------------------------------------------------------------------------------   L. Capital Reserve: Licensor may establish capital reserve requirements on Licensee (“Reserve”) in an amount not in excess of 4% of Gross Rooms Revenue annually (inclusive of lender and unit owner reserves) to be used for capital expenditures and upgrading of the Hotel including renovation of guest rooms, guest room corridors and other public spaces and replacement of furniture, fixtures and equipment. Licensor shall give Licensee no less than ninety (90) days notice of any such Reserve requirements as the same may be established or changed by Licensor from time to time, and in such event, Licensee shall establish an escrow reserve account funded monthly in a bank selected by Licensee. Licensee shall make expenditures from such account for the purposes hereinbefore specified in accordance with Licensor’s requirements. Licensee acknowledges that the Reserve may not be sufficient to maintain the Hotel as a first class facility in accordance with Licensor’s standards and Licensee shall promptly provide any necessary additional funds to meet Licensor’s product quality and consumer quality requirements.     M. Terrorism: Licensee represents, warrants and covenants that neither it nor any entity or individual having a direct or indirect ownership interest in it nor any of Licensee’s affiliates nor any officer, director, employee, member, partner or shareholder (provided that this representation shall not apply to any holder of publicly-traded shares of Licensee or its affiliates purchased through a stock exchange transaction) of any of the foregoing, has, does or will (i) support or supported terrorism; (ii) provide or provided money or financial services to terrorists; (iii) engage or engaged in terrorism; (iv) appear or appeared on the United States government list of organizations that support terrorism; and (v) engage or engaged in or be or been convicted of fraud, corruption, bribery, money laundering, narcotics trafficking or other crimes. Licensee further warrants and represents that all of the foregoing individuals are eligible under applicable United States immigration laws to travel to the United States for training or any other purpose.     N. Business Judgment: Licensor and Licensee recognize and agree, and any mediator or judge is affirmatively advised, that certain provisions of this License describe the right of Licensor (or one of its committees) to take (or refrain from taking) certain actions in the exercise of its business judgment as to the long-term overall interests of the System, and/or upon its determination that the change was adopted in good faith and is consistent with the long-term overall interests of the System. Where such judgment has been exercised by Licensor (or one of its committees), neither a mediator, nor a judge, nor any trier of fact, shall substitute his, her or their judgment for the judgment so exercised by Licensor.     O. Right of First Refusal: (this paragraph intentionally deleted) (Signatures on the following page)   27 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed this License, as of the date first stated above.   Licensee: MHI HOSPITALITY TRS, LLC By:        Andrew M. Sims Title:      Witness:        Licensor: HOLIDAY HOSPITALITY FRANCHISING, INC. By:        Jenny Tidwell Vice President   Franchise Administration   Attest:        Assistant Secretary   28 -------------------------------------------------------------------------------- ATTACHMENT “A”   Facilities and Services (paragraph 1):    Site-area and general description:    Ten story, interior corridor Fee owner (name and address):    MHI Hollywood, LLC    4801 Courthouse Street, Suite 201    Williamsburg, VA 21388 Fee lessee (Licensee):    MHI Hospitality TRS, LLC    4801 Courthouse Street, Suite 201    Williamsburg, VA 21388 Separate parcels for signs:    N/A Number of guest rooms (including suites):    Up to 309 guest rooms, subject to them being Participating Units (as defined in the Condominium Hotel Addendum), plus 2 ADA Residential Units (as defined in the Condominium Hotel Addendum) Restaurants and lounges (number, seating capacity, names and description):    Minimum of 1 restaurant and 1 lounge, with seating capacity, name and description to be approved by Licensor Holidome indoor recreation center:    N/A Gift shop:    1 gift shop Other concessions and shops:    Licensee to operate pool deck and pool bar concession Parking facilities:    Sufficient valet parking spaces to support the room count, but in no event less than one space (unstacked) per Participating Unit or such greater number as is required by applicable zoning or parking laws Swimming pool:    Outdoor pool Other facilities and services:    At the date of opening, a fitness center and a minimum of 9,000 sq. ft. of dedicated meeting space within the Hotel Unit (as defined in the   29 --------------------------------------------------------------------------------    Condominium Hotel Addendum) and 4,000 sq. ft. of tented leased function space, plus, if Phase III is completed as commercial space and not as townhouses, at least 4,000 sq. ft. of additional dedicated meeting space within the improvements constructed as part of Phase III, which will replace the tented leased function space. Ownership of Licensee (paragraph 10):    As set forth on attached Exhibit A   30 -------------------------------------------------------------------------------- Exhibit A Ownership of MHI Hospitality TRS, LLC   MHI Hospitality TRS, LLC        100 % MHI Hospitality TRS Holding, Inc., sole member      100 %   MHI Hospitality, L.P., sole shareholder        100 % General Partner        MHI Hospitality Corporation publicly traded      1.0 %   Limited Partners        MHI Hospitality Corporation publicly traded      62.2 %   AMS Family Partnership, R.L.L.L.P.      5.9 %   General Partner and Limited Partner        Andrew M. Sims    100 %     KES Family Partnership. R.L.L.L.P.      5.9 %   General Partner and Limited Partner        Kim E. Sims    100 %     CLS Family Partnership, R.L.L.L.P.      5.9 %   General Partner and Limited Partner        Christopher L. Sims    100 %     Steven McDonnell Smith Family Partnership,      2.7 %   R.L.L.L.P.        General Partner and Limited Partner        Steven McDonnell Smith    100 %     Triplezzz, R.L.L.P.      2.0 %   General Partner and Limited Partner        William Zaiser    100 %     Edgar Sims Jr. Irrevocable Family Trust      0.7 %   FBO Edgar Sims, Jr.        Wilmington Hotel Associates Corp.      3.6 %   Jeanette Sims, sole shareholder    100 %     Celia K. Krichman Charitable Trust      3.1 %   FBO Celia K. Krichman        IPAX Corporation      0.1 %   Supreme Corp., shareholder    100 %     Shareholders        Cheong Kee Cheok    20 %     Cheong Kee Fong    20 %     Cheong Kee Laie    20 %     Cheong Kee Seong    20 %     Cheong Kee Soon    20 %     Khersonese Investment (USA) Inc.      2.9 %   Shareholders        Cheong Kee Cheok    16 %     Cheong Kee Fong    16 %       31 -------------------------------------------------------------------------------- Cheong Kee Laie    16 %     Cheong Kee Seong    16 %     Cheong Kee Soon    16 %     Kwok Yuet Ling    8 %     Cheong Mooi Suet    6 %     Cheong Tho Yuen    6 %     Supreme Corp.      3.5 %   Shareholders        Cheong Kee Cheok    20 %     Cheong Kee Fong    20 %     Cheong Kee Laie    20 %     Cheong Kee Seong    20 %     Cheong Kee Soon    20 %     Phileo Land Corporation      0.5 %   Shareholders        Cheong Kee Cheok    20 %     Cheong Kee Fong    20 %     Cheong Kee Laie    20 %     Cheong Kee Seong    20 %     Cheong Kee Soon    20 %     MAVAS, LLC      0.0 %   Mark V. Smith, member    100 %       32 -------------------------------------------------------------------------------- ATTACHMENT “B” THE WORK [Conversion License] Licensee acknowledges that its agreement to perform and complete the construction, upgrading and renovation work and other items described in the attached Property Improvement Plan (the “Work”) is an essential element of the consideration relied upon by Licensor in entering into the License. Licensee shall not commence its operation of the System at the Hotel unless and until it receives Licensor’s written authorization to do so. Licensor may authorize Licensee to open and operate the Hotel as a Crowne Plaza branded hotel even though Licensee has not fully complied with the terms of the License, provided Licensee fulfills all remaining terms of this License, including completion of the Work, on or before an outside date designated by Licensor. Notwithstanding any consent by Licensor to the authorized conditional opening of the Hotel as a Crowne Plaza branded hotel, the Work described below in this Attachment “B” must be completed and the Hotel must otherwise be in compliance with the License and open as a Crowne Plaza branded hotel by no later than June 30, 2007. In the event Licensor terminates this License due to Licensee’s breach of any of its obligations under the License prior to the time that Licensee is authorized to use the System at the Hotel, Licensee shall pay to Licensor (as liquidated damages for the premature termination only, and not as a penalty nor as damages for breaching the License nor in lieu of any other payment), a lump sum equal to 2-1/2 times the full (undiscounted) amount of the application fee ($500 per guest room) for the Hotel, as disclosed in Item 5 of the UFOC, based on 309 guest rooms, irrespective of whether, in fact, any application fees have been paid or assessed for the Hotel.   33 -------------------------------------------------------------------------------- Property Improvement Plan Proposed Conversion of the Ambassador Resort & Conference Center to a Crowne Plaza Resort Hollywood, FL December 12, 2002 PROPERTY IMPROVEMENT PLAN LOGO [g79817img02.jpg] Proposed Conversion of the Ambassador Resort & Corporate Center to a Crowne Plaza Resort Hollywood, FL December 12, 2002   34 -------------------------------------------------------------------------------- Table of Contents:   PROPERTY INFORMATION    1 STANDARDS (BRAND / LIFE SAFETY / ADA)    3 PIP ISSUES    4 -------------------------------------------------------------------------------- Property Information   Address:    4000 South Ocean Drive    Hollywood, FL 33019    954.458.1900    954.455.9829    www.ambassadorresort.com General Description     •   This ten-story, interior corridor hotel was originally constructed in 1987 and is of the Miami Beach architectural flavor. U-shaped commercial spaces are located on the first floor with smaller meeting rooms and a few guestrooms on the second floor. The guest tower is centrally located above with primarily north and south views. All guestrooms (floors 3-10) have their own balconies. The back of the hotel faces the Intracoastal Waterway and has an expansive pool deck and landscaped courtyards as well as a small pier on the water.     •   The exterior finishes consist of decoratively painted concrete with natural coral rock accents on the commercial space facade.     •   The following Guestrooms were inspected in preparation of this report: #929 (std. double), #936 (king), #937 (suite), #1027 (std. king), #1022 suite), #1035 (king corner). All standard rooms are identical, each floor has corner guestrooms suites on SE and NW of tower.     •   The hotel is convenient to the beach and area shopping and dining.     •   This hotel’s primary customer base is 20% business & 80% leisure.     •   Market competitors include The Diplomat.     •   The property will require renovation to update its appearance and meet current Brand Standards. Specific renovation requirements are described in the body of the following report.     •   All areas of the hotel must meet current Brand Standards, including all Life Safety Standards. Professional Architectural, Interior Design and Landscape Design assistance is required during the renovation process of a Six Continents Hotels Brand Hotel. Please submit all plans (drawings), specifications and color boards to Six Continents Hotels, Property Improvement Department for review and approval prior to purchasing or renovation. Any items not formally submitted for approval may require replacement or modification if they do not meet Design Standards. The Licensee is to ensure all areas of the hotel are in complete compliance with local codes and Americans with Disabilities Act (ADA). Owner is required to address federal and local building codes as related to the presence and removal of any asbestos. Owner is required to repair or replace all items and finishes in the hotel that may be damaged during the course of the renovation. Ensure all areas of the hotel are in new condition upon completion of the PIP.   1 -------------------------------------------------------------------------------- Hotel Specifics   Year Built:    1987    Highest Story:    10    Year(s) Renovated:    1999, 2001 Parking Spaces: -    650 +/-    Swimming Pool Dimensions:    40 x 80    Maximum Depth:    8’   Guestrooms:    No. of Rooms Original # of Rooms    307 Total Rooms    307   Food Service Facility    Palm Court    # of seats    75 Food Service Facility    Pizza/Cafe    # of seats    25 Food Service Facility    Tiki Hut    # of seats    100+ Lounge    Finnegan’s    # of seats    50   Meeting / Banquet Room    Florida Ballroom    # of seats    950 banquet Meeting / Banquet Room    Regency    # of seats    100 banquet Meeting / Banquet Room    Hallandale    # of seats    20 banquet Meeting / Banquet Room    Hollywood Breakout Rooms    # of seats    60 banquet Meeting / Banquet Room    Dania Beach Breakout Room    # of seats    30 banquet Meeting / Banquet Room    Salon 1    # of seats    20 banquet Meeting / Banquet Room    Salon 2    # of seats    30 banquet Meeting / Banquet Room    Salon 3    # of seats    270 banquet Meeting / Banquet Room    Salon 4    # of seats    220 banquet Meeting / Banquet Room    Salon 5    # of seats    60 banquet Meeting / Banquet Room    Salon 6    # of seats    100 banquet Meeting / Banquet Room    Salon 7    # of seats    100 banquet   Fitness Room    yes        X        no    Guest Laundry    yes        X        no    Gift Shop    yes       no    X   HVAC Systems:    Commercial Area    Roof Top Guestroom Building    PTAC   Fire Safety Systems:             Hardwire Smoke    Commercial Area    yes    X    no    Guestrooms    yes    X    no    Guestroom Corridors    yes    X    no Sprinkler System    Commercial Area    yes    X    no    Guestrooms    yes    X    no    Guestroom Corridors    yes    X    no This Product Improvement Plan was developed from an on-site review of the subject hotel on December 12, 2002, by Kathreen F. Walton and Terry Logsdon, Six Continents Hotels, accompanied by Barry Gilliland, Managing Director, Ambassador Hotel.   2 -------------------------------------------------------------------------------- Standards (Brand / Life Safety / ADA)   Brand Standard    THE LICENSEE MUST ENSURE THAT THE PROPERTY COMPLIES WITH ALL BRAND STANDARDS AS NOTED IN THE CURRENT BRAND STANDARDS MANUAL.    Upon completion of the required Property Improvement Plan (PIP) work, the Licensee is responsible for ensuring that the building and building site comply with all applicable building codes, Life Safety codes, Fire Safety requirements, the Americans with Disabilities Act (ADA) and any other applicable codes and ordinances. Life Safety    PRIOR TO ISSUANCE OF THE LICENSE, WRITTEN DOCUMENTATION MUST BE SUBMITTED CERTIFYING THAT THE FIRE SAFETY SYSTEM MEETS OR EXCEEDS BRAND STANDARDS AND THAT THE SYSTEM IF FULLY OPERATIONAL AS OF THAT DATE.    •      Please note that in some cases the Six Continents Hotels Life Safety Standards are more stringent than local building and /or fire code requirements. Six Continents Hotels, including Life Safety Standards, shall be fully enforced. ADA (Americans with Disabilities Act)    Upon completion of the required Property Improvement Plan (PIP) work, the Licensee is responsible for ensuring that the building and building site comply with the Federal Americans with Disabilities Act (ADA), brand Standards and any other applicable codes and ordinances.    •      Canadian properties must ensure all areas of the hotel are in complete compliance with local, federal and provincial Canadian handicap accessibility codes and brand Standards.   3 -------------------------------------------------------------------------------- This hotel requires major renovation that affects all areas of the hotel. Exterior façades and architectural detail must be upgraded with full replacement required for windows, doors, railings, etc. All public and guestroom areas of the hotel require a complete renovation to include new FF&E throughout and modifications to the existing layout. A comprehensive design package must be submitted to Six Continents Hotels for review and approval. All replacement materials and structural modifications must be clearly identified and addressed. Professional Architectural, Interior Design and Landscape Design assistance is required during the renovation process of a Six Continents Hotels Brand Hotel. Please submit all plans (drawings), Color boards and specifications for review and approval prior to purchasing or renovation to: Six Continents Hotels Property Improvement Department Three Ravinia Drive, Suite 2900 Atlanta, GA 30346-2149 Any items not formally submitted for approval may require replacement or modification if they do not meet design approval or Brand Standards. PIP Issues Exterior (The exterior requires a complete renovation, work must include but is not limited to the following.)     1. Provide a new upscale porte cochere structure at the main entrance to signify brand change and a heightened sense of arrival. Provide an upgrade texture, pavers or other architectural feature to the drive surface in conjunction with the new entrance refurbishment. Modify curbs and ramps to ensure building is ADA accessible.     2. Repair all structural deficiencies where existing (e.g., cracking concrete, roof leaks, exposed block, mildewed stone, etc.) and provide a new exterior façade and architectural detail to both the commercial and guestroom buildings. Enhance the roofline detail to compliment the overall aesthetic improvements and to conceal rooftop equipment where existing.     3. Replace all entrance doors with new units that meet current standards. Repair or replace all exterior service doors and coordinate color with new exterior improvements. Auxiliary entrance doors that allow access to guestroom corridors must be controlled by electronic locks.     4. Replace all spandrel sections and sliding doors as noted at guestroom balconies.     5. Replace all exterior railing with new railing that meets current code requirements and Six Continents Hotels standards.   4 --------------------------------------------------------------------------------   6. Repair and refinish all sidewalks and steps surrounding building. Ensure primary entrance areas are ADA acceptable.     7. Weed, prune and trim all existing landscape features and fill in where needed to eliminate sparse areas. Remove dead or under-grown foliage and replace with mature foliage. Expand scope of landscape package to address entire site.     8. Level and re-surface and stripe the entire parking lot. Provide ADA spaces as required by Six Continents Hotels and Federal Guidelines. In conjunction with the new parking surface, provide a continuous concrete curb around the property. Ensure illumination meets Six Continents Hotels requirements and that landscape lighting and parking area fixtures are upgraded and upscale in appearance.     9. Provide architectural or landscape screens for all ground level equipment, dumpster enclosures and service areas.     10. Entire pool area must be renovated to meet Crowne Plaza brand and life safety standards. Renovation must include a new 48” pool fence with self-closing/latching gate to restrict access to pool area. Pool area furnishings must be upscale in style and design. (Refer to standards for pool requirements.)     11. Recreational facilities including the courtyard, pool and shuffleboard must be repaired and restored to like new condition; or, eliminated as a feature at the property.     12. The pool side lounge must be fully renovated in conjunction with the pool area refurbishment.     13. All existing signage (identity signage and directional signage) must be removed and all scars repaired from its removal. New primary and directional signage that meets Crowne Plaza requirements must be provided. Lobby / Entrance/ Front Desk (This area requires a complete renovation, work must include but is not limited to the following.)     1. Replace and upgrade the vestibule, lobby and lobby corridor floor finishes with new large-scale ceramic or natural stone and CYP carpeting (or better) that meets current Crowne Plaza requirements.     2. Replace and upgrade the overall directional signage package with a package that meets current Crowne Plaza standards.     3. Replace the lighting package throughout with new recessed (i.e., can) ambient fixtures and decorative pieces (e.g., chandeliers, pendants, sconces, etc.) where appropriate.     4. Replace and upgrade the ceiling finish with a new drywall ceiling or a combination of drywall and 2x2 acoustical tile with a tegular edge. A multi-plane ceiling, where possible, is required.     5. Replace all wall finishes with new Type II wall vinyl enhanced by a new architectural millwork package.     6. Replace all lobby area doors with new doors and upscale hardware.     7. Replace and upgrade the lobby seating package to include new sofas, loveseats, lounge chairs, occasional and console tables, etc. with new furnishings in a blend   5 --------------------------------------------------------------------------------   of upholstery fabrics and finishes that compliments the overall design direction of the newly renovated hotel. Seating groupings that encourage guests interaction and that break up the lobby are recommended.     8. Provide a new décor package throughout to include such elements as professionally framed artwork, themed pieces, live plants, architectural millwork, decorative lighting, etc.     9. Replace and upgrade the lobby and lobby corridor public telephone area.     10. Provide an upgraded Bell Man Station and Concierge Desk per requirements.     11. Modify the existing front desk as need to coordinate with the overall improvements; or, replace.     12. Eliminate the use of store fronts in public areas in conjunction with this renovation.     13. Provide a Gift Shop and Business Center per Crowne Plaza standards.     14. Renovate the administrative areas providing new wall and floorcovering and furnishings throughout. In general, these areas must be presentable for guests.   6 -------------------------------------------------------------------------------- Public Restrooms (All three sets of public restrooms require complete renovation, work must include but is not limited to the following.)     1. Modify at least one set of public restrooms to meet full ADA clearance and facility requirements.     2. Replace and upgrade entrance doors and hardware.     3. Repair ceilings as needed and provide either new drywall ceilings or 2x2 architectural ceiling tile per standards.     4. Replace all public restroom wall finishes with new finishes that meet Crowne Plaza standards. A tile or stone wainscot must be provided on all fixture walls.     5. Provide a new lighting package.     6. Replace and upgrade the vanity with a new natural stone or solid surface vanity and skirt. Provide under-mounted china sinks and new ADA compliant hardware in an upscale design. Provide upgraded vanity lighting and decoratively framed mirrors for the vanity area.     7. Provide a new amenity package for public restrooms - ensure recessed or semi-recessed towel/waste units, feminine products dispensers, and soap dispensers are provided in each restroom.     8. Repair or replace damaged toilets and provide new seats.     9. Renovate the break-out meeting room restrooms to meet the standards and requirements of a public restroom.     10. Provide a baby changing station in at least one set of public restrooms.     11. Lighting in public restrooms must be continuous; and, emergency lighting is required in all public restrooms.   7 -------------------------------------------------------------------------------- Food Service (The restaurant requires complete renovation, work must include but is not limited to the following.)     1. Provide a new professionally designed entrance to the restaurant.     2. Provide a new multi-plane drywall ceiling; or, incorporate a blend of drywall and 2x2 ceiling tiles.     3. Replace and upgrade wall finishes with new Type II wall vinyl supplemented by a suitable millwork package.     4. Replace floor finishes with new CYP carpet, large-scale stone, commercial quality wood, or a combination flooring package.     5. Provide décor appropriate to the new restaurant theme and overall design including upscale elements and features.     6. Replace and upgrade the overall lighting package with dimmer capable fixtures.     7. Replace and upgrade all tables and bases.     8. Replace and upgrade all chairs.     9. Provide a structural screen to shield wait stations and equipment.     10. Provide a music system.     11. Clean or replace HVAC grilles.     12. Modify the concept of the Pizza Café with a new facility that provides an upscale image. This area must be completely refurbished to include an all-new FF&E package.     13. Modify sunken areas as needed to ensure restaurant is fully ADA compliant.   8 -------------------------------------------------------------------------------- Lounge (The Lounge requires a complete renovation, work must include but is not limited to the following.)     1. Replace and upgrade lounge entrance doors with new upgraded doors and hardware.     2. Repair and paint the lounge ceiling, clean and restore grilles in conjunction with this work.     3. Replace and upgrade wall finishes (see restaurant requirements).     4. Replace and upgrade floor finishes (see restaurant requirements).     5. Replace and upgrade the overall lighting package with dimmer capable fixtures.     6. Provide a décor package appropriate to the design and theme.     7. Replace and upgrade all tables and bases.     8. Replace and upgrade all chairs and bar stools.     9. Provide structural screens to shield wait stations and work areas.     10. Replace and upgrade bar top and façade with new stone top and millwork, metal or stone façade. Repair or replace back bar equipment and finishes where damage or wear is evident.     11. Provide armoires or custom cabinets for all televisions.     12. Relocate vending machines to an appropriate vending alcove.   9 -------------------------------------------------------------------------------- Meeting / Banquet Rooms / Pre-Function (All meeting spaces require a complete renovation, work must include but is not limited to the following.)     1. Replace all doors and hardware in Pre-Function Area and Meeting Rooms. Ensure meeting rooms doors have viewers.     2. Replace and upgrade signage to coordinate with the new overall directional signage package.     3. Wherever possible in pre-function areas and meeting rooms, provide a multi-plane drywall ceiling. When ceiling tile is installed (i.e., in meeting rooms), provide 2x2 architectural ceiling tile per standards. Existing drywall ceilings must be repaired and restore to like new condition.     4. Replace and upgrade the Pre-Function Area lighting package.     5. Provide new furniture and appointments appropriate to the pre-function area.     6. Replace and upgrade all wall covering with new Type II wall vinyl and appropriate trim. Reupholster partition walls in meeting rooms. Renovate columns in meeting rooms in conjunction with wall refurbishment.     7. Provide alcoves for folding partitions.     8. Replace and upgrade carpet in Pre-Function and Meeting Rooms with new CYP carpet (or better) per standards.     9. Replace damaged banquet tables.     10. Replace and upgrade stack chairs.     11. Replace and upgrade the meeting room lighting package.     12. Provide new drapery treatments that provide full black-out capability.     13. Provide an executive upscale Boardroom per standards.   10 -------------------------------------------------------------------------------- Fitness Room (The Fitness Room requires a complete renovation, work must include but is not limited to the following.)     1. Ensure electronic lock meets standards. Provide a view window into room per standards.     2. Repair ceiling and paint. Restore HVAC grilles in this process. Upgrade lighting in this room.     3. Replace wall finish with new wall vinyl. One full wall (floor to ceiling) must be fully mirrored.     4. Replace and upgrade carpet.     5. Provide exercise equipment that meets Crowne Plaza Standards. Ten pieces of equipment are required - refer to current standards for full requirements.     6. Provide a house phone that rings to the front desk.     7. Provide a water fountain per standards.     8. Provide upscale towels, hamper and cabinets per standards.     9. Provide an electric clock.     10. Provide a wall-mounted television per standards.   11 -------------------------------------------------------------------------------- Kitchen The kitchen requires renovation address conditional and life safety issues. All back-of-the-house work and service areas must be in good working order, clean and provide a safe, upbeat working environment. Renovation to this area must include refurbishing and restoring all employee areas and modifying the existing life safety equipment as needed to meet Six Continents Hotels requirements. Employee restrooms and break area must be included with this renovation.   12 -------------------------------------------------------------------------------- Interior Guestroom Corridors (Guestroom corridors require a complete renovation, work must include but is not limited to the following.)     1. Provide either lever-style or panic hardware for all doors leading to a stairwell.     2. Restrict access on the exterior elevator so that non-registered guests do not have easy access to guestroom floors via an electronic lock.     3. Replace and upgrade the ceiling in the exterior elevator; and, replace ceiling in main cabs.     4. Upgrade and enhance elevator lighting.     5. Replace and upgrade all elevator cab walls.     6. Provide new floor finishes within elevators.     7. Repair doors and restore to like new condition on all cabs.     8. Ensure elevator(s) control panels meet ADA requirements.     9. Upgrade the ceiling at the main bank of elevators to signify access to elevators. Repair and refinish corridor ceiling to coordinate with improvements.     10. Replace and upgrade carpet in corridors and at elevator landings.     11. Upgrade corridor lighting package - sconces are recommended.     12. Conceal all exposed conduit and wiring within architectural or design features.     13. Replace and upgrade signage.     14. Per Six Continents Hotels requirements, provide smoke detectors along corridors no further apart than every 40’ O.C.     15. Provide appropriate window treatments for corridor windows.     16. Repair and refinish guestroom entrance doors and frames.     17. Replace padlocks with keyed locks and repair all scars and damage on service doors and frames. Paint to coordinate with overall improvements.     18. Clean and paint (or replace) all utility grilles.     19. Provide upgraded décor and finishes to the Club Level Floor and Corridor to differentiate this floor from others. Access to the club floor must be controlled by electronic access.     20. If a Club Floor is provided, a Club Lounge must be included. Refer to standards for specific FF&E requirements.     21. Renovate vending alcoves to coordinate with corridors.     22. Clean and restore vending area flooring.     23. Replace ill-functioning vending equipment as needed. Ensure all equipment has GFI back-up.     24. Provide continuous lighting in the vending alcoves.     25. A Guest Laundry is not required for a Crowne Plaza Hotel and was not inspected. If provided, this area must be renovated to Crowne Plaza standards with upgraded finishes and new equipment. Guest laundries, when provided, cannot have exposed wire mold, conduit or pipes.     26. Clean and paint stairwell ceilings and walls.     27. Replace handrails with new code compliant handrails.     28. Provide lenses for all light fixtures.   13 --------------------------------------------------------------------------------   29. Provide emergency lighting within the stairwells and 6” reflective floor numbers on each floor. Signage must be visible when the stairwell doors is open. Guestrooms (Model guestrooms and baths are well-designed and acceptable aesthetically; however, specifications must be provided to ensure Crowne Plaza performance standards are met. Guestrooms require a complete renovation, work must include but is not limited to the following.)     1. As previously noted, repair, sand and paint guestroom doors and frames. Provide a new ADA compliant signage package in conjunction with this refurbishment. And, replace door hardware where corroded or damaged.     2. Repair and paint connecting doors as needed and ensure connecting door hardware meets standards.     3. Provide closet doors for all guestrooms. Upgrade shelving and rods.     4. Repair guestroom ceilings where damaged and paint.     5. Replace and upgrade all carpet.     6. Replace and upgrade all window treatments.     7. Replace and upgrade all bedcovering with new coverlets or duvets with dusters.     8. Replace and upgrade linens and pillows.     9. Replace and upgrade all guestroom and suite wall finishes with new Type I vinyl or acrylic based texture. A supplementary millwork package is strongly encouraged.     10. Replace and upgrade all guestroom and suite lighting including all entrance lighting, desk lamps, occasional lamps, floor lamps, wall-mounted lamps and table lamps.     11. Replace and upgrade the guestroom seating package in all rooms and suites including new lounge chairs and ottomans, executive style ergonomic desk chairs, sofas, occasional seating, side chairs, dining chairs, etc.     12. Replace and upgrade all guestroom and suite casegoods including all armoires, dressers, nightstands, occasional tables, activity tables, desks, etc. Refer to standards for specific requirements.     13. Provide wall-mounted thermostats for the HVAC units. A new 4-pipe system is recommended for the guestroom areas of the hotel.     14. Ensure all televisions are in good working order and are 25” minimum.     15. Provide 2-touch tone telephones in every room per standards.     16. Provide upscale finishes for mini-bars (i.e., cabinetry, stone counters, etc.) and ensure equipment is in good working order.     17. Replace and upgrade all bedsets to meet Crowne Plaza standards.     18. Club Level Guestrooms, if provided, must feature upgraded finishes and amenities to differentiate them from typical guestrooms.     19. Provide natural stone or solid surface counters for all counters and cabinet tops. Provide upgraded faucetry at wet bars and sinks.     20. Renovate all parlors with new upscale furnishings and finishes.   14 --------------------------------------------------------------------------------   21. ADA guideline and Six Continents Hotels requires 12 accessible guestrooms for a hotel with 307 room (8 standard accessible rooms plus 4 with roll-in shower units). Rooms must be distributed among the various available room types. An additional 8 standard rooms (i.e., non-ADA) must be equipped for guests with hearing disabilities. Guest Bathrooms Guestrooms require a complete renovation, work must include but is not limited to the following.)     1. Repair and paint doors and frames to coordinate with overall improvements. Replace hardware where damaged or corroded. Provide upscale double robe hooks per standards.     2. Repair ceilings where damaged and paint to provide a consistent finish.     3. Replace and upgrade floor tile with new ceramic tile and base.     4. Replace and upgrade all finishes with new wall vinyl.     5. Replace general lighting with new recessed lighting.     6. Repair or replace toilets as needed. Provide new seats and lids.     7. Replace tissue dispensers with new dual role units.     8. Repair exhaust systems and clean and paint grilles.     9. Replace and upgrade vanities with new stone or solid surface counters and skirts with under-mounted china sinks and upgraded faucetry sets.     10. Replace and upgrade vanity lighting with decorative sconces or other upscale fixture.     11. Provide either a towel bar/shelf unit or towel cubbies recessed in the vanity skirts.     12. Recondition tubs, replacing any severely worn or chipped units.     13. Replace and upgrade tub enclosures with new 6x6 or larger tile, or new 3-panel solid surface or stone walls.     14. Replace and upgrade tub hardware with new upscale central-mixer sets.     15. Provide new recessed soap dishes.     16. Provide grab bars at the entrance side of the tub.     17. Replace and upgrade the shower curtain and rod. The new bowed rod with the ‘peek-a-boo’ curtain is recommended. Back of House The back of house areas must be renovated to address conditional and life safety requirements. Work spaces must be clean and provide adequate storage to keep them clutter free.   15 -------------------------------------------------------------------------------- ADDENDUM TO HOLIDAY HOSPITALITY FRANCHISING, INC. LICENSE AGREEMENT FOR A CONDOMINIUM HOTEL THIS ADDENDUM is made on September         , 2006 between Holiday Hospitality Franchising, Inc., a Delaware corporation (“Licensor”), and MHI Hospitality TRS, LLC, a Delaware limited liability company (“Licensee”). This Addendum is attached to, and intended to be a part of, the License executed by and between Licensor and Licensee concurrently herewith (the “License”), for the operation of a Crowne Plaza® Resort hotel in Hollywood, Florida pursuant to the terms of the License. In the event of any conflict between the terms of this Addendum and the terms of the License, the terms of this Addendum shall control. All capitalized terms not defined in this Addendum have the respective meanings set forth in the License. All references to the License or License Agreement shall include this Addendum (and all other addenda to the License). 1. Background. Licensee hereby represents to Licensor the matters set forth in this paragraph. The Hotel (as hereinafter defined) will be part of a condominium hotel that is being developed by MCZ/Centrum Florida XIX, L.L.C., a Delaware limited liability company (“Developer”). The condominium hotel is a conversion of an existing building located at 4000 South Ocean Drive, Hollywood, Florida. The land and the airspace occupied by the condominium hotel improvements has been or will be submitted to the condominium form of ownership. The Condominium Documents have “carved” or will “carve” the real property into one commercial condominium unit (the “Hotel Unit”) and 309 residential condominium units (each a “Residential Condominium Unit” and, collectively, the “Residential Condominium Units”). The Hotel Unit includes or will include within its boundaries the entire building comprising the Condominium (the “Hotel Building”), except for the Residential Condominium Units and the common elements of the Condominium Association, if any, within the Hotel Building. The Hotel Unit and Residential Condominium Units are more specifically described and graphically depicted in the exhibits to the declaration of condominium. The Hotel Unit will include the structure, roof, balconies, public areas, common systems, the ADA Residential Units (as hereinafter defined), at least 9,000 square feet of function space, and other physical facilities located within the Hotel Building. An Affiliate of Licensee, MHI Hollywood LLC, a Delaware limited liability company (“Purchaser”), has entered into a purchase agreement dated as of September, 2005 between MCZ/Centrum Florida VI Owner, L.L.C., an Illinois limited liability company, as seller, and Purchaser, as purchaser, to purchase the Hotel Unit, which purchase agreement was assigned by MCZ/Centrum Florida VI Owner, L.L.C. to Developer and amended by amendment dated November 16, 2005, amendment dated February         , 2006 and an amendment dated September         , 2006 (as amended from time to time, the “Purchase Agreement”). Upon acquiring title, Purchaser will simultaneously lease the Hotel Unit to Licensee on a long-term basis (“Hotel Unit Lease”), which shall in any event not expire prior to the expiration of the License. MHI Hotels Services LLC (“Management Company”), an affiliate of Purchaser and Licensee, will, pursuant to a management agreement with Licensee (“Management Agreement”), operate the Hotel Unit and the Participating Units (hereafter defined) that will serve as Hotel guest rooms and the Leased Function Space (as hereinafter defined). A swimming pool and certain other amenities that are not part of the Condominium will be managed by Licensee (and sub-managed by the Management Company) pursuant to a -------------------------------------------------------------------------------- management agreement with the Master Association or a sub-management agreement with a management company retained by the Master Association. Purchaser will offer owners of the Residential Condominium Units (“Residential Unit Owners”) the option of participating in a voluntary rental management program to be operated as part of the Hotel (the “Rental Management Program”). Each Residential Unit Owner that elects to participate will enter into a rental agreement in the form attached hereto as Exhibit D (“Rental Agreement”) engaging Purchaser to act as the Residential Unit Owner’s exclusive agent for the purpose of renting, operating and managing its Residential Condominium Unit (thereby making the Residential Condominium Unit one of the “Participating Units” and making the Residential Unit Owner a “Participating Unit Owner,” as those terms are hereinafter defined). The Participating Units will be rented on a transient basis to guests of the Hotel as part of the Hotel operation. The Hotel, including the Participating Units, will be operated by Licensee as a Crowne Plaza® Resort hotel in accordance with the System and the License. Notwithstanding anything herein to the contrary, if Developer submits any Residential Condominium Unit that it owns to the Rental Management Program, the terms and conditions governing its participation in the Rental Management Program (which terms and conditions shall be as set forth in the Purchase Agreement) shall be deemed for purposes hereof a “Rental Agreement,” the applicable unit (after Licensor has delivered written confirmation as required by the Purchase Agreement confirming that the unit meets Licensor’s brand standards) shall be deemed a “Participating Unit” and Developer shall be deemed a “Participating Unit Owner” with respect to that unit notwithstanding the fact that Developer did not execute a Rental Agreement. 2. Definitions. The following terms when used in the License (including this Addendum) shall have the meanings indicated below. To the extent any term defined below is defined differently in the original License, such definition in the original License shall be deleted in its entirety and replaced with the definition below. “ADA Residential Units” has the meaning set forth in Section 21 of this Addendum. “Affiliate” shall mean, with respect to any Person, any other Person which, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person. For all purposes hereof, 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 Person, or in each case, the power to veto major policy decisions of any Person, in each case whether through the ownership of voting securities or by contract or other legally binding obligation. For purposes of Licensee, the term “Affiliate” shall include, without limitation, the Management Company and the Purchaser. In no event shall Licensor or Licensee be deemed Affiliates of one another. “Common Properties” means the portions of the Community that are designated as “Common Properties” in the Master Declaration. Licensee hereby represents that owners of real property within the Community and their authorized agents, guests and invitees have an easement to use the Common Properties subject to the terms and conditions of the Master Declaration. Licensee further represents that certain Common Properties located west of South Ocean Drive will be operated by Licensee as part of the Hotel Operation, including the Resort Pool and all other amenities and properties necessary to conduct operations of the Hotel in accordance with the License, the Manual and all other System requirements.   2 -------------------------------------------------------------------------------- “Community” has the meaning set forth in Section 12 of this Addendum. “Condominium” means Sian Resort Residences I Condominium, a condominium formed or to be formed under the laws of the State of Florida pursuant to the declaration of condominium thereof, filed or to be filed in the public records of Broward County, Florida. “Condominium Association” means Sian Resort Residences I Condominium Association, Inc., a Florida corporation not for profit. “Condominium Documents” means the documents offering, creating and evidencing the Condominium regime including, without limitation, condominium prospectus, declaration of condominium, and Condominium Association articles, bylaws and rules and regulations. “Condominium Units” means, collectively, the Hotel Unit and each of the Residential Condominium Units. “Developer” means MCZ/Centrum Florida XIX, L.L.C., a Delaware limited liability company. “FF&E” means all furniture, fixtures and equipment located at or used in connection with any portion of the Hotel, including (as applicable and without limitation): (i) all furniture, furnishings, built-in furniture, carpeting, draperies, decorative millwork, decorative lighting, doors, cabinets, hardware, partitions (but not permanent walls), televisions and other electronic equipment, interior plantings, interior water features, artifacts and artwork, and interior and exterior graphics; (ii) communications equipment; (iii) all fixtures and specialized hotel equipment used in the operation of kitchens, laundries, dry cleaning facilities, bars and restaurants; (iv) telephone and call accounting systems; (v) rooms management systems, point-of-sale accounting equipment, front and back office accounting, computer, duplicating systems and office equipment; (vi) cleaning and engineering equipment and tools; (vii) recreational equipment; and (viii) all other similar items which are used in the operation of the Hotel, excluding, however, any personal property owned by Non-Participating Unit Owners and guests and excluding any personal property owned by Participating Unit Owners that is stored or not made available for use in connection with the operation of the Hotel. “Hotel” means (and Paragraph l.A of the original License is hereby deleted and replaced with the following definition) the Participating Units (at any given time), the Hotel Unit, the Hotel Operated Common Properties, the Leased Function Space and all other improvements, structures, facilities, appurtenances, amenities, easements, entry and exit rights, parking rights, and other rights and property owned by or leased to Licensee or its Affiliates or managed by Licensee or its Affiliates and used in connection with the Hotel operation, including, without limitation, (i) the freehold title of Licensee or its Affiliates to the Hotel Unit, and (ii) all FF&E and other fixed assets installed in, or located at, the foregoing improvements, structures and facilities. The Hotel shall not include the Non-Participating Units. Licensee hereby represents that, as of the Opening Date, the facilities listed on Attachment “A” to the License will be available for use by guests of the Hotel (exclusive of Non-Participating Units). Licensee agrees that no change in the number of Residential Condominium Units or the number of potential “keys” represented by the Residential Condominium Units and no other significant change in the   3 -------------------------------------------------------------------------------- Hotel or in the manner in which the Hotel rooms and services are offered to the public (including timesharing of existing Condominium Units or any part thereof or changes to the legal or governance structure established by the Condominium Documents and/or Master Declaration if the proposed changes could adversely affect the Hotel or Licensee’s ability to comply with the terms, conditions and payment obligations of the License) may be made without Licensor’s prior written approval. Throughout the License, the words “room” and “guest room” are intended to mean the Participating Units and ADA Residential Units (and include the word “suites” unless otherwise indicated). “Hotel Building” has the meaning set forth above in Section 1. “Hotel Operated Common Properties” means those portions of the Common Properties located West of South Ocean Drive including the Resort Pool and outdoor function areas which are located on Common Properties and which could be perceived by guests of the Hotel to be part of the Hotel. “Hotel Unit” has the meaning set forth above in Section 1, and includes, without limitation, the ADA Residential Units and at least 9,000 square feet of function space. “Hotel Unit Lease” has the meaning set forth above in Section 1. “Inventory Default” has the meaning set forth in Section 3. “Leased Function Space” has the meaning set forth in Section 12(f). “Management Agreement” has the meaning set forth above in Section 1. “Master Association” has the meaning set forth in Section 12(a). “Master Declaration” means that certain Declaration of Covenants, Conditions, Restrictions and Easements for Sian Ocean Residences & Resort Master Association filed August, 2006 in Official Records Book 41532, Page 1989, of the Public Records of Broward County, Florida, as same may be amended from time to time. “Minimum Fee” shall have the meaning set forth in Section 4. “Non-Participating Units” means, at any given time, all Residential Condominium Units that are not then Participating Units (i.e., are not subject to a Rental Agreement and do not participate in the Rental Management Program). “Non-Participating Unit Owner” means the owner of a Non-Participating Unit. “Opening Date” means the date the Hotel or any part thereof opens for business to the public as a Crowne Plaza® Resort hotel pursuant to the normal opening procedures established by Licensor, which, pursuant to Paragraph 5 below, must occur by no later than June 30, 2007.   4 -------------------------------------------------------------------------------- “Participating Units” means and includes from time to time all Residential Condominium Units which Licensee has a right to rent as a Hotel room to the general public pursuant to a Rental Agreement or other arrangement satisfactory to Licensor. “Participating Unit Owner” shall mean the owner of a Participating Unit. “Person” means (i) an individual, corporation, partnership, joint venture, limited liability company, limited liability partnership, estate, trust, unincorporated association or other entity, (ii) any governmental authority, and (iii) a fiduciary acting in such capacity on behalf of any of the foregoing. “Phase II” has the meaning set forth in Section 12(c). “Phase III” has the meaning set forth in Section 12(c). “PIP” means the Property Improvement Plan (including all supplemental amendments thereto by Licensor) attached as Attachment “B” to the License. “Rental Agreement” has the meaning set forth above in Section 1. “Rental Management Program” shall have the meaning set forth above in Section 1. “Residential Condominium Units” has the meaning set forth above in Section 1. “Residential Unit Owners” shall have the meaning set forth above in Section 1. “Resort Pool” has the meaning set forth in Section 9(b). “Rolling 12-Month Period” shall mean each period of twelve (12) full consecutive calendar months during the License Term, commencing on or after July 1, 2007. “Territory” means a 2.5 mile radius extending outwards in all directions from the Hotel Building. 3. Grant of License; Area of Protection; Termination Right. The first two sentences of Paragraph 2 of the original License are hereby deleted and replaced with the following (except as expressly modified by this provision, all other portions of Paragraph 2 remain in full force and effect): “Licensor hereby grants to Licensee, upon and subject to the terms and conditions contained in this License, including all addenda, a non-exclusive license to use the System only at the Hotel Building, and only during the “License Term,” beginning with the Term Commencement Date and terminating as provided under Paragraph 12 hereof. This License applies to the Hotel and to no other location. As long as (a) the Hotel remains a Crowne Plaza® Resort hotel, (b) Licensee is not in default under this License, and (c) Licensee maintains, as Participating Units, an average of not less than two hundred (200) daily room nights available for rental to Hotel   5 -------------------------------------------------------------------------------- guests per calendar month, calculated on the basis of a Rolling 12-Month Period throughout the License Term, then during the License Term, Licensor will not open a Crowne Plaza®-branded hotel (including, without limitation, Crowne Plaza® Suites and Crowne Plaza® Resort hotels) within the Territory, provided that this restriction does not apply to any such hotel open or licensed in the Territory as of the Term Commencement Date. Licensee acknowledges and agrees that, notwithstanding anything else herein to the contrary, this prohibition does not include any other of Licensor’s or its Affiliates’ existing or future brands, including, without limitation, Intercontinental® Hotels and Resorts, Holiday Inn®, Holiday Inn Express®, Staybridge Suites®, Candlewood Suites®, or Hotel Indigo™, or any brand extensions of any of the same. Notwithstanding anything else herein to the contrary, Licensee’s rights to protection in the Territory under this Paragraph 2 shall (a) automatically and immediately terminate (i) if the Hotel fails during any Rolling 12-Month Period to achieve and maintain the level determined by Licensor to be the System average for such period under Licensor’s then current program(s) for measuring and assessing quality, service, cleanliness, condition, brand standards and/or customer satisfaction for the System, and such failure is not cured by achieving the System average within 120 days after notice from Licensor specifying such failure; (ii) if Licensor sends to Licensee a notice of default and termination; or (iii) if this License expires or terminates for any reason or the Hotel ceases for any reason to be a Crowne Plaza® Resort hotel; and (b) immediately terminate, at Licensor’s discretion, upon written notice from Licensor to Licensee, if Licensee fails to maintain, as Participating Units, during any Rolling 12-Month Period, an average of not less than two hundred (200) daily room nights available for rental to Hotel guests per calendar month (an “Inventory Default”); provided that Licensor’s right to terminate such Territory protection as a result of an Inventory Default shall lapse with respect to such Inventory Default if not exercised within ninety (90) days of such default, but Licensor shall continue to have the right during the License Term to terminate the Territory protection within ninety (90) days of any other occurrence of an Inventory Default. Notwithstanding anything else herein to the contrary, Licensor shall have the right to develop, own, operate, manage and/or grant a license to a Crowne Plaza®-branded hotel (including, without limitation, Crowne Plaza® Suites and Crowne Plaza® Resort hotels) within the Territory to serve as a replacement for any Crowne Plaza®-branded hotel operating within the Territory as of the Term Commencement Date or licensed but not yet open or operating as of the Term Commencement Date.”     4. Fees; Minimum Fees. (a) Per-Room Fees. The parties acknowledge that the number of Participating Units can vary from day to day in a hotel condominium and therefore agree that, notwithstanding anything to the contrary set forth in Paragraphs 3.C(l)(c) and (f) of the original License, the monthly fees payable under Paragraphs 3.C(l)(c) and (f) of the License (Technology Fees and Hotel Marketing Association fees, respectively) and any other monthly fees based on a per room basis shall be based on the average number of Participating Units participating in the Rental Management Program during the subject month, subject to the Minimum Fee described below.   6 -------------------------------------------------------------------------------- (b) Minimum Fees. The following language is added after Paragraph 3.C(1)(f) of the License: “Notwithstanding anything to the contrary set forth in Paragraphs 3.C(1)(a), (b), (c) and (f) above, commencing on April 1, 2007, in no event shall the fees owed by Licensee to Licensor under any one of Paragraphs 3.C(1)(a), (b), (c) or (f) in any month be less than the applicable Minimum Fee (hereinafter defined). The “Minimum Fee” shall be as follows: (i) with respect to the Technology Fee and Hotel Marketing Association fee (which are calculated on a “per guest room” basis), the Minimum Fee for any given month shall be the greater of: (x) the amount due for the subject month pursuant to the License based on the average number of Participating Units that actually participated in the Rental Management Program during the subject month, and (y) the amount that would have been due for the subject fee for the subject month pursuant to the License if the number of Participating Units each day that entire month was two hundred (200), and (ii) with respect to the royalty fee and Services Contribution fee (which are calculated based on a percentage of Gross Rooms Revenue), the Minimum Fee for any given month shall be the greater of: (x) the amount due for the subject month pursuant to the License based on the actual Gross Rooms Revenue attributable to or payable for rental of guest rooms (i.e., Participating Units) at the Hotel during the subject month multiplied by the applicable percentage set forth in the License, and (y) the amount that would have been due for the subject fee for the subject month pursuant to the License if there had been two hundred (200) Participating Units available for rental to Hotel guests each night that entire month, with a sixty percent (60%) occupancy rate and an average daily room rate of One Hundred and Twenty Dollars ($120.00) per night (i.e. $14,400 in Gross Rooms Revenue per night). These amounts set forth in both items (y) above have been negotiated by the parties to establish minimum fees given the lack of assurance of room inventory by Licensee and is not, and is in no way intended to be, a representation or estimate by either party of the average inventory, average daily room rate or occupancy rate expected for the Hotel.” 5. Conversion; Upgrading. Licensee may not commence to operate the Hotel, or permit any agent or Affiliate to commence to operate the Hotel, as a Crowne Plaza® Resort hotel without Licensor’s written authorization. Upon Licensee’s written request, Licensor will issue such written authorization upon (and only upon) completion of all pre-opening requirements provided for in the PIP and all other requirements set forth in the License. Licensor may, however, in its sole discretion, authorize Licensee to conditionally open and operate the Hotel as a Crowne Plaza® Resort hotel even though Licensee has not fully complied with the terms of the License or has not fully performed the Work described in the PIP (other than the pre-opening Work), provided Licensee fulfills all remaining terms of the License and PIP on or before the date designated by Licensor. Notwithstanding any consent by Licensor to the authorized conditional operation of the Hotel as a Crowne Plaza® Resort hotel, the Work more fully described in Paragraph 14.1 of the License and the PIP shall be completed and the Hotel shall otherwise be in compliance with the License and shall open as a Crowne Plaza® Resort hotel by no later than June 30, 2007. Licensee’s failure to perform the Work in accordance Licensor’s requirements and specifications (including the completion and other dates specified in the PIP or   7 -------------------------------------------------------------------------------- the outside date specified above in this provision) shall constitute a material breach of Licensee’s obligations under the License. 6. Condominium Documents. Licensee shall deliver to Licensor a true and complete copy of the Condominium Documents filed with the Division of Florida Land Sales, Condominiums and Mobile Homes, including all previous and subsequent amendments thereto. It is understood and agreed, however, that Licensor’s review of the Condominium Documents will not be deemed an approval of the legal sufficiency, marketability or other effects or characteristics thereof. Until control of the Condominium Association is transferred to the Residential Unit Owners, Licensee will ensure that the Condominium Documents will not be amended without Licensor’s prior written consent if the proposed amendment could adversely affect in any material respect the Hotel or Licensee’s ability to comply with the terms, conditions and payment obligations of the License, which consent will not be unreasonably withheld. In addition, until transfer of control of the Condominium Association to the Residential Unit Owners, Licensee will ensure that the Board of Directors of the Condominium Association does not take any action that adversely affects in any material respect the Hotel or Licensee’s ability to comply with the terms, conditions and payment obligations of the License and does not deny approval of reasonable requests made by Licensee relating to the operation of the Hotel. 7. Sale of Condominium Units. (a) No Use of Crowne Plaza® Marks in Sales. Subject to the terms and conditions of the License (including, without limitation, the provisions of Section 20 of this Addendum), Developer shall have the right to sell Condominium Units within the Condominium at any time and from time to time in accordance with the Condominium Documents and in compliance with all applicable federal, state and local laws. However, notwithstanding any other term or provision of this License or other document or communication, neither Developer nor Licensee, nor any of their respective Affiliates, agents, employees or other Persons involved in the solicitation, promotion, marketing, sales or rental of Condominium Units or the Rental Management Program shall have the right or license at any time to use the “Crowne Plaza®” name and marks (or any other names and marks owned by Licensor or its Affiliates) regarding or in connection with any solicitation, promotion or marketing relating to the offer and/or sale of the Condominium Units or the Rental Management Program or in any materials relating to the offer or sale of any Condominium Unit or the Rental Management Program; except that Licensee may use the “Crowne Plaza®” name and marks in connection with the promotion and marketing of the Hotel to prospective guests of the Hotel and in connection with the operation of the Rental Management Program at the Hotel in accordance with and subject to the License. No such materials shall state or suggest in any way that they have been approved by Licensor, that Licensor has participated or will participate in the development, construction, operation, marketing and/or sale of any of the Condominium Units or the Rental Management Program or that Licensor assumes, guarantees or is otherwise responsible in any way for any of the obligations, acts or omissions of the Developer, Licensee or any Affiliate, manager or agent of either or of any other Person in connection with the Condominium Units or the Rental Management Program. Licensee expressly acknowledges and agrees that Licensor has in fact had no involvement whatsoever in the development, construction, operation, marketing and/or sale of any of the Condominium Units or the Rental Management Program. Licensee shall ensure that it and Developer and its and Developer’s Affiliates’ marketing staff and agents do not   8 -------------------------------------------------------------------------------- make any written or oral representations that suggest that Licensor has participated or will participate in the development, construction, operation, marketing and/or sale of any of the Condominium Units or Rental Management Program or that Licensor assumes, guarantees, or is otherwise responsible in any way for, any of the obligations, acts or omissions of the Developer, Licensee or any Affiliate, manager or agent of either or of any other Person in connection with the Condominium Units or Rental Management Program. (b) Special Authorization; Disclaimers. Notwithstanding the foregoing, if, in connection with any on-going sales of Condominium Units or resales or the Rental Management Program, Licensor, in its sole discretion, expressly permits in writing the use of the Crowne Plaza® name and mark (or any other names and marks owned by Licensor or its Affiliates), any sales or marketing materials for the Condominium Units or Rental Management Program shall contain the disclaimers and waivers and other provisions set forth in Exhibit A attached to this Addendum. (c) Conduct of Sales Professionals. Licensee shall further ensure that it, Developer and their respective Affiliates’ marketing staff and agents conduct all sales and marketing activities for the offer and sale of Condominium Units and the Rental Management Program in a professional, lawful and ethical manner and refrain from disturbing guests at the Hotel. Licensor’s failure to object to any sales or marketing activities shall not constitute any judgment or determination by Licensor that all or any part of such activities are in compliance with applicable laws or other requirements. (d) Review of Sales and Marketing Materials. Licensor shall have the right (but not the obligation), upon request, to review all Condominium Unit and Rental Management Program sales and marketing materials or similar or related documents to confirm they comply with the License. Licensor’s review of any such materials shall not constitute any judgment or determination by Licensor that such materials are in compliance with applicable laws or other requirements. (e) Purchaser Certificates. Licensee shall cause Developer to request each purchaser of a Condominium Unit that signs a sales contract to purchase the Condominium Unit, following the Term Commencement Date, to execute a Certificate in favor of Licensor in the form attached hereto as Exhibit B-1, in which the purchaser acknowledges and agrees to the contents of the Certificate. If the purchaser refuses to sign the Certificate, Licensee shall cause Developer to use commercially reasonable efforts to obtain an alternate Certificate from the purchaser in the form attached hereto as Exhibit B-2. in which the purchaser acknowledges receipt of the disclosures and disclaimers but does not expressly agree to them. With respect to purchasers who signed a sales contract for a Condominium Unit prior to the Term Commencement Date, Licensee shall cause Developer to use commercially reasonable efforts to obtain from each such purchaser at closing an executed Certificate in favor of Licensor in the same form as attached hereto as Exhibit B-1; however, if the purchaser refuses to sign the Certificate at closing, Licensee shall cause Developer to use commercially reasonable efforts to obtain the alternate Certificate from the purchaser in the form attached hereto as Exhibit B-2. Licensee shall be required to cause Developer to use commercially reasonable efforts, but shall not be required to cause Developer to force or require, a purchaser or prospective purchaser to sign a Certificate. No modification shall be made to any Certificate that would cause it to differ   9 -------------------------------------------------------------------------------- from the applicable attached form, without the prior written consent of Licensor (other than insertion of the name of the purchaser(s), the unit number and the date of execution). Licensee shall cause Developer to deliver each original, signed Certificate to Licensee promptly after it is executed by the purchaser(s) and Licensee shall promptly forward all original, signed Certificates to Licensor. These Certificates are in addition to, and not in lieu of, any certificate for the benefit of Licensor required to be signed by owners of Condominium Units electing to become Participating Unit Owners. (f) FF&E Package. All Residential Condominium Units that are eligible to be a Participating Unit must be sold or furnished with a standard package of FF&E approved by Licensor for the Hotel. (g) Notification. Licensee shall notify Licensor immediately upon its receipt of notice or knowledge of any action by Developer or any of its Affiliates that is reasonably likely to materially impair the ability of Licensee to comply with the provisions of the License. 8. Rental Management Program: Operation of Hotel. (a) Rental Agreements. Before a Residential Condominium Unit (other than those owned by Licensee or Developer) may be included in the Hotel as a Participating Unit, Licensee shall cause Purchaser to enter into a Rental Agreement with the Residential Unit Owner of such Residential Condominium Unit, pursuant to which the Residential Unit Owner shall grant Purchaser the exclusive authority to manage the Residential Condominium Unit and to rent the Residential Condominium Unit to the general public as part of the Hotel as a guest room pursuant to the requirements of the System. In its operation of the Rental Management Program, Licensee shall cause Purchaser to use the attached form of Rental Agreement and no material changes shall be made to the form without the prior written consent of Licensor. Licensor shall have the right to specify provisions that must be included in any agreement between a Non-Participating Unit Owner or the Condominium Association and the Licensee, Purchaser or Management Company. Licensor shall also have the right to require modifications to the Rental Agreement as may be reasonably necessary to cause such agreement to comply with applicable laws or the License. Licensee acknowledges and agrees that, during the License Term, Licensee will be the lessee of the Hotel Unit under the Hotel Unit Lease and will acquire from Purchaser, pursuant to the Hotel Unit Lease, the exclusive authority to manage and rent all of the Participating Units in accordance with the Rental Agreements. Further, Licensee will enter into the Management Agreement with the Management Company to operate the Hotel Unit and perform the obligations of Licensee under the Hotel Unit Lease with respect to the Rental Agreements. Licensee agrees not to assign (or permit an assignment of) or materially amend the Hotel Unit Lease or the Management Agreement without the prior written consent of Licensor. Notwithstanding Licensor’s acknowledgement of Licensee as the lessee of the Hotel Unit and of Management Company as the sub-manager of the Hotel Unit, and notwithstanding Licensor’s review of the Hotel Unit Lease and Management Agreement, Licensee and all guarantors shall remain fully liable to Licensor under the terms of the License and the guarantees and Licensor need look only to Licensee and the guarantors with respect to any matter arising under the License.   10 -------------------------------------------------------------------------------- (b) Participating Units’ Compliance With Brand Standards. No Residential Condominium Unit (including any Residential Condominium Unit previously withdrawn from the Hotel as a Participating Unit as permitted under the Rental Agreement) shall become a Participating Unit that may be rented to a guest as part of the Hotel until such Residential Condominium Unit meets all System brand standards for Crowne Plaza® Resort hotel properties and Licensee has certified in writing to Licensor that it meets all such standards. Licensor reserves the right to inspect each Participating Unit for compliance with the terms of the License and may suspend or revoke the approval of any Residential Condominium Unit that fails to meet such standards as a Participating Unit. Licensee shall maintain or cause to be maintained each Participating Unit in good repair and condition and in full compliance with the System. Licensee, its agents and Affiliates, shall not rent or offer to rent any Residential Condominium Unit as a Participating Unit that (i) has not been certified in writing by Licensee to Licensor as complying with the System, (ii) does not actually comply with the System, or (iii) has been rejected by Licensor. Licensee, its agents and Affiliates, shall prohibit Participating Unit Owners from personalizing their Residential Condominium Units (including anything in the Condominium Unit other than the standard FF&E package) and further shall require any such Residential Unit Owners to maintain their Residential Condominium Unit in accordance with the System’s brand standards for Crowne Plaza® Resort hotel properties. (c) Other Areas Compliance with Brand Standards. Licensee shall ensure that any and all common elements of the Condominium that are or may be accessible to guests of the Hotel, all Hotel Operated Common Properties and the Leased Function Space also are maintained in accordance with all System brand standards for Crowne Plaza® Resort hotel properties. (d) No Nuisance. Licensee shall ensure that all Participating Unit Owners and, to the extent within Licensee’s control, all Non-Participating Unit Owners and their respective families, tenants and guests are prohibited from using Residential Condominium Units in any way that would interfere with or be inconsistent with the use of one or more of the Residential Condominium Units as part of the Hotel, including, but not limited to, a prohibition on conducting illegal, offensive or commercial activities of any kind in or from a Residential Condominium Unit or exceeding maximum occupancy rates per Residential Condominium Unit or creating excessive or unreasonable noise or odors. (e) Front Desk. Licensee shall at all times maintain or cause to be maintained a reservations desk and equipment for the Hotel in the lobby of the Hotel for purposes of check-in/check-out and related services for guests of the Hotel and for key pick-up and drop-off for Participating Unit Owners and shall comply or cause compliance with all standards of the System related to reservations. (f) Insurance. The commercial general liability insurance and business automobile liability insurance single-limit coverage required to be carried by Licensee under Paragraph 9.B of the License for personal and bodily injury and property damage is hereby amended to be not less than Fifteen Million Dollars ($15,000,000) per occurrence (all other portions of Paragraph 9.B remain in effect and unchanged). In addition to the liability and other insurance required to be carried by Licensee under Paragraph 9.B. of the License, at all times during the License Term, Licensee shall be required to carry “All Risk” (or its equivalent)   11 -------------------------------------------------------------------------------- property damage insurance for the Hotel Unit and shall cause each Participating Unit Owner to carry, at all times that they are participating in the Rental Management Program, “All Risk” (or its equivalent) property damage insurance for the FF&E in their Participating Unit in the amount and upon the terms and conditions set forth in the form Rental Agreement. In addition, Licensee shall carry “All Risk” (or its equivalent) property damage insurance for the FF&E in any Condominium Unit owned by Licensee or its Affiliates and shall cause Developer to carry “All Risk” (or its equivalent) property damage insurance for the FF&E in any Condominium Unit owned by Developer or its Affiliates, protecting Licensee and Licensor and their respective Affiliates, as their interests may appear, with replacement cost valuation in an amount not less than the replacement value thereof. In addition, Licensee shall carry for any Condominium Unit that it or its Affiliate owns, and shall cause Participating Unit Owners to carry for their Participating Units and Developer to carry for its Participating Units, commercial general liability insurance and all other insurance required to be carried by Participating Unit Owners pursuant to the terms and provisions set forth in the form Rental Agreement. 9. Licensee Representations. Acknowledging that Licensor is relying on the representations, warranties, covenants, and other agreements contained in this Addendum, Licensee, after adequate inquiry and investigation, expressly represents and warrants: (a) Management of Condominium Association. That Licensee or an Affiliate of Licensee has entered (or will prior to the Opening Date enter) into a valid, enforceable management agreement with the Condominium Association in which the Condominium Association retains Licensee or its Affiliate to manage all of the common elements of the Condominium during the License Term in accordance with the System standards, and has delivered (or will prior to the Opening Date deliver) an accurate and complete copy of such agreement to Licensor. For so long as Licensee or its Affiliate shall manage the Condominium Association, Licensee shall manage same, or shall cause such management to be, in accordance with the License and the System standards. (b) Possession of Hotel; Management of Hotel Operated Common Properties. That Licensee is entitled to possession of the Hotel during the entire License Term without restrictions that would interfere with anything contemplated in the License. That Licensee or an Affiliate of Licensee has entered into a valid, enforceable management agreement with the Master Association giving Licensee or its Affiliate the exclusive right to manage the portions of Common Properties located west of South Ocean Drive, including the resort pool located adjacent to the intracoastal waterway (the “Resort Pool”) and the outdoor function areas which are located on Common Properties and which could be perceived by guests of the Hotel to be part of the Hotel, during the License Term and to impose rules and regulations restricting and regulating usage of same, all in accordance with the License, the System standards and the Master Declaration. That Licensee shall manage the Resort Pool and Hotel Operated Common Properties, or shall cause such management to be performed, in accordance with the License and the System standards. That the Resort Pool and all walkways and facilities necessary to access the Resort Pool from the Hotel will be available for use and enjoyment by Licensee, all Residential Unit Owners and their respective authorized agents, guests and invitees by the Opening Date and throughout the License Term in accordance with the System standards.   12 -------------------------------------------------------------------------------- (c) Beach Access. That Purchaser, Licensee and all Residential Unit Owners and their respective authorized agents, guests and invitees have been granted an easement which gives them perpetual access at all times over Common Properties to the beach, which access has been granted by easement and can not be unreasonably restricted or blocked. That all Common Properties necessary to access the beach from the Hotel will be available for use and enjoyment by Purchaser, Licensee, all Residential Unit Owners and their respective authorized agents, guests and invitees by the Opening Date and throughout the License Term in accordance with the System standards. Notwithstanding the foregoing, the walkway to the beach shall not be required to be beautified to System standards until completion of Phase V of the Project. (d) Rental Agreements. That Purchaser has entered into (or will enter into before the Opening Date) Rental Agreements with Participating Unit Owners of at least one hundred (100) Participating Units. That, on or before June 30, 2007, Purchaser will have entered into Rental Agreements with Participating Unit Owners of at least two hundred (200) Participating Units. That, pursuant to the Hotel Unit Lease, Purchaser has delegated (or will delegate prior to the Opening Date) to Licensee Purchaser’s exclusive authority to manage and rent the Participating Units in accordance with the Rental Agreements. (e) Condominium Filing. That it, Developer or the appropriate Affiliates of each, have properly prepared and filed the Condominium Documents with the Division of Florida Land Sales, Condominiums and Mobile Homes and have properly addressed any deficiencies cited by the Division and that the “Shared Costs” budget attached as an exhibit to the Condominium Documents is adequate to enable Licensee to operate the Hotel in conformance with the System and the License. Licensee hereby represents that, as of the date of this License, Developer has binding sales contracts for one hundred and ninety three (193) of the Residential Condominium Units and one (1) signed Reservation Agreement. (f) Securities Laws. That there have been no violations by any Person of any federal or state securities laws or regulations or any other laws (including, without limitation, the Interstate Land Sales Act) or regulations applicable to the offering for sale or the sale of any of the Condominium Units and/or participation in the Rental Management Program. (g) Delivery of Documents. That it has delivered to Licensor true and correct copies of all agreements and documents referenced in Sections 9(a), (b) and (e), as well as true and correct copies of the Hotel Unit Lease Agreement and the Management Agreement and all other agreements or documents reasonably requested by Licensor. (h) Ability to Perform. If Licensee cannot directly accomplish all of the requirements set forth in the License (including this Addendum), Licensee covenants, represents and warrants that (i) Licensee or Purchaser has enforceable agreements with Developer providing Licensee or Purchaser with rights to require Developer to act in accordance with the requirements of the License, and Licensee agrees to take all action as may be necessary to enforce such rights whether held by Licensee or Purchaser, (ii) Licensee will cause Purchaser and Management Company to act in accordance with the requirements of the License, and (iii) Licensee will cause Participating Unit Owners to act in accordance with the requirements of the License. Accordingly, Licensee acknowledges that it shall not be relieved from timely and   13 -------------------------------------------------------------------------------- complete performance of any obligation hereunder on the basis that the failure to perform was outside of its control or authority. 10. Non-Participating Units. Licensee understands and agrees that the Non-Participating Units are not part of the Hotel and that Licensee has no license from Licensor to operate the Non-Participating Units as part of a Crowne Plaza® Resort hotel. Therefore, with respect to any Non-Participating Units: (i) Licensee shall not, and shall use its best efforts to ensure that all Non-Participating Unit Owners do not, rent, lease or otherwise make such Non-Participating Units available to the general public through the Crowne Plaza® reservation system required by Licensor for the Hotel, nor shall it or they use any part of the System in any other manner in connection with the Non-Participating Units. No reservations for Non-Participating Units may be made through the reservations phone line or website used by the Hotel for rental of Participating Units. (ii) Licensee shall ensure that the registration signed by all guests using Non-Participating Units shall include the following language: “The unit being rented is not affiliated in any manner with the Crowne Plaza® system of hotels or resorts or the franchisor or owner thereof and that those guests using Non-Participating Units are informed at the time of reservation and check-in and at all other appropriate times that the Non-Participating Units are not affiliated with the Hotel, the System, Licensor or its Affiliates. (iii) Licensee and its Affiliates will not use the words “Crowne Plaza®” or any other mark or name associated with the System, or any variation of such marks or names, with respect to the Non-Participating Units. Such names or marks shall not appear on any items or products in the Non-Participating Units. Licensee and its Affiliates will not, and will ensure that Developer and its Affiliates do not, and Licensee and its Affiliates will use their best efforts to ensure that all Non-Participating Unit Owners do not, identify any Non-Participating Units with any other hotel brand. (iv) Licensee will take such other and further steps as Licensor may reasonably require from time to time and as may be permitted under applicable law and the Condominium Documents to disassociate the Non-Participating Units from the System and to minimize the chance of a claim being made against Licensor or its Affiliates for anything relating to the Non-Participating Units. (v) Notwithstanding the fact that the Non-Participating Units are not part of the Hotel, Licensee expressly agrees that all indemnity, hold harmless, defense and release provisions of the License (including this Addendum) shall apply to any matter, occurrence, act or omission arising from or in connection with the Non-Participating Units or any of them (even where the negligence of Licensor and/or its Affiliates is alleged).   14 -------------------------------------------------------------------------------- 11. Responsibility for and Assurance of Product Quality. Licensee understands and agrees that among the most significant purposes of the License is the requirement of Licensee to comply with the brand standards of the System at the Hotel and to timely complete the PIP. Licensee represents to Licensor that Licensee has the ability to comply, and to secure compliance with, all System brand standards at the Hotel (including the Participating Units, Hotel Managed Common Properties and Leased Function Space) and to timely complete the PIP. Accordingly, should any of the terms and conditions of the License not be satisfied, Licensor shall have the right to terminate the License and to collect liquidated damages pursuant to Paragraph 12.F of the License. Licensee acknowledges such default and termination risks may be increased due to the operation of the Hotel as a condominium hotel. Licensee further acknowledges that all portions of the Hotel other than the Non-Participating Units must satisfy and be subject to the Licensor’s regular product quality and service requirements as provided in the License and the brand standards of the System and that all such portions of the Hotel must be available for Licensor’s inspection as required in the License. 12. Planned Community; Master Association; Future Development. (a) Master Association. Licensee hereby represents to Licensor that prior to the Opening Date, the Condominium will be a part of a master planned community (the “Community”) that will include the Condominium, the Common Properties and the Sian Ocean Residences Condominium Property (a residential condominium tower located at 4001 South Ocean Drive) and that every owner of real property within the Community will be a member of the master homeowners’ association known as the Sian Ocean Residences Resort Master Association (the “Master Association”). Licensee further represents that the Master Association has responsibility for maintaining the Common Properties of the Community, which include, or will include, prior to the Opening Date, the internal roadways (excluding the public road identified as A1A or South Ocean Drive, which is a main thoroughfare that traverses the Community), beach and beach access areas, parking facilities, and the Resort Pool (which Resort Pool will be part of the Hotel Operated Common Properties). Licensee agrees to secure, at the time of, and as a condition to, the opening of the Hotel and otherwise upon Licensor’s request from time to time, a duly-executed estoppel certificate from the Master Association certifying that the Condominium is in compliance with the requirements of the Master Association. Licensee further agrees to obtain an undertaking from the Master Association to provide Licensor with written notice of any failure by the Condominium to comply with the requirements of the Master Association. (b) Hotel and Common Properties Plans and PIP. Licensee shall cause a provision to be included in the Purchase Agreement that requires Developer to construct the Hotel and Hotel Operated Common Properties in accordance with the plans and specifications previously submitted to Licensor for review and the PIP, and that prohibits material changes from being made to such plans and specifications without the prior written consent of Licensor and that names Licensor as a third party beneficiary of such provision. Licensee further agrees to cause a provision to be included in the Purchase Agreement requiring Developer and Licensee to submit to Licensor for prior review and approval the specifications for the interior design and finishes for all parts of the Hotel, as well as any proposed material changes to such specifications and that names Licensor as a third party beneficiary of such provision.   15 -------------------------------------------------------------------------------- (c) Future Development Parcels. Licensee has informed Licensor that there are two future development parcels on the west side of South Ocean Drive that Developer may submit to the Master Declaration and make part of the Community. Developer has informed Licensee that it currently intends to develop the one that is to the south of the Condominium (“Phase II”) as a hotel or hotel condominium and the one that is to the north of the Condominium (“Phase III”) as commercial space or town homes. Licensee shall cause the current site plan for Phase II and Phase III previously submitted to Licensor for review to be attached as an exhibit to the Purchase Agreement and shall cause the Purchase Agreement to be amended to provide that if Developer constructs Phase II and/or Phase III, it will be constructed substantially in accordance with said site plan and no material changes will be made to the site plan without Licensor’s prior written consent and Licensor shall be a named third party beneficiary to said provision of the Purchase Agreement. (d) Covenant Running With Land – Phases I, II and III. Licensee shall cause Developer or its Affiliate to record in the public records, concurrently with Purchaser’s acquisition of the Hotel Unit (and prior to the filing of any mortgage, ground lease or other encumbrance against the land included in Phase II or III), the deed restriction attached hereto as Exhibit C, which shall be binding upon all of the real property included in Phases I, II and III and shall require the exterior appearance and quality of all improvements, facilities and landscaping constructed or placed within Phases II and III to be equal to or better (at the time of such completion, renovation or replacement) than the exterior appearance and quality of the Hotel Building on the date the Hotel opened for business, and require the interior finishes of all improvements within Phases II and III to be of a complementary quality or better quality than the finishes of the Hotel Building on the date the Hotel opened for business. The deed restriction shall also require all commercial uses in Phases II and III to be upscale uses and shall expressly prohibit uses that would detract from the operation of the Hotel including, without limitation, flea markets, dollar stores, adult entertainment, pawn shops and adult-themed restaurants and establishments (it being agreed that competition from a second hotel shall not be deemed a detraction). Licensee agrees to enforce Licensee’s rights under the restrictive covenant and enforce the provisions thereof, including upon Licensor’s request. (e) Review of Phases II and III Plans. Licensor shall have the right, but not the obligation, to review and comment upon the plans and specifications for the improvements to be constructed upon Phases II and III, and to review and comment upon any subsequent material changes to such plans and specifications, but only to confirm that the exterior appearance of all improvements, facilities and landscaping within Phases II and III, and the interior finishes of all improvements within Phases II and III, will conform to the standards imposed by the deed restriction described in the preceding paragraph and to comment upon the configuration and finishes of the replacement Leased Function Space described in subsection (f) below, which Leased Function Space must meet all System standards. (f) Leased Function Space. In addition to the function space in the Hotel Building, Licensee represents to Licensor that Licensee has (or will have prior to the Opening Date) the exclusive right, throughout the License Term, by written lease or other binding agreement, to use and occupy approximately 4,000 square feet of space in a semi-permanent tent or similar structure acceptable to Licensor which shall be constructed west of South Ocean Drive by the Opening Date, as Hotel function space for meetings, events, conferences, catered parties   16 -------------------------------------------------------------------------------- and similar activities, upon terms and conditions acceptable to Licensee and Licensor (the “Leased Function Space”). Licensee further represents that, if Phase III is developed with commercial or mixed use improvements (as opposed to town homes), the improvements will include at least 4,000 square feet of Hotel function space and Licensee will have the exclusive right, throughout the remaining License Term, by written lease or other binding agreement, to use at least 4,000 square feet of permanent space within the Phase III improvements as the Leased Function Space for meetings, events, conferences, catered parties and similar activities, upon terms and conditions acceptable to Licensee and Licensor, in lieu of the semi-permanent tent. 13. Monthly Statements. In addition to the statements and information required under Paragraph 8.A of the License, Licensee shall provide a written report to Licensor by the third (3rd) day of each month, stating the average daily number of Participating Units during the immediately preceding calendar month and including all documents and information required by Licensor to substantiate Licensee’s calculations pursuant to Sections 3, 4 and 14(ii) of this Addendum. The written report will be in such form (including but not limited to electronic transmission or automatic capture) and detail as Licensor may request from time to time. 14. Termination by Licensor. In addition to, but not in lieu of, Licensor’s termination rights under the original License (including Paragraph 12 thereof), Licensor shall have the right to terminate the License immediately upon delivery of written notice to Licensee and, with respect to Subsection 14(iii)(B) and (C) only, the expiration of the cure period set forth in Paragraph 12.C of the original License: (i) If Licensee’s right to (A) possess or manage any part of the Hotel is terminated, surrendered or lost for any reason (provided that (1) the termination of one or more Rental Agreements shall not give rise to a termination right unless it meets the termination criteria of Section 14(ii) below, and (2) the termination of the Condominium Association management agreement referred to in Section 9(a) hereof shall not give rise to a termination right), or (B) participate as part of the Master Association with at least the level of voting rights and voting power that it is entitled to have as of the Term Commencement Date; or (ii) If an Inventory Default occurs (i.e., during any Rolling 12-Month Period, an average of less than two hundred (200) daily room nights are available for rental to Hotel guests per calendar month); provided Licensor exercises its termination right and delivers written notice of same to Licensee within one hundred and eighty (180) days after the last day of the last month of the subject Rolling 12-Month Period in which the Inventory Default occurs; or (iii) If (A) there has been a material misrepresentation or material breach of any warranty on the part of the Licensee in the representations and warranties contained in this Addendum, (B) Licensee has breached any covenant or agreement contained in this Addendum or otherwise failed to comply with or fulfill any of its obligations hereunder, (C) Licensor reasonably determines that the operation of the Hotel is derogating, injuring or impairing the reputation, standards and/or trademark rights of the System, Licensor or its Affiliates, (D)   17 -------------------------------------------------------------------------------- Licensor reasonably determines that the solicitation, promotion, marketing or sale of Condominium Units is derogating, injuring or impairing the reputation, standards and/or trademark rights of the System, Licensor or its Affiliates, or (E) Licensor determines that the filing (or imminent filing) of lawsuit(s) by Residential Unit Owners alleging violation by any Person of any federal or state securities laws or regulations or any other laws (including, without limitation, the Interstate Land Sales Act) or regulations applicable to the offering for sale or the sale of any of the Condominium Units and/or the offering of participation in the Rental Management Program, is derogating, injuring or impairing the reputation, standards and/or trademark rights of the System, Licensor or its Affiliates; or (iv) If the Master Declaration or Condominium Documents are amended in a manner that Licensor reasonably determines has an adverse effect upon the reputation, standards and/or trademark rights of the System, Licensor or its Affiliates or Licensor’s fees; or (v) If the Master Association or Condominium Association takes any action (or fails to take any action or grant any reasonable request or approval) and Licensor reasonably determines that such act or inaction has an adverse effect upon the reputation, standards and/or trademark rights of the System, Licensor or its Affiliates or Licensor’s fees or leads to unacceptable risks of liability; or (vi) If the Purchase Agreement is terminated or materially modified without Licensor’s consent; or (vii) Non-Participating Unit Owners identify any Non-Participating Unit with any other hotel brand. 15. Liquidated Damages. Notwithstanding any other term or provision of this License or otherwise, Licensee acknowledges and agrees that the liquidated damages payment calculated pursuant to Paragraph 12.F of the original License, which provision is being amended as set forth below, shall also be payable (as liquidated damages for the premature termination only, i.e., loss of anticipated fees for the remainder of the term, and not as a penalty nor as damages for breaching the License nor in lieu of any other payment) in the event Licensor terminates the License pursuant to this Addendum, including, without limitation, pursuant to Section 14 hereof. Paragraph 12.F of the original License is hereby modified to provide that (except as expressly modified by this provision, all other portions of said Paragraph 12.F remain in full force and effect): (a) the amounts due as liquidated damages will be calculated based on the total amounts required under Paragraph 3.C(1), (3) and (4) of the original License as amended by Section 4 of this Addendum to include the Minimum Fee requirement in such calculations, and (b) after the fifth (5th) anniversary of the Opening Date, the amounts due as liquidated damages under Paragraph 12.F will be calculated on a twenty-four (24) month basis, rather than a thirty-six (36) month basis. 16. Guaranties and Indemnification Agreement. MHI Hospitality Corporation, a publicly traded corporation, Purchaser and Management Company each agrees to guarantee Licensee’s performance of all of Licensee’s obligations, covenants, indemnities and agreements   18 -------------------------------------------------------------------------------- in the License by executing the form of Guaranty attached as Exhibit E hereto. In addition, Licensee shall cause Developer to execute and deliver to Licensor the Indemnification Agreement in favor of Licensor in the form of Exhibit F attached hereto concurrently with Licensee’s execution of the License and cause certain principals of Developer simultaneously to execute and deliver to Licensor the Guaranty in favor of Licensor in the form of Exhibit G attached hereto. 17. Prior Consent to Release of Information. Without Licensor’s prior written consent after adequate time for review (which shall in no event be less than ten (10) days), there shall be no publicity (regardless of format or forum or whether instigated or undertaken by Licensee or Developer or their respective Affiliates or any agents of any of same) which includes, but is not limited to, a statement, press release, interview, article, advertisement, commercial, or other release or dissemination of information intended to give dissemination of information to the public which identifies Licensor, its Affiliates, Crowne Plaza®, or the franchise arrangement established by the License in connection with the Condominium, the Hotel, the Licensee, the Developer, or any other Person having a role in the Condominium. Licensor understands Licensee’s desire to achieve an appropriate level of publicity, but Licensee acknowledges that Licensor has a substantial interest in the Crowne Plaza® name and reputation and therefore needs to be completely satisfied with the content and means of publication for all such publicity and accordingly can withhold its consent for any reason. Upon request of Licensee, Licensor will designate a person for Licensee to contact to process such review. Through such designated person, Licensor will use its best efforts to review and give its reactions to each item of publicity within ten (10) days after receipt of such submission. The foregoing shall not apply with respect to any filing or disclosure obligation of Licensee or its Affiliates under the federal securities laws or the listing requirements of any securities exchange or market on which its or its Affiliate’s securities are listed or quoted, provided, however, that such disclosures are true and correct. 18. Third Party Beneficiary Rights. (a) No Third Party Beneficiaries of License. Except as otherwise specifically set forth in the License, no provision of the License (including this Addendum) is intended or shall be construed to provide or create any third party beneficiary right or interest or any other right or interest of any kind in any Residential Unit Owner, the Developer or any Affiliate of either or any other Person (including, without limitation, the Condominium Association, the Master Association or any lender), and all terms and provisions hereof shall be personal solely between the parties to the License and their proper successors and assigns. (b) Third Party Beneficiary of Purchase Agreement. On or prior to the date of this License, Licensee shall cause Licensor to be made a third party beneficiary of the provisions in the Purchase Agreement that directly or indirectly benefit Licensor. 19. Indemnification. In addition to, but not in lieu of, Licensee’s obligations (and Licensor’s rights) under Paragraph 9.A of the original License and Section 10(v) of this Addendum and any other indemnity set forth in the License (including this Addendum), Licensee agrees to indemnify Licensor and its Affiliates and its and their respective members, managers, officers, directors, employees, agents, successors and assigns (collectively, the “Indemnified   19 -------------------------------------------------------------------------------- Parties”) and hold each of them harmless against, and promptly reimburse each of them upon demand for, all costs, liabilities and payments of money (including, but not limited to, fines, damages, legal fees, expenses and court costs through all trial and appellate levels) incurred or suffered by the Indemnified Party (excluding consequential damages for the premature termination of the License, i.e., loss of anticipated fees for the remainder of the term, but not other consequential damages), by reason of any claim, demand, tax, penalty, or judicial or administrative investigation or proceeding whenever asserted or filed, including, but not limited to, claims brought by the Securities and Exchange Commission, the State of Florida securities regulators, the Division of Florida Land Sales, and any other regulatory authority (even where negligence of Licensor and/or its Affiliates is alleged), arising out of or related to: (i) the development, construction, promotion, marketing, offer, sale, lease or transfer of any Condominium Unit or any other part of the Condominium or Community; (ii) (a) the development, promotion, marketing, or offering of the Rental Management Program, or (b) any Rental Agreement; (iii) any violation or alleged violation of the Securities Act of 1933, as amended, or any other applicable federal or state securities laws, rules or regulations, by Licensee, Developer, Purchaser, Management Company, or their respective Affiliates or the agents or contractors of any of same arising in connection with or relating to (i) any sales or offers of sales of any of the Condominium Units (or any other portion of the Community) or (ii) the Rental Management Program; (iv) the inaccuracy or breach by Licensee of any representation, warranty, covenant or agreement made in the License (including this Addendum); (v) any untrue statement or alleged untrue statement of material fact contained in any of the Condominium Documents, as the same may be amended or restated, or in any of the solicitation, promotion, sales, rental, marketing or other documents, materials, procedures or practices used by Licensee, Purchaser, Management Company, Developer or any Residential Unit Owner, or any of their respective Affiliates, or any agents, contractors, employees, or other Persons associated with any of them who are involved in the solicitation, promotion, sale, rental or marketing of any of the Condominium Units (or any other portion of the Community), or arising out of or based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; (vi) the failure of Licensee, Purchaser, Management Company, Developer or any Residential Unit Owner, or any of their respective Affiliates, or any agents, contractors, employees, or other Persons related to any of them, to comply with any obligations under any applicable law, regulation or other governmental or court requirement, whether federal, state or local;   20 -------------------------------------------------------------------------------- (vii) the use or occupancy of the Hotel, Condominium Units, Condominium, Common Properties or any other amenity, or any part of any of same, by any Person or any incident involving any Residential Unit Owner or guest of any Residential Condominium Unit (whether or not it is a Participating Unit) or any invitee of either (including, without any implied limitation, the disruption of Hotel guests and/or the Hotel’s orderly operations); (viii) any other matter arising from the development, construction, sale or rental, offering for sale or rental, use, management, occupancy or operation of the Hotel, Condominium, Community, Common Properties or any part of any of same. Licensee understands and agrees that the defense rights and obligations set forth in the second and third sentences of Paragraph 9.A of the original License shall apply to the indemnifications set forth in this Section 19. The indemnification obligations provided for in the License (including this Addendum), including, without limitation, Paragraph 9.A of the original License and in Section 10(v) and this Section 19 of this Addendum shall survive the expiration or termination of the License for whatever reason. In the event of a conflict between any provision of the original License and any provision of this Addendum relating to the indemnification and defense obligations of Licensee, the provision affording Licensor and other indemnified Persons the broadest rights to indemnification and defense shall control. 20. Compliance with Laws. Licensee agrees to comply with, and shall cause its Affiliates, Developer, Developer’s Affiliates and Participating Unit Owners to comply with, all laws, rules, and regulations applicable to the Hotel or Hotel operations, including, without limitation, the Americans With Disabilities Act and federal and state securities laws, rules and regulations. Licensee shall obtain (or cause to be obtained) in a timely manner all permits, certificates, and licenses necessary to the full and proper opening and operation of the Hotel (including those, if any, required to be obtained for each Participating Unit) and shall cause the Developer and Developer’s Affiliates to obtain in a timely manner all permits, certificates and licenses necessary for the offer and sale of any of the Condominium Units. Licensee agrees to forward to Licensor a copy of all inspection reports, warnings, certifications and ratings issued by any governmental entity during the License Term in connection with the Hotel or the offer and sale of any of the Condominium Units that indicates a failure to meet or maintain governmental standards or less than full compliance with any applicable law, rule, or regulation within five (5) days of receipt thereof by Licensee or its agent or Affiliate. 21. ADA-Compliant Units. Licensee agrees that it will cause Purchaser to purchase from Developer prior to the Opening Date at least two (2) guest rooms that are ADA-compliant (i.e., designed and constructed to comply with requirements of the Americans With Disabilities Act) as part of the Hotel Unit, to retain them as ADA-compliant guest rooms during the entire License Term and to lease such rooms to Licensee under the Hotel Unit Lease during the License Term for use in the Rental Management Program (the “ADA Residential Units”). In addition to the restrictions set forth in Paragraph 10 of the original License, Licensee agrees that it will not, and will cause its Affiliates not to, sell, assign, transfer, convey, pledge, mortgage, encumber or give away, directly or indirectly, any interest in such ADA Residential Units without the prior written consent of Licensor. It is understood and agreed by Licensee that these ADA Residential   21 -------------------------------------------------------------------------------- Units are not adequate to meet all ADA requirements for the Hotel and that Licensee is obligated at all times to meet all requirements of the Americans With Disabilities Act. Licensee agrees that it shall at all times ensure that there are sufficient ADA-compliant Participating Units to meet all ADA requirements for the Hotel. For purposes of calculating fees and other amounts due to Licensor and the minimum number of guest rooms or Participating Units under the License, the ADA Residential Units shall be deemed guest rooms and Participating Units. 22. Waivers. Licensor’s failure to insist upon strict compliance by Licensee with any of the terms, covenants, or conditions of the License or to exercise any termination right shall not be deemed a waiver of such terms, covenants or conditions, nor shall any waiver or relinquishment of any right or power under the License at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times. 23. Management of the Hotel. The first sentence of Paragraph 10.J of the original License is hereby deleted and replaced with the following (except as expressly modified by this provision, all other portions of Paragraph 10.J remain in full force and effect): “Licensor hereby acknowledges that the Management Company will be the manager of the Hotel pursuant to the Management Agreement between Licensee and the Management Company. Licensee shall cause the Management Company to accept, abide by and be subject to the License and all rules, regulations and requirements of Licensor. Upon termination or expiration of the License, Licensee shall cause the Management Company to cease operating the Hotel as a Crowne Plaza® hotel. In the event of any conflict between the terms of the Management Agreement between Licensee and the Management Company and the terms of the License, the terms of the License shall govern and control. Notwithstanding Licensor’s acknowledgement of the Management Company as the manager of the Hotel or Licensor’s review of the Management Agreement, Licensee and all guarantors shall remain liable to Licensor under the terms of the License and the guarantees. The Management Agreement between Licensee and the Management Company shall include provisions acceptable to Licensor by which the Management Company agrees to all of the foregoing.” 24. Site Control. The following is added as Paragraph 15.A of the License: “Licensee expressly understands and agrees that control of the Hotel by Licensee is a condition precedent to the opening of the Hotel as a Crowne Plaza® hotel. Licensor agrees that, as of the Term Commencement Date, the Purchase Agreement is sufficient evidence of control of the Hotel for purposes of this Paragraph, provided that Licensor retains the right to terminate this License for lack of such control unless: (i) Purchaser acquires fee simple title to the Hotel Unit as evidenced by a recorded deed therefor prior to the Opening Date, (ii) Licensee enters into the Hotel Unit Lease with Purchaser prior to the Opening Date and such lease is acceptable to Licensor, (iii) Purchaser enters into Rental Agreements for at least one hundred (100) Participating Units with its respective Residential Condominium Unit Owners prior to the Opening Date, and (iv) the Purchase Agreement remains in full force and effect until the matters described in (i) and (ii) herein shall have occurred. Unless Licensor receives a copy of the documents described in (i) and (ii) herein by the Opening Date and Licensor receives satisfactory evidence that the events described in (iii) and (iv) herein have occurred by the Opening Date, Licensor shall have the right to terminate the License by written notice to Licensee. Such right   22 -------------------------------------------------------------------------------- shall expire upon Licensor’s receipt and acceptance of a copy of the documents described in (i) and (ii) herein and Licensor’s receipt of evidence that the events described in (iii) and (iv) herein have occurred.” (Signatures on following page)   23 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed this Addendum to License as of the date first set forth above.   LICENSEE: MHI HOSPITALITY TRS, LLC By:      Name:      Title:      Attest:        LICENSOR: HOLIDAY HOSPITALITY FRANCHISING, INC. By:      Name:      Title:      Attest:        24 -------------------------------------------------------------------------------- EXHIBIT A SALES MATERIAL DISCLAIMERS AND WAIVERS FOR SALES IF USE OF CROWNE PLAZA NAME IS EXPRESSLY PERMITTED BY LICENSOR No material or publicity used in the solicitation, promotion, marketing, sale, offering, lease and conveyance of the Condominium Units (regardless of format or forum), including sales brochures, magazines, television or cable channels and programs, telephone calls or messages, model displays, signs, interviews, articles, advertisements, or contracts of sale (collectively, the “Sales Materials”) shall state or suggest in any way that they have been approved by Licensor or its Affiliates; that Licensor or its Affiliates has or will participate in the marketing and/or sale of the Condominium Units; or that Licensor or its Affiliates assumes, guarantees or is otherwise responsible in any way for any of the obligations, acts or omissions of the seller in connection with the Condominium Units. All Sales Materials shall include the following statements: (1) Owners of condominium units have no interest in the Crowne Plaza license granted to the hotel operator by Holiday Hospitality Franchising, Inc. (“Franchisor”). (2) Owners of condominium units have no right of any kind to the use of the “Crowne Plaza®” name and marks or related names and marks licensed to the hotel operator by Franchisor. (3) Franchisor and its affiliates have no obligation of any kind (including, but not limited to, any contractual or fiduciary duty or obligation express or implied) to Owners of condominium units or to any mortgagee of a condominium unit. (4) Franchisor and its affiliates have not approved or endorsed, and are not responsible for these sales materials. (5) Franchisor and its affiliates have not participated and will not participate in the marketing and/or sale of the condominium units. (6) Franchisor and its affiliates do not assume, guarantee or have any responsibility in any way for any of the obligations, acts or omissions of the seller of the condominium units, the hotel operator or any of their respective affiliates, agents or contractors.   D-1 -------------------------------------------------------------------------------- EXHIBIT B-1 FORM PURCHASER CERTIFICATE (Disclosure, Acknowledgement and Agreement) [see attached]   G-1 -------------------------------------------------------------------------------- EXHIBIT B-2 FORM PURCHASER CERTIFICATE (Disclosure and Acknowledgement) [see attached]   E-2 -------------------------------------------------------------------------------- EXHIBIT C DEED RESTRICTION [see attached]   E-3 -------------------------------------------------------------------------------- EXHIBIT D FORM RENTAL AGREEMENT [see attached]   E-4 -------------------------------------------------------------------------------- EXHIBIT E GUARANTY [see attached]   E-5 -------------------------------------------------------------------------------- EXHIBIT F INDEMNIFICATION AGREEMENT [see attached]   E-6 -------------------------------------------------------------------------------- EXHIBIT G GUARANTY (OF INDEMNIFICATION OBLIGATIONS) [see attached]   E-7 -------------------------------------------------------------------------------- EXHIBIT B Design Criteria   19 -------------------------------------------------------------------------------- Property Improvement Plan Proposed Conversion of the Ambassador Resort & Conference Center to a Crowne Plaza Resort Hollywood, FL December 12, 2002 PROPERTY IMPROVEMENT PLAN LOGO [g79817img02.jpg] Proposed Conversion of the Ambassador Resort & Corporate Center to a Crowne Plaza Resort Hollywood, FL December 12, 2002   34 -------------------------------------------------------------------------------- Table of Contents:   PROPERTY INFORMATION    1 STANDARDS (BRAND / LIFE SAFETY / ADA)    3 PIP ISSUES    4 -------------------------------------------------------------------------------- Property Information   Address:    4000 South Ocean Drive    Hollywood, FL 33019    954.458.1900    954.455.9829    www.ambassadorresort.com General Description     •   This ten-story, interior corridor hotel was originally constructed in 1987 and is of the Miami Beach architectural flavor. U-shaped commercial spaces are located on the first floor with smaller meeting rooms and a few guestrooms on the second floor. The guest tower is centrally located above with primarily north and south views. All guestrooms (floors 3-10) have their own balconies. The back of the hotel faces the Intracoastal Waterway and has an expansive pool deck and landscaped courtyards as well as a small pier on the water.     •   The exterior finishes consist of decoratively painted concrete with natural coral rock accents on the commercial space facade.     •   The following Guestrooms were inspected in preparation of this report: #929 (std. double), #936 (king), #937 (suite), #1027 (std. king), #1022 suite), #1035 (king corner). All standard rooms are identical, each floor has corner guestrooms suites on SE and NW of tower.     •   The hotel is convenient to the beach and area shopping and dining.     •   This hotel’s primary customer base is 20% business & 80% leisure.     •   Market competitors include The Diplomat.     •   The property will require renovation to update its appearance and meet current Brand Standards. Specific renovation requirements are described in the body of the following report.     •   All areas of the hotel must meet current Brand Standards, including all Life Safety Standards. Professional Architectural, Interior Design and Landscape Design assistance is required during the renovation process of a Six Continents Hotels Brand Hotel. Please submit all plans (drawings), specifications and color boards to Six Continents Hotels, Property Improvement Department for review and approval prior to purchasing or renovation. Any items not formally submitted for approval may require replacement or modification if they do not meet Design Standards. The Licensee is to ensure all areas of the hotel are in complete compliance with local codes and Americans with Disabilities Act (ADA). Owner is required to address federal and local building codes as related to the presence and removal of any asbestos. Owner is required to repair or replace all items and finishes in the hotel that may be damaged during the course of the renovation. Ensure all areas of the hotel are in new condition upon completion of the PIP. Hotel Specifics   Year Built:    1987 Highest Story:    10 Year(s) Renovated:    1999, 2001   1 -------------------------------------------------------------------------------- Parking Spaces:   650 +/-    Swimming Pool Dimensions:    40 x 80    Maximum Depth:    8’   Guestrooms:    No. of Rooms Original # of Rooms    307 Total Rooms    307   Food Service Facility    Palm Court    # of seats    75 Food Service Facility    Pizza/Cafe    # of seats    25 Food Service Facility    Tiki Hut    # of seats    100+ Lounge    Finnegan’s    # of seats    50   Meeting / Banquet Room    Florida Ballroom    # of seats    950 banquet Meeting / Banquet Room    Regency    # of seats    100 banquet Meeting / Banquet Room    Hallandale    # of seats    20 banquet Meeting / Banquet Room    Hollywood Breakout Rooms    # of seats    60 banquet Meeting / Banquet Room    Dania Beach Breakout Room    # of seats    30 banquet Meeting / Banquet Room    Salon 1    # of seats    20 banquet Meeting / Banquet Room    Salon 2    # of seats    30 banquet Meeting / Banquet Room    Salon 3    # of seats    270 banquet Meeting / Banquet Room    Salon 4    # of seats    220 banquet Meeting / Banquet Room    Salon 5    # of seats    60 banquet Meeting / Banquet Room    Salon 6    # of seats    100 banquet Meeting / Banquet Room    Salon 7    # of seats    100 banquet   Fitness Room      yes    X    no    Guest Laundry      yes    X    no    Gift Shop      yes       no    X   HVAC Systems:    Commercial Area    Roof Top Guestroom Building    PTAC   Fire Safety Systems:             Hardwire Smoke    Commercial Area    yes    X    no    Guestrooms    yes    X    no    Guestroom Corridors    yes    X    no Sprinkler System    Commercial Area    yes    X    no    Guestrooms    yes    X    no    Guestroom Corridors    yes    X    no This Product Improvement Plan was developed from an on-site review of the subject hotel on December 12, 2002, by Kathreen F. Walton and Terry Logsdon, Six Continents Hotels, accompanied by Barry Gilliland, Managing Director, Ambassador Hotel.   2 -------------------------------------------------------------------------------- Standards (Brand / Life Safety / ADA)   Brand Standard    THE LICENSEE MUST ENSURE THAT THE PROPERTY COMPLIES WITH ALL BRAND STANDARDS AS NOTED IN THE CURRENT BRAND STANDARDS MANUAL.    Upon completion of the required Property Improvement Plan (PIP) work, the Licensee is responsible for ensuring that the building and building site comply with all applicable building codes, Life Safety codes, Fire Safety requirements, the Americans with Disabilities Act (ADA) and any other applicable codes and ordinances. Life Safety    PRIOR TO ISSUANCE OF THE LICENSE, WRITTEN DOCUMENTATION MUST BE SUBMITTED CERTIFYING THAT THE FIRE SAFETY SYSTEM MEETS OR EXCEEDS BRAND STANDARDS AND THAT THE SYSTEM IF FULLY OPERATIONAL AS OF THAT DATE.    =>     Please note that in some cases the Six Continents Hotels Life Safety Standards are more stringent than local building and /or fire code requirements. Six Continents Hotels, including Life Safety Standards, shall be fully enforced. ADA (Americans with Disabilities Act)    Upon completion of the required Property Improvement Plan (PIP) work, the Licensee is responsible for ensuring that the building and building site comply with the Federal Americans with Disabilities Act (ADA), brand Standards and any other applicable codes and ordinances.    =>     Canadian properties must ensure all areas of the hotel are in complete compliance with local, federal and provincial Canadian handicap accessibility codes and brand Standards.   3 -------------------------------------------------------------------------------- This hotel requires major renovation that affects all areas of the hotel. Exterior façades and architectural detail must be upgraded with full replacement required for windows, doors, railings, etc. All public and guestroom areas of the hotel require a complete renovation to include new FF&E throughout and modifications to the existing layout. A comprehensive design package must be submitted to Six Continents Hotels for review and approval. All replacement materials and structural modifications must be clearly identified and addressed. Professional Architectural, Interior Design and Landscape Design assistance is required during the renovation process of a Six Continents Hotels Brand Hotel. Please submit all plans (drawings), Color boards and specifications for review and approval prior to purchasing or renovation to: Six Continents Hotels Property Improvement Department Three Ravinia Drive, Suite 2900 Atlanta, GA 30346-2149 Any items not formally submitted for approval may require replacement or modification if they do not meet design approval or Brand Standards. PIP Issues Exterior (The exterior requires a complete renovation, work must include but is not limited to the following.)     1. Provide a new upscale porte cochere structure at the main entrance to signify brand change and a heightened sense of arrival. Provide an upgrade texture, pavers or other architectural feature to the drive surface in conjunction with the new entrance refurbishment. Modify curbs and ramps to ensure building is ADA accessible.     2. Repair all structural deficiencies where existing (e.g., cracking concrete, roof leaks, exposed block, mildewed stone, etc.) and provide a new exterior façade and architectural detail to both the commercial and guestroom buildings. Enhance the roofline detail to compliment the overall aesthetic improvements and to conceal rooftop equipment where existing.     3. Replace all entrance doors with new units that meet current standards. Repair or replace all exterior service doors and coordinate color with new exterior improvements. Auxiliary entrance doors that allow access to guestroom corridors must be controlled by electronic locks.     4. Replace all spandrel sections and sliding doors as noted at guestroom balconies.     5. Replace all exterior railing with new railing that meets current code requirements and Six Continents Hotels standards.   4 --------------------------------------------------------------------------------   6. Repair and refinish all sidewalks and steps surrounding building. Ensure primary entrance areas are ADA acceptable.     7. Weed, prune and trim all existing landscape features and fill in where needed to eliminate sparse areas. Remove dead or under-grown foliage and replace with mature foliage. Expand scope of landscape package to address entire site.     8. Level and re-surface and stripe the entire parking lot. Provide ADA spaces as required by Six Continents Hotels and Federal Guidelines. In conjunction with the new parking surface, provide a continuous concrete curb around the property. Ensure illumination meets Six Continents Hotels requirements and that landscape lighting and parking area fixtures are upgraded and upscale in appearance.     9. Provide architectural or landscape screens for all ground level equipment, dumpster enclosures and service areas.     10. Entire pool area must be renovated to meet Crowne Plaza brand and life safety standards. Renovation must include a new 48” pool fence with self-closing/latching gate to restrict access to pool area. Pool area furnishings must be upscale in style and design. (Refer to standards for pool requirements.)     11. Recreational facilities including the courtyard, pool and shuffleboard must be repaired and restored to like new condition; or, eliminated as a feature at the property.     12. The pool side lounge must be fully renovated in conjunction with the pool area refurbishment.     13. All existing signage (identity signage and directional signage) must be removed and all scars repaired from its removal. New primary and directional signage that meets Crowne Plaza requirements must be provided. Lobby / Entrance / Front Desk (This area requires a complete renovation, work must include but is not limited to the following.)     1. Replace and upgrade the vestibule, lobby and lobby corridor floor finishes with new large-scale ceramic or natural stone and CYP carpeting (or better) that meets current Crowne Plaza requirements.     2. Replace and upgrade the overall directional signage package with a package that meets current Crowne Plaza standards.     3. Replace the lighting package throughout with new recessed (i.e., can) ambient fixtures and decorative pieces (e.g., chandeliers, pendants, sconces, etc.) where appropriate.     4. Replace and upgrade the ceiling finish with a new drywall ceiling or a combination of drywall and 2x2 acoustical tile with a tegular edge. A multi-plane ceiling, where possible, is required.     5. Replace all wall finishes with new Type II wall vinyl enhanced by a new architectural millwork package.     6. Replace all lobby area doors with new doors and upscale hardware.     7. Replace and upgrade the lobby seating package to include new sofas, loveseats, lounge chairs, occasional and console tables, etc. with new furnishings in a blend   5 --------------------------------------------------------------------------------        of upholstery fabrics and finishes that compliments the overall design direction of the newly renovated hotel. Seating groupings that encourage guests interaction and that break up the lobby are recommended.     8. Provide a new décor package throughout to include such elements as professionally framed artwork, themed pieces, live plants, architectural millwork, decorative lighting, etc.     9. Replace and upgrade the lobby and lobby corridor public telephone area.     10. Provide an upgraded Bell Man Station and Concierge Desk per requirements.     11. Modify the existing front desk as need to coordinate with the overall improvements; or, replace.     12. Eliminate the use of store fronts in public areas in conjunction with this renovation.     13. Provide a Gift Shop and Business Center per Crowne Plaza standards.     14. Renovate the administrative areas providing new wall and floorcovering and furnishings throughout. In general, these areas must be presentable for guests.   6 -------------------------------------------------------------------------------- Public Restrooms (All three sets of public restrooms require complete renovation, work must include but is not limited to the following.)     1. Modify at least one set of public restrooms to meet full ADA clearance and facility requirements.     2. Replace and upgrade entrance doors and hardware.     3. Repair ceilings as needed and provide either new drywall ceilings or 2x2 architectural ceiling tile per standards.     4. Replace all public restroom wall finishes with new finishes that meet Crowne Plaza standards. A tile or stone wainscot must be provided on all fixture walls.     5. Provide a new lighting package.     6. Replace and upgrade the vanity with a new natural stone or solid surface vanity and skirt. Provide under-mounted china sinks and new ADA compliant hardware in an upscale design. Provide upgraded vanity lighting and decoratively framed mirrors for the vanity area.     7. Provide a new amenity package for public restrooms - ensure recessed or semi-recessed towel/waste units, feminine products dispensers, and soap dispensers are provided in each restroom.     8. Repair or replace damaged toilets and provide new seats.     9. Renovate the break-out meeting room restrooms to meet the standards and requirements of a public restroom.     10. Provide a baby changing station in at least one set of public restrooms.     11. Lighting in public restrooms must be continuous; and, emergency lighting is required in all public restrooms.   7 -------------------------------------------------------------------------------- Food Service (The restaurant requires complete renovation, work must include but is not limited to the following.)     1. Provide a new professionally designed entrance to the restaurant.     2. Provide a new multi-plane drywall ceiling; or, incorporate a blend of drywall and 2x2 ceiling tiles.     3. Replace and upgrade wall finishes with new Type II wall vinyl supplemented by a suitable millwork package.     4. Replace floor finishes with new CYP carpet, large-scale stone, commercial quality wood, or a combination flooring package.     5. Provide decor appropriate to the new restaurant theme and overall design including upscale elements and features.     6. Replace and upgrade the overall lighting package with dimmer capable fixtures.     7. Replace and upgrade all tables and bases.     8. Replace and upgrade all chairs.     9. Provide a structural screen to shield wait stations and equipment.     10. Provide a music system.     11. Clean or replace HVAC grilles.     12. Modify the concept of the Pizza Café with a new facility that provides an upscale image. This area must be completely refurbished to include an all-new FF&E package.     13. Modify sunken areas as needed to ensure restaurant is fully ADA compliant.   8 -------------------------------------------------------------------------------- Lounge (The Lounge requires a complete renovation, work must include but is not limited to the following.)     1. Replace and upgrade lounge entrance doors with new upgraded doors and hardware.     2. Repair and paint the lounge ceiling, clean and restore grilles in conjunction with this work.     3. Replace and upgrade wall finishes (see restaurant requirements).     4. Replace and upgrade floor finishes (see restaurant requirements).     5. Replace and upgrade the overall lighting package with dimmer capable fixtures.     6. Provide a décor package appropriate to the design and theme.     7. Replace and upgrade all tables and bases.     8. Replace and upgrade all chairs and bar stools.     9. Provide structural screens to shield wait stations and work areas.     10. Replace and upgrade bar top and façade with new stone top and millwork, metal or stone façade. Repair or replace back bar equipment and finishes where damage or wear is evident.     11. Provide armoires or custom cabinets for all televisions.     12. Relocate vending machines to an appropriate vending alcove.   9 -------------------------------------------------------------------------------- Meeting / Banquet Rooms /Pre-Function (All meeting spaces require a complete renovation, work must include but is not limited to the following.)     1. Replace all doors and hardware in Pre-Function Area and Meeting Rooms. Ensure meeting rooms doors have viewers.     2. Replace and upgrade signage to coordinate with the new overall directional signage package.     3. Wherever possible in pre-function areas and meeting rooms, provide a multi-plane drywall ceiling. When ceiling tile is installed (i.e., in meeting rooms), provide 2x2 architectural ceiling tile per standards. Existing drywall ceilings must be repaired and restore to like new condition.     4. Replace and upgrade the Pre-Function Area lighting package.     5. Provide new furniture and appointments appropriate to the pre-function area.     6. Replace and upgrade all wall covering with new Type II wall vinyl and appropriate trim. Reupholster partition walls in meeting rooms. Renovate columns in meeting rooms in conjunction with wall refurbishment.     7. Provide alcoves for folding partitions.     8. Replace and upgrade carpet in Pre-Function and Meeting Rooms with new CYP carpet (or better) per standards.     9. Replace damaged banquet tables.     10. Replace and upgrade stack chairs.     11. Replace and upgrade the meeting room lighting package.     12. Provide new drapery treatments that provide full black-out capability.     13. Provide an executive upscale Boardroom per standards.   10 -------------------------------------------------------------------------------- Fitness Room (The Fitness Room requires a complete renovation, work must include but is not limited to the following.)     1. Ensure electronic lock meets standards. Provide a view window into room per standards.     2. Repair ceiling and paint. Restore HVAC grilles in this process. Upgrade lighting in this room.     3. Replace wall finish with new wall vinyl. One full wall (floor to ceiling) must be fully mirrored.     4. Replace and upgrade carpet.     5. Provide exercise equipment that meets Crowne Plaza Standards. Ten pieces of equipment are required - refer to current standards for full requirements.     6. Provide a house phone that rings to the front desk.     7. Provide a water fountain per standards.     8. Provide upscale towels, hamper and cabinets per standards.     9. Provide an electric clock.     10. Provide a wall-mounted television per standards.   11 -------------------------------------------------------------------------------- Kitchen The kitchen requires renovation address conditional and life safety issues. All back-of-the-house work and service areas must be in good working order, clean and provide a safe, upbeat working environment. Renovation to this area must include refurbishing and restoring all employee areas and modifying the existing life safety equipment as needed to meet Six Continents Hotels requirements. Employee restrooms and break area must be included with this renovation.   12 -------------------------------------------------------------------------------- Interior Guestroom Corridors (Guestroom corridors require a complete renovation, work must include but is not limited to the following.)     1. Provide either lever-style or panic hardware for all doors leading to a stairwell.     2. Restrict access on the exterior elevator so that non-registered guests do not have easy access to guestroom floors via an electronic lock.     3. Replace and upgrade the ceiling in the exterior elevator; and, replace ceiling in main cabs.     4. Upgrade and enhance elevator lighting.     5. Replace and upgrade all elevator cab walls.     6. Provide new floor finishes within elevators.     7. Repair doors and restore to like new condition on all cabs.     8. Ensure elevator(s) control panels meet ADA requirements.     9. Upgrade the ceiling at the main bank of elevators to signify access to elevators. Repair and refinish corridor ceiling to coordinate with improvements.     10. Replace and upgrade carpet in corridors and at elevator landings.     11. Upgrade corridor lighting package - sconces are recommended.     12. Conceal all exposed conduit and wiring within architectural or design features.     13. Replace and upgrade signage.     14. Per Six Continents Hotels requirements, provide smoke detectors along corridors no further apart than every 40’ O.C.     15. Provide appropriate window treatments for corridor windows.     16. Repair and refinish guestroom entrance doors and frames.     17. Replace padlocks with keyed locks and repair all scars and damage on service doors and frames. Paint to coordinate with overall improvements.     18. Clean and paint (or replace) all utility grilles.     19. Provide upgraded décor and finishes to the Club Level Floor and Corridor to differentiate this floor from others. Access to the club floor must be controlled by electronic access.     20. If a Club Floor is provided, a Club Lounge must be included. Refer to standards for specific FF&E requirements.     21. Renovate vending alcoves to coordinate with corridors.     22. Clean and restore vending area flooring.     23. Replace ill-functioning vending equipment as needed. Ensure all equipment has GFI back-up.     24. Provide continuous lighting in the vending alcoves.     25. A Guest Laundry is not required for a Crowne Plaza Hotel and was not inspected. If provided, this area must be renovated to Crowne Plaza standards with upgraded finishes and new equipment. Guest laundries, when provided, cannot have exposed wire mold, conduit or pipes.     26. Clean and paint stairwell ceilings and walls.     27. Replace handrails with new code compliant handrails.     28. Provide lenses for all light fixtures.   13 --------------------------------------------------------------------------------   29. Provide emergency lighting within the stairwells and 6” reflective floor numbers on each floor. Signage must be visible when the stairwell doors is open. Guestrooms (Model guestrooms and baths are well-designed and acceptable aesthetically; however, specifications must be provided to ensure Crowne Plaza performance standards are met. Guestrooms require a complete renovation, work must include but is not limited to the following.)     1. As previously noted, repair, sand and paint guestroom doors and frames. Provide a new ADA compliant signage package in conjunction with this refurbishment. And, replace door hardware where corroded or damaged.     2. Repair and paint connecting doors as needed and ensure connecting door hardware meets standards.     3. Provide closet doors for all guestrooms. Upgrade shelving and rods.     4. Repair guestroom ceilings where damaged and paint.     5. Replace and upgrade all carpet.     6. Replace and upgrade all window treatments.     7. Replace and upgrade all bedcovering with new coverlets or duvets with dusters.     8. Replace and upgrade linens and pillows.     9. Replace and upgrade all guestroom and suite wall finishes with new Type I vinyl or acrylic based texture. A supplementary millwork package is strongly encouraged.     10. Replace and upgrade all guestroom and suite lighting including all entrance lighting, desk lamps, occasional lamps, floor lamps, wall-mounted lamps and table lamps.     11. Replace and upgrade the guestroom seating package in all rooms and suites including new lounge chairs and ottomans, executive style ergonomic desk chairs, sofas, occasional seating, side chairs, dining chairs, etc.     12. Replace and upgrade all guestroom and suite casegoods including all armoires, dressers, nightstands, occasional tables, activity tables, desks, etc. Refer to standards for specific requirements.     13. Provide wall-mounted thermostats for the HVAC units. A new 4-pipe system is recommended for the guestroom areas of the hotel.     14. Ensure all televisions are in good working order and are 25” minimum.     15. Provide 2-touch tone telephones in every room per standards.     16. Provide upscale finishes for mini-bars (i.e., cabinetry, stone counters, etc.) and ensure equipment is in good working order.     17. Replace and upgrade all bedsets to meet Crowne Plaza standards.     18. Club Level Guestrooms, if provided, must feature upgraded finishes and amenities to differentiate them from typical guestrooms.     19. Provide natural stone or solid surface counters for all counters and cabinet tops. Provide upgraded faucetry at wet bars and sinks.     20. Renovate all parlors with new upscale furnishings and finishes.   14 --------------------------------------------------------------------------------   21. ADA guideline and Six Continents Hotels requires 12 accessible guestrooms for a hotel with 307 room (8 standard accessible rooms plus 4 with roll-in shower units). Rooms must be distributed among the various available room types. An additional 8 standard rooms (i.e., non-ADA) must be equipped for guests with hearing disabilities. Guest Bathrooms Guestrooms require a complete renovation, work must include but is not limited to the following.)     1. Repair and paint doors and frames to coordinate with overall improvements. Replace hardware where damaged or corroded. Provide upscale double robe hooks per standards.     2. Repair ceilings where damaged and paint to provide a consistent finish.     3. Replace and upgrade floor tile with new ceramic tile and base.     4. Replace and upgrade all finishes with new wall vinyl.     5. Replace general lighting with new recessed lighting.     6. Repair or replace toilets as needed. Provide new seats and lids.     7. Replace tissue dispensers with new dual role units.     8. Repair exhaust systems and clean and paint grilles.     9. Replace and upgrade vanities with new stone or solid surface counters and skirts with under-mounted china sinks and upgraded faucetry sets.     10. Replace and upgrade vanity lighting with decorative sconces or other upscale fixture.     11. Provide either a towel bar/shelf unit or towel cubbies recessed in the vanity skirts.     12. Recondition tubs, replacing any severely worn or chipped units.     13. Replace and upgrade tub enclosures with new 6x6 or larger tile, or new 3-panel solid surface or stone walls.     14. Replace and upgrade tub hardware with new upscale central-mixer sets.     15. Provide new recessed soap dishes.     16. Provide grab bars at the entrance side of the tub.     17. Replace and upgrade the shower curtain and rod. The new bowed rod with the ‘peek-a-boo’ curtain is recommended. Back of House The back of house areas must be renovated to address conditional and life safety requirements. Work spaces must be clean and provide adequate storage to keep them clutter free.   15 -------------------------------------------------------------------------------- EXHIBIT C List of Acceptable Franchisors Any franchise that is categorized as upper scale or luxury by Smith Travel Research.   20 -------------------------------------------------------------------------------- EXHIBIT D Hotel Signage   21 -------------------------------------------------------------------------------- LOGO [g79817img03.jpg] (LAYOUT @ EAST ELEVATION) -------------------------------------------------------------------------------- CROWNE PLAZA       145.56 SQ.FT.    LOGO LAYOUT          TOTAL SQ.FT. = 145.56 SQ.FT.                                                                    END VIEW    150.0 SQ.FT. MAX PER CODE    LOGO [g79817img04.jpg] WEEDED OUT. FLAG & RING TO HAVE #3630-131 METALLIC GOLD VINYL APPLIED TO 1st SURFACE.   •   INTERNALLY-ILLUMINATED w/ HIGH-OUTPUT FLUORESCENT LAMPS.   •   LOGO TO BE CLIP-MOUNTED TO BUILDING WALL. LETTERS:   •   ALUMINUM RETURNS PAINTED AKZO SIGN7988 GOLD, HIGH-GLOSS FINISH.   •   RETAINERS PAINTED AKZO SIGN7988 GOLD, HIGH-GLOSS FINISH.   •   CLEAR LEXAN FACES w/ #3630-53 CARDINAL RED VINYL APPLIED TO 1st SURFACE.   •   RED L.E.D. ILLUMINATION.   •   REMOTE POWER SUPPLIES.   •   LETTERS TO BE CLIP-MOUNTED TO BUILDING WALL. LOGO [g79817img05.jpg] LAYOUT @ SOUTH ELEVATION -------------------------------------------------------------------------------- CROWNE PLAZA®       145.56 SQ.FT.    LOGO LAYOUT          TOTAL SQ.FT. = 145.56 SQ.FT.                                                                    END VIEW    150.0 SQ.FT. MAX PER CODE    LOGO [g79817img04.jpg] LOGO [g79817img06.jpg] LAYOUT @ NORTH ELEVATION   •   WEEDED OUT FLAG & RING TO HAVE #3630-131 METALLIC GOLD VINYL APPLIED TO 1st SURFACE.   •   INTERNALLY-ILLUMINATED w/ HIGH-OUTPUT FLUORESCENT LAMPS.   •   LOGO TO BE CLIP-MOUNTED TO BUILDING WALL. LETTERS:   •   ALUMINUM RETURNS PAINTED AKZO SIGN7988 GOLD, HIGH-GLOSS FINISH.   •   RETAINERS PAINTED AKZO SIGN7988 GOLD, HIGH-GLOSS FINISH.   •   CLEAR LEXAN FACES w/ #3630-53 CARDINAL RED VINYL APPLIED TO 1st SURFACE.   •   RED L.E.D. ILLUMINATION.   •   REMOTE POWER SUPPLIES.   •   LETTERS TO BE CLIP-MOUNTED TO BUILDING WALL. -------------------------------------------------------------------------------- LOGO [g79817img07.jpg] LAYOUT @ WEST ELEVATION -------------------------------------------------------------------------------- LOGO [g79817img08.jpg] 15.52 SQ.FT. CROWNE PLAZA® 59.54 SQ.FT. LOGO [g79817img09.jpg] SIGN SPECIFICATIONS: LOGO:   •   ALUMINUM CABINET & RETAINERS PAINTED AKZO SIGN7988 GOLD, HIGH-GLOSS FINISH.   •   WHITE PANAFLEX BLEED FACE w/ SCOTCHCAL VTV-12371 RED OPAQUE VINYL BACKGROUND APPLIED TO 1st SURFACE. FLAG & RING TO BE WEEDED OUT. FLAG & RING TO HAVE #3630-131 METALLIC GOLD VINYL APPLIED TO 1st SURFACE.   •   INTERNALLY-ILLUMINATED w/ HIGH-OUTPUT FLUORESCENT LAMPS.   •   LOGO TO BE CLIP-MOUNTED TO BUILDING WALL. LETTERS:   •   ALUMINUM RETURNS PAINTED AKZO SIGN7988 GOLD, HIGH-GLOSS FINISH.   •   RETAINERS PAINTED AKZO SIGN7988 GOLD, HIGH-GLOSS FINISH.   •   CLEAR LEXAN FACES w/ #3630-53 CARDINAL RED VINYL APPLIED TO 1st SURFACE.   •   RED L.E.D. ILLUMINATION.   •   REMOTE POWER SUPPLIES.   •   LETTERS TO BE CLIP-MOUNTED TO BUILDING WALL. LOGO [g79817img10.jpg] -------------------------------------------------------------------------------- EXHIBIT E Franchisor Indemnity Agreement   22 -------------------------------------------------------------------------------- INDEMNIFICATION AGREEMENT THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is made this __ day of _____________, 2006, by and between MCZ/Centrum Florida XIX, L.L.C., a Delaware limited liability company (“Indemnitor”), and Holiday Hospitality Franchising, Inc., a Delaware corporation (“Licensor”). W I T N E S S E T H : WHEREAS, as an inducement for Licensor to execute concurrently herewith that certain License Agreement between Licensor and MHI Hospitality TRS, LLC, a Delaware limited liability company (“Licensee”), granting Licensee the right to operate a hotel to be located at 4000 South Ocean Drive, Hollywood, Florida as a Crowne Plaza® branded hotel (as it may be amended from time to time, the “License Agreement”), Licensor required the execution and delivery of (a) this Agreement, and (b) a guaranty by Arthur Slaven, Michael Lerner, and John McLinden (“Guarantors”), principals of Indemnitor, in favor of the Indemnified Parties (as defined below), guarantying the payment and performance by Indemnitor of all of its obligations set forth in this Agreement (the “Guaranty”); WHEREAS, Indemnitor has agreed to indemnify and hold harmless Licensor and its Affiliates and its and their respective members, managers, officers, directors, employees, agents, successors and assigns (each, including Licensor, an “Indemnified Party” and collectively the “Indemnified Parties”) with respect to the matters and subject to the terms and conditions set forth below. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, Indemnitors and Licensor agree as follows (capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them in the License Agreement): 1. Recitals. The foregoing recitals are true and correct and incorporated by this reference. 2. Representations. Acknowledging that the Indemnified Parties are relying on the representations, warranties, covenants, and other agreements contained in this Agreement, Indemnitor represents, warrants and covenants as follows: (a) Management of Condominium Association. Indemnitor will cause the Condominium Association to enter into, prior to the Opening Date, a valid, enforceable management agreement with Licensee in which the Condominium Association retains Licensee to manage all of the common elements of the Condominium during the License Term in accordance with the System standards, subject to the termination rights provided under applicable laws, which Management Agreement shall be in the form of Exhibit “A” attached hereto.   1 -------------------------------------------------------------------------------- (b) Management of Common Properties. Indemnitor will cause the Master Association to enter into a valid, enforceable management agreement with Licensee giving Licensee the exclusive right to manage the pool adjacent to the Condominium (the “Pool”), the walkway between the Pool and Sian Resort Residence I Condominium (the “Hotel Condominium”), the service road leading to South Ocean Drive and the Hotel Condominium and the turn around to be located at the end of the service road (the “Service Road”), the parking facility on the West side of the South Ocean Drive and the related landscaping along the Service Road and such walkway during the License Term, in the form of Exhibit “B” attached hereto. (c) Beach Access. Subject to the terms and provisions of the Master Declaration, all members of the Master Association and their guests and invitees have access over the Common Properties to the beach and the Pool, and the right to utilize same as provided in the Master Declaration. Indemnitor has caused an easement to be recorded in the Public Records of Broward County, Florida in the form of Exhibit “C” attached hereto (the “Easement Agreement”). (d) Condominium Filing. Indemnitor has prepared and filed the Condominium Documents with the Division of Florida Land Sales, Condominiums and Mobile Homes (the “Division”) and has addressed any deficiencies cited by the Division in a manner satisfactory to the Division. (e) To the best of its Knowledge, the Indemnitor and its parent company, subsidiaries, affiliates, managers, members, officers, directors, employees, agents and contractors, including brokers and sales agents, and MCZ/Centrum Florida VI Owner, L.L.C., an Illinois limited liability company (“MCZ/Centrum VI”) and its parent company, subsidiaries, affiliates, managers, members, officers, directors, employees, agents and contractors, including brokers and sales agents, have complied with all federal securities laws including, without limitation, the Securities Act of 1933, as amended, as such laws have been interpreted by the Securities and Exchange Commission (“SEC”) “no action” letters, and all state securities laws (collectively the federal and state securities laws shall be referred to as the “Securities Laws”) applicable to the promoting, marketing, offering for sale, lease or transfer of the Condominium Units, the Condominium, the Community and/or any rental management program with respect to the Condominium Units. (f) To the best of its Knowledge, Indemnitor and its parent company, subsidiaries, affiliates, managers, members, officers, directors, employees, agents and contractors, including brokers and sales agents, and MCZ/Centrum VI and its parent company, subsidiaries, affiliates, managers, members, officers, directors, employees, agents and contractors, including brokers and sales agents, have complied with all laws applicable to the promoting, marketing, offering for sale, lease or transfer of the Condominium Units, including, without limitation, in accordance with Section 718 of the Florida Statutes (Florida Condominium Act) and the federal Interstate Land Sales Act. (g) Indemnitor has no Knowledge of any violation by any Person of the Securities Laws or other laws applicable to the promoting, marketing, offering for sale, lease or transfer of the Condominium Units, Condominium, Community and/or any rental management program with respect to the Condominium Units.   2 -------------------------------------------------------------------------------- For purposes of this Agreement, the term “Knowledge” shall mean the actual current knowledge of Arthur Slaven, Michael Lerner, John McLinden and Brian Niven, or any of them. 3. Indemnity. Indemnitor hereby agrees to indemnify each of the Indemnified Parties and hold each of them harmless against, and promptly reimburse each of them upon demand for, all costs, liabilities and payments of money (including, but not limited to, fines, damages, legal fees, expenses and court costs through all trial and appellate levels) incurred or suffered by the Indemnified Party, excluding consequential damages and lost profits of any such Indemnified Party, by reason of any claim, demand, tax, penalty or judicial or administrative investigation or proceeding, whenever asserted or filed, including, but not limited to, claims brought by the SEC, the State of Florida securities regulators, the Division of Florida Land Sales, and any other regulatory authority (even where negligence of any Indemnified Party is alleged) arising out of or related to: (a) the development, construction, promotion, marketing, offer, sale, lease or transfer of any Condominium Unit or any other part of the Condominium or Community; and/or (b) the development, promotion, marketing, or offering of the (i) Rental Management Program or (ii) any Rental Agreement; and/or (c) any violation or alleged violation of any of the Securities Laws by an Indemnitor or any of its Affiliates or the agent or contractor of any of same arising in connection with or relating to (i) any sales or offers of sales of any of the Condominium Units (or any other portion of the Community), or (ii) the Rental Management Program; and/or (d) the inaccuracy or breach by an Indemnitor of any representation, warranty, covenant or agreement made in this Agreement; and/or (e) any untrue statement or alleged untrue statement of material fact contained in any of the Condominium Documents, as the same may be amended or restated, or in any of the solicitation, promotion, sales, rental, marketing or other documents, materials, procedures or practices used by Indemnitor or any of its Affiliates, or any agents, contractors, employees, or other Persons associated with Indemnitor who are involved in the solicitation, promotion, sale, rental or marketing of any of the Condominium Units (or any other portion of the Community), or arising out of or based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading. These indemnification and hold harmless provisions shall survive the termination of the License Agreement, shall be continuing and irrevocable and shall continue in full force until any and all such claims, losses, actions, demands and liabilities against the Indemnified Parties have been satisfied in full. 4. Guaranty. Indemnitor shall cause the Guarantors to execute and deliver the Guaranty simultaneously with execution of this Agreement.   3 -------------------------------------------------------------------------------- 5. Amendments. The provisions of this Agreement may not be amended, supplemented, waived or changed orally, but only by a writing signed by all parties to this Agreement and making specific reference to this Agreement. 6. Binding Effect. All of the terms and provisions of this Agreement shall be binding upon, inure to the benefit of, and be enforceable by the parties and their respective legal representatives, successors and permitted assigns. 7. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Confirmation of execution by electronic transmission of a facsimile signature page shall be binding upon any party so confirming. 8. Entire Agreement. This Agreement represents the entire understanding and agreement between the parties with respect to the subject matter of this Agreement, and supersedes all other negotiations, understandings and representations (if any), whether oral or written, made by and between such parties regarding the subject matter of this Agreement. 9. Governing Law. This Agreement and all transactions contemplated by this Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of Georgia without regard to principles of conflicts of laws. 10. Jurisdiction and Venue. The parties acknowledge that a substantial portion of the negotiations and anticipated performance of this Agreement occurred or shall occur in DeKalb County, Georgia. Any civil action or legal proceeding arising out of or relating to this Agreement shall be brought in the courts of record (federal, superior, or state) situated in the County of DeKalb, State of Georgia. Each party consents to the jurisdiction of such Georgia court in any such civil action or legal proceeding and waives any objection to the laying of venue of any such civil action or legal proceeding in such Georgia court. Service of any court paper may be effected on any party in any manner permitted under applicable laws, rules of procedure or local rules. 11. Severability. If any provision of this Agreement is held to be unenforceable, void or voidable as being contrary to the law or public policy of the United States or any other jurisdiction entitled to exercise authority hereunder, neither the legality, validity or enforceability of the remaining provisions of this Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. If any provision of this Agreement may be construed in two or more ways, one of which would render the provision invalid or otherwise voidable or unenforceable and another of which would render the provision valid and enforceable, such provision shall have the meaning which renders it valid and enforceable. 12. Waivers. The failure or delay of any Indemnified Party at any time to require performance by the Indemnitor of any provision of this Agreement, even if known, shall not affect the right of such Indemnified Party or any other Indemnified Party to require performance of that provision or to exercise any right, power or remedy under this Agreement. Any waiver by any Indemnified Party of any breach of any provision of this Agreement should not be   4 -------------------------------------------------------------------------------- construed as a waiver of any continuing or succeeding breach of such provision, a waiver of the provision itself, or a waiver of any right, power or remedy under this Agreement. No notice to or demand on Indemnitor in any circumstance shall, of itself, entitle the Indemnitor to any other or further notice or demand in similar or other circumstances. 13. General Representations. Indemnitor represents and warrants to the Indemnified Parties that: (a) there are no agreements to which Indemnitor is a party or binding on Indemnitor that are in conflict with this Agreement, (b) there are no actions or proceedings pending or, to Indemnitor’s Knowledge, threatened, against Indemnitor that challenge or impair Indemnitor’s ability to execute or perform its obligations under this Agreement, and (c) Indemnitor and the person signing this Agreement on behalf of Indemnitor has obtained all necessary approvals and the execution, delivery and performance of this Agreement will not violate, create a default under or breach any charter, bylaws, agreement or other contract, license, permit, order or decree to which Indemnitor is a party or to which it is subject or to which the Hotel is subject. I Notices. Notices will be effective hereunder when and only when they are reduced to writing and delivered personally or mailed by Federal Express or comparable overnight or express delivery service, by documented facsimile transmission or by certified mail to the appropriate party at its address, hereinafter set forth, or to such person and at such address as may subsequently be designated by one party to the other.   Indemnitor:    MCZ/Centrum Florida XIX, L.L.C.    c/o MCZ Development, Inc.    1555 N. Sheffield Avenue    Chicago, Illinois 60622    Attn: Brian Niven and Michael Lerner    Telephone: 312-573-1122    Fax: 312-573-1028 Licensor:    Holiday Hospitality Franchising, Inc.    Three Ravinia Drive, Suite 100    Atlanta, Georgia 30346    Attn: Vice President, Franchise Administration    Telephone: 770-604-2135    Fax: 770-604-8895 Licensee:    MHI Hospitality TRS, LLC    c/o: Andrew M. Sims    4801 Courthouse Street, Suite 201    Williamsburg, VA 23188    Attn: Andrew M. Sims    Telephone: 757-564-5684    Fax: 757-564-8801 [SIGNATURE PAGE FOLLOWS]   5 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as of this      day of                         , 2006.   Indemnitors     Licensor MCZ/Centrum Florida XIX, L.L.C., a Delaware limited liability company     Holiday Hospitality Franchising, Inc., a Delaware corporation By:          By:      Name:          Name:      Title:          Title:      Witness:          Attest:        6 -------------------------------------------------------------------------------- EXHIBIT F Franchise Indemnity Guaranty   23 -------------------------------------------------------------------------------- GUARANTY THIS GUARANTY (this “Guaranty”) is made and given as of                         , 2006 by Michael Lerner, Arthur Slaven, and John McLinden (each a “Guarantor”; and collectively, the “Guarantors”) for the benefit of Holiday Hospitality Franchising, Inc., a Delaware corporation (“Licensor”), and its parent company, and each of their respective affiliates, managers, members, officers, directors, employees, agents, successors and assigns (each, including Licensor, an “Indemnified Party”; and collectively, the “Indemnified Parties”). W I T N E S S E T H : WHEREAS, as an inducement for Licensor to execute concurrently herewith that certain License Agreement between MHI Hospitality TRS, LLC (“Licensee”) and Licensor for the Crowne Plaza® branded hotel (the “Hotel”) to be located at 4000 South Ocean Drive, Hollywood, Florida (the “License Agreement”), Licensor required the execution of (a) that certain Indemnification Agreement dated concurrently herewith between MCZ/Centrum Florida XIX, L.L.C., a Delaware limited liability company (the “Indemnitor”) and the Licensor (the “Indemnification Agreement”), and (b) this Guaranty; WHEREAS, pursuant to the Indemnification Agreement, the Indemnitor has agreed to indemnify and hold harmless each of the Indemnified Parties with respect to the matters and subject to the terms and conditions set forth in the Indemnification Agreement; and WHEREAS, pursuant to this Guaranty, the Guarantors (jointly and severally) guaranty Indemnitor’s obligations with respect to the Indemnification Agreement subject to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, the Guarantors (jointly and severally) agree as follows: 1. Recitals. The foregoing recitals are true and correct and incorporated by this reference. 2. Guaranty. 2.1 Subject to the limitation set forth in Section 2.2 below, the Guarantors, jointly and severally, hereby irrevocably and unconditionally (a) guarantee, warrant and represent to each of the Indemnified Parties that all of the Indemnitor’s warranties and representations in the Indemnification Agreement are true, complete and correct in all material respects, and (b) guarantee that all of the obligations, covenants, agreements and indemnities of Indemnitor under the Indemnification Agreement will be punctually and fully paid and performed in strict accordance with the terms and conditions of the Indemnification Agreement and this Guaranty (a and b are collectively the “Guaranteed Obligations”). -------------------------------------------------------------------------------- 2.2 Notwithstanding any provision of this Guaranty to the contrary, the liability of Guarantors under this Guaranty and under the joinder executed by Guarantors to that Third Amendment dated as of August 1, 2006 by and between Indemnitor and MHI Hollywood, LLC, a Delaware limited liability company shall not exceed an aggregate amount of Five Million Dollars ($5,000,000). 2.3 This Guaranty shall be continuing, irrevocable and remain in full force and effect from the date of execution of this Guaranty, until any and all statutes of limitation for any cause of actions, claims or other legal or administrative proceedings with respect to any matter giving rise to a Guaranteed Obligation shall have expired, and thereafter for a sufficient period of time as is necessary or appropriate (as determined by Licensor in its sole and absolute discretion) to finally resolve and satisfy any claims, actions, demands, proceedings and liabilities against the Indemnified Parties brought during such period and to satisfy all of the Guaranteed Obligations. 2.4 Upon the failure of Indemnitor to punctually and fully pay and/or perform any of the obligations, covenants, agreements and/or indemnities of Indemnitor arising under the Indemnification Agreement, and upon delivery of written notice from Licensor, the Guarantors will immediately perform the Guaranteed Obligations. Without affecting the obligations of the Guarantors under this Guaranty, Licensor may without notice to the Guarantors extend, modify or release any indebtedness or obligation of Indemnitor or any of the Guarantors, or settle, adjust or compromise any claims against the Indemnitor or any of the Guarantors. The Guarantors waive notice of amendment of the Indemnification Agreement and notice of presentment and demand for payment and/or performance under the Indemnity Agreement. 2.5 This Guaranty constitutes a guaranty of payment and performance and not of collection, and each of the Guarantors specifically waives any obligation of the Indemnified Parties to proceed against Indemnitor for any money or property held by Indemnitor or by any other person or entity as collateral security, by way of set off or otherwise. The Guarantors further agree that this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time payment of any of the Guaranteed Obligations is rescinded or must otherwise be restored or returned by any of the Indemnified Parties upon the insolvency, bankruptcy or reorganization of any of the Guarantors, all as though such payment had not been made. 2.6 The obligations of Guarantors hereunder shall be absolute and primary and in no way contingent, and shall be complete and binding as to Guarantors upon the execution of this Guaranty, and shall be subject to no conditions precedent. 3. Representations. Each Guarantor represents and warrants to each of the Indemnified Parties that: (a) there are no agreements to which he is a party or binding on him that are in conflict with this Guaranty, (b) there are no actions or proceedings pending or, to such Guarantor’s knowledge, threatened, against such Guarantor that challenge or impair his ability to execute or perform his obligations under this Guaranty, and (c) Guarantor’s execution, delivery and performance of this Guaranty will not violate, create a default under or breach any agreement or other contract, license, permit, order or decree to which he is a party or to which he is subject or to which the Hotel is subject.   2 -------------------------------------------------------------------------------- 4. Continuing Guaranty; Transfer. This Guaranty is a continuing guaranty and shall be binding upon each Guarantor and their respective heirs, administrators, executors, successors and assigns, who shall be jointly and severally liable hereunder in accordance with the terms hereof; provided, however, Guarantors may not assign any of their rights and obligations hereunder without the prior written consent of Licensor. Notwithstanding the foregoing, upon the death of an individual Guarantor, the estate of such Guarantor will be bound by this Guaranty, and the obligations of the other Guarantors will continue in full force and effect. This Guaranty shall inure to the benefit of and be enforceable by each of the Indemnified Parties and their respective heirs, administrators, executors, successors and assigns. 5. Reimbursement, Subrogation, Etc. The Guarantors each covenant and agree that they will not enforce or otherwise exercise any rights of reimbursement, subrogation, contribution or other similar rights against the Indemnitor with respect to the Guaranteed Obligations prior to termination or expiration of, and payment in full of all amounts then due and owing under the Indemnification Agreement. 6. Notices. Notices will be effective hereunder when and only when they are reduced to writing and delivered personally or mailed by Federal Express or comparable overnight or express delivery service, by documented facsimile transmission or by certified mail to the appropriate party at its address, hereinafter set forth, or to such person and at such address as may subsequently be designated by one party to the other. To Licensor and Indemnified Parties: Holiday Hospitality Franchising, Inc. Three Ravinia Drive, Suite 100 Atlanta, Georgia 30346 Attn: Vice President, Franchise Administration Phone: 770-604-2135 Fax: To Guarantors: Michael Lerner c/o MCZ Development 1555 North Sheffield Chicago, IL   60622 Phone: (312) 573-1122 Fax: (312) 573-1028 John McLinden c/o Centrum Properties, Inc. 225 W. Hubard Street 4th Floor Chicago, IL   60610 Phone: (312) 832-2500 Fax: 312-832-2525   3 -------------------------------------------------------------------------------- Arthur Slaven c/o Centrum Properties, Inc. 225 W. Hubard Street 4th Floor Chicago, IL 60610 Phone: (312) 832-2500 Fax: 312-832-2525 7. Governing Law. This Guaranty and the obligations provided for hereunder shall be governed and construed in all respects by the internal laws and decisions (except any conflicts of law provisions) of the State of Georgia, including all matters of construction, validity, enforceability and performance. 8. Venue and Jurisdiction. To the extent permitted by law, the Guarantors each (i) consent and submit, at Licensor’s election and without limiting the Indemnified Parties’ rights to commence an action in any other jurisdiction, to the personal jurisdiction and venue of any courts of record (federal, superior, or state) situated in the County of DeKalb, State of Georgia. Each party consents to the jurisdiction of such Georgia court in any such civil action or legal proceeding and waives any objection to the laying of venue of any such civil action or legal proceeding in such Georgia court. Service of any court paper may be effected on any party in any manner permitted under applicable laws, rules of procedure or local rules. 9. Severability. If any provision of this Agreement is held to be unenforceable, void or voidable as being contrary to the law or public policy of the United States or any other jurisdiction entitled to exercise authority hereunder, neither the legality, validity or enforceability of the remaining provisions of this Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. If any provision of this Agreement may be construed in two or more ways, one of which would render the provision invalid or otherwise voidable or unenforceable and another of which would render the provision valid and enforceable, such provision shall have the meaning which renders it valid and enforceable. 10. Remedies; Costs of Enforcement. Upon any breach or default with respect to any of Guarantors’ obligations, covenants, agreements, warranties or representations under this Guaranty, each of the Indemnified Parties shall be entitled to any and all remedies available at law or in equity subject to the limitation of liability set forth in Section 2.2 above. In addition to all other remedies available, the Guarantors each agree to pay the Indemnified Parties, subject to the limitations contained in Section 2.2, all expenses (including, without limitation, all attorneys’ fees, court costs, and all fees, taxes, costs and expenses incident to arbitration, appellate, bankruptcy and post judgment proceedings), incurred by any of the Indemnified Parties, to remedy any defaults of or enforce any rights under this Guaranty or the Indemnification Agreement, or to collect any amounts due under this Guaranty or the Indemnification Agreement. Attorneys’ fees shall include, without limitation, paralegal fees, investigative fees, administrative costs, sales and use taxes and all other charges billed by the attorney to the prevailing party (including any fees and costs associated with collecting such amounts). No remedy herein conferred upon the Indemnified Parties is intended to be exclusive of any other   4 -------------------------------------------------------------------------------- remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. 11. Entire Agreement. This Guaranty represents the entire understanding and agreement between the parties with respect to the subject matter of this Guaranty, and supersedes all other negotiations, understandings and representations (if any), whether oral or written, made by and between such parties regarding the subject matter of this Guaranty. 12. Waivers. The failure or delay of any Indemnified Party at any time to require performance by any of the Guarantors of any provision of this Guaranty, even if known, shall not affect the right of such Indemnified Party to require performance of that provision or to exercise any right, power or remedy under this Guaranty. Any waiver by any Indemnified Party of any breach of any provision of this Guaranty should not be construed as a waiver of any continuing or succeeding breach of such provision, a waiver of the provision itself, or a waiver of any right, power or remedy under this Guaranty. No notice to or demand on any Guarantor in any circumstance shall, of itself, entitle any Guarantor to any other or further notice or demand in similar or other circumstances. 13. Counterparts. This Guaranty may be executed in one or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Confirmation of execution by electronic transmission of a facsimile signature page shall be binding upon any party so confirming. 14. Amendments. The provisions of this Guaranty may not be amended, supplemented, waived or changed orally, but only by a writing signed by the Guarantors and Licensor making specific reference to this Guaranty. 15. Headings. The headings in this Guaranty are for convenience only and shall not control or affect the meaning or construction of any provision in this Guaranty. [SIGNATURE PAGE FOLLOWS]   5 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed this Guaranty as of the day first set forth above.   Guarantors:     Witnesses:           Michael Lerner     Print Name:                 Print Name:                Arthur Slaven     Print Name:                 Print Name:                John McLinden     Print Name:                 Print Name:        6 -------------------------------------------------------------------------------- EXHIBIT G Contribution Agreement   24 -------------------------------------------------------------------------------- CONTRIBUTION AGREEMENT THIS CONTRIBUTION AGREEMENT (the “Agreement”) is made and entered into as of the      day of September     , 2006 (the “Effective Date”) by and among MCZ/Centrum Florida XIX, L.L.C., a Delaware limited liability company (“MCZ”), and MHI Hollywood LLC, a Delaware limited liability company (“Hollywood”). The signatories hereto are hereinafter collectively referred to as the “Parties”. Capitalized terms sued herein but not defined shall, unless otherwise specified herein, have the meaning ascribed to such terms in the Franchise Agreement (as defined below). WITNESSETH WHEREAS, MCZ and Hollywood have entered into that Third Amendment dated the Effective Date (the “Amendment”) amending that certain agreement dated September 7, 2005 between Hollywood and MCZ/Centrum Florida VI Owner, L.L.C., an Illinois limited liability company (“MCZ/Centrum”), regarding the purchase and sale of a hotel condominium unit located in Hollywood, Florida which agreement was subsequently amended on November 16, 2005 and February     , 2006 and MCZ/Centrum’s rights assigned to MCZ (as so amended, the “Purchase Agreement”); WHEREAS, MCZ has agreed to indemnify Holiday Hospitality Franchising, Inc., a Delaware Corporation (“Franchisor”) and its Affiliates and its and their respective members, managers, officers, directors, employees, agents, successors and assigns (each, including Franchisor, an “Indemnified Party” and collectively, the “Indemnified Parties”), pursuant to an Indemnification Agreement dated the Effective Date (the “Indemnification Agreement”); WHEREAS, the Guarantors (as defined in the Indemnification Agreement) have agreed, subject to certain limitations, to guaranty the obligation of MCZ pursuant to such Indemnification Agreement (the “IHG Guaranty”); WHEREAS, Franchisor and MHI Hospitality TRS LLC (“MHI TRS”) have entered into a Franchise Agreement and related Addendum dated the Effective Date (collectively, the “Franchise Agreement”) pursuant to which MHI TRS has agreed to indemnify the Indemnified Parties respect to certain matters set forth in Section 19 of the Addendum to the Franchise Agreement (the “Franchise Indemnity”) and Hollywood and MHI Hospitality Corporation, a Delaware corporation (“MHI”), have executed a guaranty in favor of Franchisor with respect to the Franchise Agreement, including the Franchise Indemnity; WHEREAS, pursuant to the Amendment and the Purchase Agreement, MCZ and Hollywood have each agreed to indemnify the other with respect to certain matters; and WHEREAS, the Parties wish to agree upon their respective responsibilities, one to another, in the event of a claim against an Indemnified Party or a Party or an affiliate of a Party that results in a claim for indemnification under the Indemnification Agreement, the Amendment or the Franchise Indemnity. -------------------------------------------------------------------------------- NOW, THEREFORE, for and in consideration of the foregoing and the execution of the Amendment, the Franchise Agreement and the Indemnification Agreement and other consideration the mutual receipt and legal sufficiency of which are hereby acknowledged, the Parties hereto agree as follows: Section 1. Claims by an Indemnified Party Against MCZ. In the event any Indemnified Party seeks indemnification from MCZ under the Indemnification Agreement arising out or relating to any of the following matters (each an “MHI Matter”): (i) the development, promotion, marketing, or offering of the Rental Management Program or the Rental Agreements by Hollywood, MHI TRS and their parent companies, subsidiaries, Affiliates, managers, members, officers, directors, employees, agents and contractors, including brokers and sales agents (collectively a “Hollywood Party”); (ii) any violation or alleged violation of any Securities Laws, as defined in the Indemnification Agreement, by a Hollywood Party based solely on activities by a Hollywood Party relating to the Rental Management Program and/or the Rental Agreement; (iii) a claim based solely on an untrue statement or alleged untrue statement of material fact contained in any solicitation, promotion, rental, marketing or other documents, materials, procedures or practices by a Hollywood Party related to the Rental Management Program and/or the Rental Agreement; and/or (iv) a claim relating to the solicitation, promotion or marketing by a Hollywood Party of the Rental Management Program and/or a Rental Agreement based solely upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, Hollywood shall bear the costs of the defense of any Indemnified Party and shall promptly reimburse any Indemnified Party for the losses arising from such claim or, if such losses have been paid by MCZ and/or the Guarantors, reimburse MCZ and/or the Guarantors for the amount of such losses paid by MCZ and/or the Guarantors to any Indemnified Party in respect of such claim. Section 2. Claims by Indemnified Party Against MHI TRS. In the event any Indemnified Party seeks indemnification from MHI TRS under the Franchise Indemnity arising out of or relating to any of the following matters (each an “MCZ Matter”): (i) the development, construction, marketing, offer, sale, lease or transfer of any Condominium Units or any part of the Condominium or Community by MCZ and its parent company, subsidiaries, Affiliates, managers, members, officers, directors, employees, agents and contractors, including brokers and sales agents (collectively a “MCZ Party”); (ii) any violation or alleged violation of the Securities Act of 1933, as amended, or any other applicable state securities laws, rules or regulations based solely on activities by an MCZ Party, arising in connection with or relating to any sales or offers of sales of any of the Condominium Units (or any other portion of the Community); (iii) any untrue statement or alleged untrue statement of material fact contained in any of the Condominium Documents, as the same may be amended or restated, or in any of the solicitation, promotion, sales, marketing or other documents, materials, procedures or practices used by a MCZ Party who is involved in the solicitation, promotion, sale or marketing of any of the Condominium Units (or any other portion of the Community), or arising out of or based solely upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading by a MCZ Party; (iv) the failure of a MCZ Party to comply with any obligations under any applicable law, regulation or other governmental or court requirement, whether federal, state or local; and/or (v) any other matter arising from the development, construction, sale or offering for sale of the Hotel Condominium, Community, Common Properties or any part of same by a MCZ Party, MCZ shall bear the costs   2 -------------------------------------------------------------------------------- of the defense of any Indemnified Party and shall promptly reimburse any Indemnified Party for the losses arising from such MCZ Matter or, if such losses have been paid by MHI TRS, Hollywood or MHI, reimburse MHI TRS for the amount of such losses paid by MHI TRS, Hollywood and/or MHI to any Indemnified Party in respect of such MCZ Matter. Section 3. Securities Law Claim Against MHI TRS and MCZ. In the event (i) any Indemnified Party seeks indemnification by either or both of MHI TRS and MCZ with respect to a claim alleging a violation of any securities laws and asserting that the sale of Units and the offering of the Rental Program allegedly constituted the offering of a security (a “Securities Law Claim”); (ii) any Indemnified Party seeks indemnification by either or both of MHI TRS and MCZ with respect to a claim alleging an untrue statement or alleged untrue statement of a material fact or the omission or alleged omission of a material fact necessary to make the statements therein not misleading in connection with (a) the solicitation, promotion, sales, marketing or other documents, materials, procedures or practices relating to the Rental Management and/or the Rental Agreement and (b) the solicitation, promotion, sale or marketing of any of the Condominium Units (or any other portion of the Community) (an “Omissions Claim”) or (iii) a third party other than an Indemnified Party initiates a Securities Law Claim and/or an Omissions Claim against MHI, MHI TRS or Hollywood (each an “MHI Party”) as well as MCZ or an Affiliate (a “MCZ/Centrum Party”), Hollywood and MCZ shall equally share the costs of the defense relating to the Securities Law Claim and/or an Omissions Claim during the pendency of such claim and MCZ and Hollywood shall each bear that portion of the losses (including, without limitation, the costs of defense) that the relative fault of such Hollywood Party and such MCZ/Centrum Party bears to the relative fault of the other with respect to such claim. It is agreed that the relative fault of a Hollywood Party versus a MCZ Party, with respect to a Securities Law Claim and/or an Omissions Claim shall be determined by reference to, among other things, whether a Party breached a representation or warranty in the Purchase Agreement regarding the manner in which the Rental Program or the Units should be offered. In the event that losses relating to a Securities Law Claim and/or an Omissions Claim arise from a final adjudication of such claim and the adjudication makes a determination as to the relative fault of the Hollywood Party and the MCZ Party, such determination shall be binding upon the Parties for purposes of allocating the losses between the Parties pursuant to this Section 3. Absent such a determination, the Parties shall meet and confer for purposes of allocating losses between the Parties on such basis. If the Parties are unable to agree upon an allocation within ten (10) days of a request by either Party to meet and confer, the matter may be submitted by either Party to binding arbitration pursuant to Section 5 below. Section 4. Multiple Claims by Indemnified Party Against MHI TRS and MCZ. In the event (i) any Indemnified Party seeks indemnification from both MHI TRS and MCZ with respect to claims that include a Securities Law Claim and/or an Omissions Claim along with additional causes of action (“Multiple Claims”) for which any Indemnified Party seeks or may seek indemnification from MHI TRS and/or MCZ; or (ii) a third party other than any Indemnified Party initiates Multiple Claims against a MCZ/Centrum Party and a MHI Party, the Parties shall share the costs of defense with respect to the Multiple Claims in the proportion that the damages sought in such actions in respect of causes of action arising from an MHI Matter, in the case of Hollywood, and causes of action arising from MCZ Matters, in the case of MCZ, bear to the aggregate damages sought with respect to the Multiple Claims and the Parties shall each bear that portion of the aggregate losses (including, without limitation, costs of defense) arising   3 -------------------------------------------------------------------------------- from such claims determined in accordance with the following: (i) that portion of the losses reasonably allocated to a Securities Law Claim and/or an Omissions Claim shall be borne by the Parties in accordance with Section 3 above; (ii) that portion of the losses reasonably allocated to MHI Matters shall be borne by Hollywood and (ii) that portion of the losses reasonably allocated to MCZ Matters shall be borne by MCZ. In the event that any such losses arise from a final adjudication of such Multiple Claims and the adjudicator makes a determination as to an allocation of losses among the Multiple Claims, such allocation shall be binding on the Parties. Absent such an allocation, the Parties shall meet and confer to establish an allocation of the losses. If the Parties are unable to agree upon an allocation within ten (10) days of a written request by either Party to so confer, the matter may be submitted by either Party to binding arbitration pursuant to Section 5 below. Section 5. Arbitration. Any controversy, dispute or claim of any nature arising out of, in connection with or in relation to the interpretation, performance, enforcement or breach of this Agreement shall be resolved by binding arbitration under the commercial rules of arbitration of the American Arbitration Association (“AAA”). Such arbitration may be initiated by either Party with written notice to the other Party. The arbitration shall be held in Miami, Florida and shall be conducted by a single arbitrator to be selected by the Parties from a list of AAA arbitrators. If the Parties are unable to agree on an arbitrator, the AAA will select the arbitrator. The decision of the arbitrator shall be final and binding on the Parties and the Parties shall share equally in the cost of the arbitrator. Each shall bear their own legal fees and other costs. Section 6. MCZ Guaranty. MCZ shall cause the Guarantors to execute and deliver the guaranty attached hereto as Exhibit “A” (the “MCZ Guaranty”) simultaneously with the execution of this Agreement. The MCZ Guaranty shall oblige the Guarantors to guaranty the obligations of MCZ hereunder provided that the aggregate obligation of the Guarantors under the MCZ Guaranty, the Amendment and the IHG Guaranty shall not in any event exceed $5 million. Section 7. MHI Guaranty. Hollywood shall cause MHI to execute and deliver the guaranty attached hereto as Exhibit “B” (the “MHI Guaranty”) simultaneously with the execution of this Agreement. The MHI Guaranty shall oblige MHI to guaranty the obligations of Hollywood hereunder provided that the aggregate obligation of MHI under the MHI Guaranty shall not in any event exceed $5 million. Section 8. Amendments. The provisions of this Agreement may not be amended, supplemented, waived or changed orally, but only by a writing signed by all Parties to this Agreement and making specific reference to this Agreement. Section 9. Binding Effect. All of the terms and provisions of this Agreement shall be binding upon, inure to the benefit of, and be enforceable by the Parties and their respective legal representatives, successors and permitted assigns. Section 10. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Confirmation of execution by electronic transmission of a facsimile signature page shall be binding upon any party so confirming.   4 -------------------------------------------------------------------------------- Section 11. Entire Agreement. This Agreement represents the entire understanding and agreement between the Parties with respect to the subject matter of this Agreement, and supersedes all other negotiations, understandings and representations (if any), whether oral or written, made by and between such Parties regarding the subject matter of this Agreement. Section 12. Governing Law. This Agreement and all transactions contemplated by this Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of Florida without regard to principles of conflicts of laws. Section 13. Jurisdiction and Venue. The Parties acknowledge that a substantial portion of the negotiations and anticipated performance of this Agreement occurred or shall occur in Broward County, Florida. Any civil action or legal proceeding arising out of or relating to this Agreement shall be brought in the courts of record (federal, superior, or state) situated in the County of Broward, State of Florida. Each Party consents to the jurisdiction of such Florida court in any such civil action or legal proceeding and waives any objection to the laying of venue of any such civil action or legal proceeding in such Florida court. Service of any court paper may be effected on such Party in such manner as may be provided under applicable laws, rules of procedure or local rules. Section 14. Severability. If any provision of this Agreement is held to be unenforceable, void or voidable as being contrary to the law or public policy of the United States or any other jurisdiction entitled to exercise authority hereunder, neither the legality, validity or enforceability of the remaining provisions of this Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. If any provision of this Agreement may be construed in two or more ways, one of which would render the provision invalid or otherwise voidable or unenforceable and another of which would render the provision valid and enforceable, such provision shall have the meaning which renders it valid and enforceable. Section 15. Waivers. The failure or delay of any Party at any time to require performance by the other Party of any provision of this Agreement, even if known, shall not affect the right of such Indemnified Party or any other Indemnified Party to require performance of that provision or to exercise any right, power or remedy under this Agreement. Any waiver by any Indemnified Party of any breach of any provision of this Agreement should not be construed as a waiver of any continuing or succeeding breach of such provision, a waiver of the provision itself, or a waiver of any right, power or remedy under this Agreement. No notice to or demand on Indemnitor in any circumstance shall, of itself, entitle the Indemnitor to any other or further notice or demand in similar or other circumstances. Section 16. General Representations. Each party represents and warrants to the that: (a) there are no agreements to which the Party is a party or binding on such Party that are in conflict with this Agreement, (b) there are no actions or proceedings pending or, to the Party’s Knowledge, threatened, against any such Party that challenge or impair any the Party’s ability to execute or perform its obligations under this Agreement, and (c) the Party and the person signing this Agreement on behalf of such Party has obtained all necessary approvals and the execution, delivery and performance of this Agreement will not violate, create a default under or breach any   5 -------------------------------------------------------------------------------- charter, bylaws, agreement or other contract, license, permit, order or decree to which such Party is a party or to which it is subject or to which the Hotel is subject. Section 17. Notices. Notices will be effective hereunder when and only when they are reduced to writing and delivered personally or mailed by Federal Express or comparable overnight or express delivery service, by documented facsimile transmission or by certified mail to the appropriate party at its address, hereinafter set forth, or to such person and at such address as may subsequently be designated by one Party to the other.   Indemnitor:    MCZ/Centrum Florida XIX, L.L.C.    c/o MCZ Development, Inc.    1555 N. Sheffield Avenue    Chicago, Illinois 60622    Attn: Michael Lerner/Brian Nivan    Telephone: 312-573-1122    Fax: 312-573-1028    MHI Hollywood LLC    c/o: Andrew M. Sims    4801 Courthouse Street    Suite 201    Williamsburg, VA 23188    Attn: Andrew M. Sims    Telephone: 757-564-5684    Fax: 757-564-8801 Section 18. WAIVER OF JURY TRIAL. THE PARTIES EACH HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM FILED BY ANY PARTY, RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR THE RIGHTS AND OBLIGATIONS ARISING HEREUNDER. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.   MHI Hollywood LLC, a Delaware limited liability company By:      Name:      Title:        6 -------------------------------------------------------------------------------- MCZ/Centrum Florida XIX, L.L.C., a Delaware limited liability company By:      Name:      Title:        7 -------------------------------------------------------------------------------- EXHIBIT “A” GUARANTY THIS GUARANTY (this “Guaranty”) is made and given as of                         , 2006 by Michael Lerner, Arthur Slaven, and John McLinden (each a “Guarantor”; and collectively, the “Guarantors”) for the benefit of MHI Hollywood, LLC, a Delaware limited liability company (“Hollywood”). WITNESSETH: WHEREAS, MCZ/Centrum Florida XIX, L.L.C., a Delaware limited liability company (“MCZ”) and Hollywood have executed that certain Contribution Agreement concurrently herewith (the “Contribution Agreement”). WHEREAS, pursuant to the Contribution Agreement, MCZ has agreed to reimburse Hollywood and bear certain costs with respect to certain matters set forth in the Contribution Agreement subject to the terms and conditions set forth in such agreement; and WHEREAS, pursuant to this Guaranty, the Guarantors (jointly and severally) guaranty MCZ’s obligations with respect to the Contribution Agreement subject to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, the Guarantors (jointly and severally) agree as follows: 1. Recitals. The foregoing recitals are true and correct and incorporated by this reference. 2. Guaranty. 2.1 Subject to the limitation set forth in Section 2.2 below, the Guarantors, jointly and severally, hereby irrevocably and unconditionally guarantee that all of the obligations, covenants, agreements and indemnities of MCZ under the Contribution Agreement will be punctually and fully paid and performed in strict accordance with the terms and conditions of the Contribution Agreement and this Guaranty (collectively, the “Guaranteed Obligations”). 2.2 Notwithstanding any provision of this Guaranty to the contrary, the liability of Guarantors under (i) this Guaranty, (ii) the joinder to the Third Amendment between Hollywood and MCZ executed concurrently herewith and (iii) the guaranty in favor of Holiday Hospitality Franchising, Inc., a Delaware corporation executed concurrently herewith shall not exceed an aggregate amount of Five Million Dollars ($5,000,000). -------------------------------------------------------------------------------- 2.3 This Guaranty shall be continuing, irrevocable and remain in full force and effect from the date of execution of this Guaranty, until any and all statutes of limitation for any cause of action, claim or other legal or administrative proceeding with respect to any matter giving rise to a Guaranteed Obligation shall have expired, and thereafter for a sufficient period of time as is necessary or appropriate (as determined by Hollywood in its sole and absolute discretion) to finally resolve and satisfy any claim, action, demand, proceeding and liability against any MHI Party, as defined in the Contribution Agreement, or any claim, action, proceeding and liability with respect to which any MHI Party may have an obligation to indemnify an Indemnified Party pursuant to the Franchise Indemnity (as such terms are defined in the Contribution Agreement) brought during such period and to satisfy all of the Guaranteed Obligations. 2.4 Upon the failure of MCZ to punctually and fully pay and/or perform any of the obligations, covenants, agreements and/or indemnities of MCZ arising under the Contribution Agreement, and upon delivery of written notice from Hollywood, the Guarantors will immediately perform the Guaranteed Obligations. Without affecting the obligations of the Guarantors under this Guaranty, Hollywood may without notice to the Guarantors extend, modify or release any indebtedness or obligation of MCZ or any of the Guarantors, or settle, adjust or compromise any claims against the MCZ or any of the Guarantors. The Guarantors waive notice of amendment of the Contribution Agreement and notice of presentment and demand for payment and/or performance under the Contribution Agreement. 2.5 This Guaranty constitutes a guaranty of payment and performance and not of collection, and each of the Guarantors specifically waives any obligation of Hollywood to proceed against MCZ for any money or property held by MCZ or by any other person or entity as collateral security, by way of set off or otherwise. The Guarantors further agree that this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time payment of any of the Guaranteed Obligations is rescinded or must otherwise be restored or returned by any MHI Party upon the insolvency, bankruptcy or reorganization of any of the Guarantors, all as though such payment had not been made. 2.6 The obligations of Guarantors hereunder shall be absolute and primary and in no way contingent, and shall be complete and binding as to Guarantors upon the execution of this Guaranty, and shall be subject to no conditions precedent. 3. Representations. Each Guarantor represents and warrants to Hollywood that: (a) there are no agreements to which he is a party or binding on him that are in conflict with this Guaranty, (b) there are no actions or proceedings pending or, to such Guarantor’s knowledge, threatened, against such Guarantor that challenge or impair his ability to execute or perform his obligations under this Guaranty, and (c) Guarantor’s execution, delivery and performance of this Guaranty will not violate, create a default under or breach any agreement or other contract, license, permit, order or decree to which he is a party or to which he is subject. 4. Continuing Guaranty; Transfer. This Guaranty is a continuing guaranty and shall be binding upon each Guarantor and their respective heirs, administrators, executors, successors and assigns, who shall be jointly and severally liable hereunder in accordance with the terms hereof; provided, however, Guarantors may not assign any of their rights and obligations   2 -------------------------------------------------------------------------------- hereunder without the prior written consent of Hollywood. Notwithstanding the foregoing, upon the death of an individual Guarantor, the estate of such Guarantor will be bound by this Guaranty, and the obligations of the other Guarantors will continue in full force and effect. This Guaranty shall inure to the benefit of and be enforceable by Hollywood and its heirs, administrators, executors, successors and assigns. 5. Reimbursement, Subrogation, Etc. The Guarantors each covenant and agree that they will not enforce or otherwise exercise any rights of reimbursement, subrogation, contribution or other similar rights against MCZ with respect to the Guaranteed Obligations prior to termination or expiration of, and payment in full of all amounts then due and owing under the Contribution Agreement. 6. Notices. Notices will be effective hereunder when and only when they are reduced to writing and delivered personally or mailed by Federal Express or comparable overnight or express delivery service, by documented facsimile transmission or by certified mail to the appropriate party at its address, hereinafter set forth, or to such person and at such address as may subsequently be designated by one party to the other. To Hollywood: MHI Hollywood LLC c/o Andrew M. Sims 4801 Courthouse Street Suite 201 Williamsburg, VA 23188 Telephone: 757-564-5684 Fax: 757-564-8801 To Guarantors: Michael Lerner c/o MCZ Development 1555 North Sheffield Chicago, IL 60622 Phone: (312) 573-1122 Fax:     (312) 573-1028 John McLinden c/o Centrum Properties, Inc. 225 W. Hubard Street 4th Floor Chicago, IL 60610 Phone: (312) 832-2500 Fax:    312-832-2525   3 -------------------------------------------------------------------------------- Arthur Slaven c/o Centrum Properties, Inc. 225 W. Hubard Street 4th Floor Chicago, IL 60610 Phone: (312) 832-2500 Fax:    312-832-2525 7. Governing Law. This Guaranty and the obligations provided for hereunder shall be governed and construed in all respects by the internal laws and decisions (except any conflicts of law provisions) of the State of Florida, including all matters of construction, validity, enforceability and performance. 8. Venue and Jurisdiction. To the extent permitted by law, the Guarantors each (i) consent and submit, at Hollywood’s election and without limiting Hollywood’s rights to commence an action in any other jurisdiction, to the personal jurisdiction and venue of any courts of record (federal, superior, or state) situated in the County of Broward, State of Florida. Each party consents to the jurisdiction of such Florida court in any such civil action or legal proceeding and waives any objection to the laying of venue of any such civil action or legal proceeding in such Florida court. Service of any court paper may be effected on such party by in such manner as may be provided under applicable laws, rules of procedure or local rules. 9. Severability. If any provision of this Agreement is held to be unenforceable, void or voidable as being contrary to the law or public policy of the United States or any other jurisdiction entitled to exercise authority hereunder, neither the legality, validity or enforceability of the remaining provisions of this Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. If any provision of this Agreement may be construed in two or more ways, one of which would render the provision invalid or otherwise voidable or unenforceable and another of which would render the provision valid and enforceable, such provision shall have the meaning which renders it valid and enforceable. 10. Remedies; Costs of Enforcement. Upon any breach or default with respect to any of Guarantors’ obligations, covenants, agreements, warranties or representations under this Guaranty, Hollywood shall be entitled to any and all remedies available at law or in equity subject to the limitation of liability set forth in Section 2.2 above. In addition to all other remedies available, the Guarantors each agree to pay the Hollywood, subject to the limitations contained in Section 2.2, all expenses (including, without limitation, all attorneys’ fees, court costs, and all fees, taxes, costs and expenses incident to arbitration, appellate, bankruptcy and post judgment proceedings), incurred by Hollywood, to remedy any defaults of or enforce any rights under this Guaranty or the Contribution Agreement, or to collect any amounts due under this Guaranty or the Contribution Agreement. Attorneys’ fees shall include, without limitation, paralegal fees, investigative fees, administrative costs, sales and use taxes and all other charges billed by the attorney to the prevailing party (including any fees and costs associated with collecting such amounts). No remedy herein conferred upon Hollywood is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.   4 -------------------------------------------------------------------------------- 11. Entire Agreement. This Guaranty represents the entire understanding and agreement between the parties with respect to the subject matter of this Guaranty, and supersedes all other negotiations, understandings and representations (if any), whether oral or written, made by and between such parties regarding the subject matter of this Guaranty. 12. Waivers. The failure or delay of Hollywood at any time to require performance by any of the Guarantors of any provision of this Guaranty, even if known, shall not affect the right of Hollywood to require performance of that provision or to exercise any right, power or remedy under this Guaranty. Any waiver by any Hollywood of any breach of any provision of this Guaranty should not be construed as a waiver of any continuing or succeeding breach of such provision, a waiver of the provision itself, or a waiver of any right, power or remedy under this Guaranty. No notice to or demand on any Guarantor in any circumstance shall, of itself, entitle any Guarantor to any other or further notice or demand in similar or other circumstances. 13. Counterparts. This Guaranty may be executed in one or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Confirmation of execution by electronic transmission of a facsimile signature page shall be binding upon any party so confirming. 14. Amendments. The provisions of this Guaranty may not be amended, supplemented, waived or changed orally, but only by a writing signed by the Guarantors and Hollywood making specific reference to this Guaranty. 15. Headings. The headings in this Guaranty are for convenience only and shall not control or affect the meaning or construction of any provision in this Guaranty. [SIGNATURE PAGE FOLLOWS]   5 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed this Guaranty as of the day first set forth above.   Guarantors:     Witnesses:           Michael Lerner     Print Name:                 Print Name:                Arthur Slaven     Print Name:                 Print Name:                John McLinden     Print Name:                 Print Name:        6 -------------------------------------------------------------------------------- EXHIBIT “B” GUARANTY THIS GUARANTY (this “Guaranty”) is made and given as of                         , 2006 by MHI HOSPITALITY CORPORATION, a Delaware corporation (the “Guarantor”) for the benefit of MCZ/CENTRUM FLORIDA XIX, L.L.C., a Delaware limited liability company (“MCZ”). W I T N E S S E T H : WHEREAS, MCZ and Hollywood have executed that certain Contribution Agreement concurrently herewith (the “Contribution Agreement”). WHEREAS, pursuant to the Contribution Agreement, Hollywood has agreed to reimburse MCZ and bear certain costs with respect to certain matters set forth in the Contribution Agreement subject to the terms and conditions set forth in such agreement; and WHEREAS, pursuant to this Guaranty, the Guarantor guaranties Hollywood’s obligations with respect to the Contribution Agreement subject to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, the Guarantor agrees as follows: 1. Recitals. The foregoing recitals are true and correct and incorporated by this reference. 2. Guaranty. 2.1 Subject to the limitation set forth in Section 2.2 below, the Guarantor hereby irrevocably and unconditionally guarantee that all of the obligations, covenants, agreements and indemnities of Hollywood under the Contribution Agreement will be punctually and fully paid and performed in strict accordance with the terms and conditions of the Contribution Agreement and this Guaranty (collectively, the “Guaranteed Obligations”). 2.2 Notwithstanding any provision of this Guaranty to the contrary, the liability of Guarantor under (i) this Guaranty, (ii) the joinder to the Third Amendment between Hollywood and MCZ executed concurrently herewith and (iii) the guaranty in favor of Holiday Hospitality Franchising, Inc., a Delaware corporation executed concurrently herewith shall not exceed an aggregate amount of Five Million Dollars ($5,000,000). 2.3 This Guaranty shall be continuing, irrevocable and remain in full force and effect from the date of execution of this Guaranty, until any and all statutes of limitation for any cause of action, claim or other legal or administrative proceeding with respect to any matter giving rise to a Guaranteed Obligation shall have expired, and thereafter for a sufficient period of -------------------------------------------------------------------------------- time as is necessary or appropriate (as determined by MCZ in its sole and absolute discretion) to finally resolve and satisfy any claim, action, demand, proceeding and liability against any MCZ Party, as defined in the Contribution Agreement, or any claim, action, proceeding and liability with respect to which any MCZ Party may have an obligation to indemnify an Indemnified Party pursuant to the Franchise Indemnity (as such terms are defined in the Contribution Agreement) brought during such period and to satisfy all of the Guaranteed Obligations. 2.4 Upon the failure of Hollywood to punctually and fully pay and/or perform any of the obligations, covenants, agreements and/or indemnities of Hollywood arising under the Contribution Agreement, and upon delivery of written notice from MCZ, the Guarantor will immediately perform the Guaranteed Obligations. Without affecting the obligations of the Guarantor under this Guaranty, MCZ may without notice to the Guarantor extend, modify or release any indebtedness or obligation of Hollywood, or settle, adjust or compromise any claims against the Hollywood. The Guarantor waives notice of amendment of the Contribution Agreement and notice of presentment and demand for payment and/or performance under the Contribution Agreement. 2.5 This Guaranty constitutes a guaranty of payment and performance and not of collection, and the Guarantor specifically waives any obligation of MCZ to proceed against Hollywood for any money or property held by Hollywood or by any other person or entity as collateral security, by way of set off or otherwise. Guarantor further agrees that this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time payment of any of the Guaranteed Obligations is rescinded or must otherwise be restored or returned by any MCZ Party upon the insolvency, bankruptcy or reorganization of the Guarantor, all as though such payment had not been made. 2.6 The obligations of Guarantor hereunder shall be absolute and primary and in no way contingent, and shall be complete and binding as to Guarantor upon the execution of this Guaranty, and shall be subject to no conditions precedent. 3. Representations. Guarantor represents and warrants to MCZ that: (a) there are no agreements to which it is a party or binding on it that are in conflict with this Guaranty, (b) there are no actions or proceedings pending or, to Guarantor’s knowledge, threatened, against Guarantor that challenge or impair his ability to execute or perform his obligations under this Guaranty, and (c) Guarantor’s execution, delivery and performance of this Guaranty will not violate, create a default under or breach any agreement or other contract, license, permit, order or decree to which it is a party or to which it is subject. 4. Continuing Guaranty; Transfer. This Guaranty is a continuing guaranty and shall be binding upon Guarantor and its respective heirs, administrators, executors, successors and assigns, who shall be jointly and severally liable hereunder in accordance with the terms hereof; provided, however, Guarantor may not assign any of his rights and obligations hereunder without the prior written consent of MCZ. Notwithstanding the foregoing, upon the death of an individual Guarantor, the estate of such Guarantor will be bound by this Guaranty, and the obligations of the Guarantor will continue in full force and effect. This Guaranty shall inure to the benefit of and be enforceable by MCZ and its heirs, administrators, executors, successors and assigns.   2 -------------------------------------------------------------------------------- 5. Reimbursement, Subrogation, Etc. Guarantor covenants and agrees that it will not enforce or otherwise exercise any rights of reimbursement, subrogation, contribution or other similar rights against Hollywood with respect to the Guaranteed Obligations prior to termination or expiration of, and payment in full of all amounts then due and owing under the Contribution Agreement. 6. Notices. Notices will be effective hereunder when and only when they are reduced to writing and delivered personally or mailed by Federal Express or comparable overnight or express delivery service, by documented facsimile transmission or by certified mail to the appropriate party at its address, hereinafter set forth, or to such person and at such address as may subsequently be designated by one party to the other. To Guarantor: MHI Hospitality Corporation c/o Andrew M. Sims 4801 Courthouse Street Suite 201 Williamsburg, VA 23188 Telephone: 757-564-5684 Fax: 757-564-8801 To MCZ: MCZ/Centrum Florida XIX, L.L.C. c/o MCZ Development 1555 North Sheffield Chicago, IL 60622 Phone: (312) 573-1122 Fax:    (312)573-1028 Attn: Brian Niven/Michael Lerner 7. Governing Law. This Guaranty and the obligations provided for hereunder shall be governed and construed in all respects by the internal laws and decisions (except any conflicts of law provisions) of the State of Florida, including all matters of construction, validity, enforceability and performance. 8. Venue and Jurisdiction. To the extent permitted by law, Guarantor (i) consents and submits, at MCZ’s election and without limiting MCZ’s rights to commence an action in any other jurisdiction, to the personal jurisdiction and venue of any courts of record (federal, superior, or state) situated in the County of Broward, State of Florida. Each party consents to the jurisdiction of such Florida court in any such civil action or legal proceeding and waives any objection to the laying of venue of any such civil action or legal proceeding in such Florida court. Service of any court paper may be effected on such party by in such manner as may be provided under applicable laws, rules of procedure or local rules.   3 -------------------------------------------------------------------------------- 9. Severability. If any provision of this Agreement is held to be unenforceable, void or voidable as being contrary to the law or public policy of the United States or any other jurisdiction entitled to exercise authority hereunder, neither the legality, validity or enforceability of the remaining provisions of this Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. If any provision of this Agreement may be construed in two or more ways, one of which would render the provision invalid or otherwise voidable or unenforceable and another of which would render the provision valid and enforceable, such provision shall have the meaning which renders it valid and enforceable. 10. Remedies; Costs of Enforcement. Upon any breach or default with respect to any of Guarantor’s obligations, covenants, agreements, warranties or representations under this Guaranty, MCZ shall be entitled to any and all remedies available at law or in equity subject to the limitation of liability set forth in Section 2.2 above. In addition to all other remedies available, Guarantor agrees to pay MCZ, subject to the limitations contained in Section 2.2, all expenses (including, without limitation, all attorneys’ fees, court costs, and all fees, taxes, costs and expenses incident to arbitration, appellate, bankruptcy and post judgment proceedings), incurred by MCZ, to remedy any defaults of or enforce any rights under this Guaranty or the Contribution Agreement, or to collect any amounts due under this Guaranty or the Contribution Agreement. Attorneys’ fees shall include, without limitation, paralegal fees, investigative fees, administrative costs, sales and use taxes and all other charges billed by the attorney to the prevailing party (including any fees and costs associated with collecting such amounts). No remedy herein conferred upon MCZ is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. 11. Entire Agreement. This Guaranty represents the entire understanding and agreement between the parties with respect to the subject matter of this Guaranty, and supersedes all other negotiations, understandings and representations (if any), whether oral or written, made by and between such parties regarding the subject matter of this Guaranty. 12. Waivers. The failure or delay of MCZ at any time to require performance by Guarantor of any provision of this Guaranty, even if known, shall not affect the right of MCZ to require performance of that provision or to exercise any right, power or remedy under this Guaranty. Any waiver by any MCZ of any breach of any provision of this Guaranty should not be construed as a waiver of any continuing or succeeding breach of such provision, a waiver of the provision itself, or a waiver of any right, power or remedy under this Guaranty. No notice to or demand on Guarantor in any circumstance shall, of itself, entitle Guarantor to any other or further notice or demand in similar or other circumstances. 13. Counterparts. This Guaranty may be executed in one or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Confirmation of execution by electronic transmission of a facsimile signature page shall be binding upon any party so confirming.   4 -------------------------------------------------------------------------------- 14. Amendments. The provisions of this Guaranty may not be amended, supplemented, waived or changed orally, but only by a writing signed by the Guarantor and MCZ making specific reference to this Guaranty. 15. Headings. The headings in this Guaranty are for convenience only and shall not control or affect the meaning or construction of any provision in this Guaranty. [SIGNATURE PAGE FOLLOWS]   5 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed this Guaranty as of the day first set forth above.   Guarantor:     Witnesses: MHI HOSPITALITY CORPORATION,        a Delaware corporation     Print Name:               By:          Print Name:        Andrew M. Sims, President         6 -------------------------------------------------------------------------------- EXHIBIT H Rental Agreement   25 -------------------------------------------------------------------------------- UNIT RENTAL MANAGEMENT AGREEMENT This Agreement is entered into effect as of                         , between MHI Hollywood, LLC, a Delaware Limited Liability Company (“Manager”), and the persons named on Schedule 1 (“Owner”). WITNESSETH: WHEREAS, Owner is the owner of or has contracted to purchase condominium unit Number                          of Sian Resort Residences I Condominium (hereinafter referred to as the “Condominium”) according to the Declaration of Condominium thereof recorded in Official Records Book                     , Pages                      through                     , of the Public Records of Broward County, Florida; (filing information to be completed by Manager upon filing of the Declaration of Condominium). WHEREAS, if and when title to the Unit is transferred to Owner, Owner desires to have Manager manage and market the rental of the Unit on an exclusive basis during the term of this Agreement, and Manager desires to manage the rental of the Unit on an exclusive basis through its rental management program (the “Rental Management Program”); NOW, THEREFORE, for and in consideration of the mutual promises and covenants contained herein, the parties hereby agree as follows: 1. Exclusive Management of Unit; Manager Responsibilities. This Agreement shall be effective and enforceable as of the Effective Date (as defined in Section 17(k)). Commencing on the Effective Date, Owner agrees to make the Unit available for rental or lease by Manager on an exclusive basis, and Manager agrees to offer the Unit for rental on a daily or weekly basis (as determined by Manager). Manager will have the exclusive right and authority to manage the rental of the Unit to third parties (“Rental Guests”) during the term of this Agreement. For purposes of the preceding sentence, any person or entity other than Owner or a guest of Owner who uses the Unit on a complimentary basis will be deemed to be a “third party.” All decisions concerning the operation of the Rental Management Program and the rental of the Unit during the term hereof will be made by Manager in its sole discretion. Manager shall manage in a commercially reasonable manner the Unit and the other Units at the Condominium which are part of the Rental Management Program as a hotel. Manager shall market and maintain the Unit in the manner described herein. 2. Occupancy of Unit. Owner agrees that, in order to assist in the promotion and rental of the Unit through the Rental Management Program, the use of the Unit by Owner and Owner’s guests will be subject to the limitations described on Exhibit A to this Agreement. 3. Establishment of Rental Rates; Collection of Rent. During the term of this Agreement, Manager will have the sole right to establish rental rates for the Unit and to modify such rental rates from time to time as Manager, in its reasonable discretion, may deem appropriate. Owner acknowledges and agrees that the rental rates will be established based on a variety of factors, including, without limitation, through negotiations with a prospective renter, -------------------------------------------------------------------------------- with consideration given to competition, location, time of year, length of stay, and the number of persons occupying the subject Unit. No Rental Guest of the Unit will be charged any rate other than the rate determined by Manager. Manager will establish a system which attempts to equitably allocate rental requests among comparable units which are participating in the Rental Management Program after considering any specific requests of prospective renters or other factors deemed relevant by Manager. Manager is not required to adhere to a strict rotation system and may vary the rental of the Unit in its reasonable discretion including, but not limited to: (a) preferences for a particular size, feature, location or type of unit expressed by potential Rental Guests; (b) prior reservations or other occurrences making a Unit unavailable for the duration of occupancy desired by potential Rental Guests; (c) needed or ongoing repair or replacement operations or unsuitability of the Unit for rental; (d) the effect of nearby construction activity on the use of, and guest experience with respect to particular Units; (e) personal usage of the Unit by Owner; (f) the rental rate commanded by the Unit; and (g) the length of an Owner’s participation in the Rental Management Program. Manager will, at Manager’s expense, use commercially reasonable efforts to collect all rent payable by Rental Guests who rent the Unit during the term of this Agreement. 4. Contiguous Construction. For some time in the future, Owners, their guests, tenants and invitees, may be disturbed by the noise, commotion, and other unpleasant effects of nearby construction activity and as a result, Owner and its guests, tenants, and invitees may be impeded in using portions of the Condominium by that activity. Because the Condominium is located in an urban area, demolition or construction of buildings and other structures within the immediate area, or with view lines of any particular Unit or other part of the Condominium (“Views”) may block, obstruct, shadow or otherwise affect the Views. Manager has no control of and is not responsible for such nearby construction activity and the Owner agrees to release, indemnify and hold harmless Manager and its affiliates from and against any and all claims, demands, costs, expenses (including without limitation attorneys’ fees) and damages incurred by Manager or any of its affiliates which occur or exist at any time during the term of this Agreement resulting from inconvenience, loss of rental income, or any other loss whatsoever in connection with such construction activity. Owner’s indemnification obligations hereunder will survive the termination of this Agreement and will be binding on the successors, heirs and permitted assigns of Owner. 5. Standards. Owner acknowledges that by entering the Unit into the Rental Management Program, Owner’s Unit must conform to the standards and requirements referenced in the Declaration of Condominium or those established by the Manager from time to time, whichever are higher (the “Standards”), which Standards will be consistent with other high-end, first class hotels and resorts. 6. Maintenance of Units. During the term of this Agreement, the Unit will be maintained in accordance with the terms set forth on Exhibit B to this Agreement. 7. Marketing of Unit. Manager will provide marketing services for the rental of the Unit in accordance with the Standards and as may be required by a Franchise System (as hereinafter defined), if any, together with such additional marking as it deems appropriate in its sole discretion. Without limiting the generality of the foregoing, Manager may, in its sole discretion, affiliate the Unit with other condominium units or hotels under a hotel branding, franchise, license or similar agreement or arrangement, or enter into any other similar arrangements with   -2- -------------------------------------------------------------------------------- respect to the Unit or terminate any such branding, franchise or license or similar agreement or arrangement. Owner will not engage in any marketing efforts for the rental of the Unit during the term of this Agreement, provided that Owner may solicit Rental Guests so long as such guests make their reservations through Manager. Owner will not accept any remuneration from any party other than Manager for rental of the Unit. Owner authorizes Manager to make the Unit available to third parties on a complimentary basis for up to 5 nights per calendar year for promotional or administrative purposes. 8. Utilities and Services. Utilities and certain other services for the Unit will be provided in accordance with the terms set forth on Exhibit C to this Agreement. 9. Insurance. Owner will obtain the insurance coverage with respect to the Unit and will take certain related actions as set forth on Exhibit D to this Agreement. 10. Rental Management Program Base Fee. Exhibit E to this Agreement sets forth the Manager’s Base Fee (as defined in Exhibit E) relating to Owner’s participation in the Rental Management Program. 11. Indemnification. Owner will indemnify and hold harmless Manager and its affiliates from and against any and all claims, demands, costs, expenses (including without limitation attorneys’ fees) and damages incurred by Manager or any of its affiliates arising out of any incident, action, omission, fact or circumstance relating to the Unit which occurs or exists at any time during the term of this Agreement, including without limitation injury to any person or property in, on, or about the Unit, any action or omission on the part of Manager or its affiliates in performing its obligations under this Agreement or other management agreements, any neglect or misconduct by Owner or Owner’s guests or any Rental Guests, except to the extent caused by the gross negligence or willful misconduct by Manager. Owner’s indemnification obligations hereunder will survive the termination of this Agreement and will be binding on the successors, heirs and permitted assigns of Owner. 12. Assignment. The Owner shall not have the right to assign its rights and obligations under this Agreement without the express written consent of the Manager and any such attempted assignment or delegation without such consent will be null and void. This Agreement shall terminate upon the transfer of title to the Unit to an unaffiliated party pursuant to a bona fide sale provided, however, that this Agreement shall survive such transfer of title for so long as necessary for Manager to honor all confirmed reservations for occupancy of the Unit in place on the date of the closing and the purchaser of the Unit shall purchase the Unit subject to all such confirmed reservations and this Agreement until such reservations have been satisfied provided, however, that Manager may elect in its sole discretion to transfer such reservations to other Units in the Rental Management Program and terminate this Agreement effective on such closing date. Any transfer of title to a Unit to an institutional lender through foreclosure or other transfer in lieu of foreclosure shall operate to terminate this Agreement, subject to all confirmed reservations for occupancy of the Units in place as of the date of title transfer; provided, however, that Manager may elect in its sole discretion to transfer such reservations to other Units in the Rental Management Program. Manager (and its successors and assigns) will have the right to assign Manager’s rights and obligations under this Agreement without Owner’s consent to (i) any lender of Manager or any of its affiliates or (ii) any person or entity which directly or   -3- -------------------------------------------------------------------------------- indirectly controls or is controlled by Manager or is under common control with Manager or (iii) any other person or entity which agrees, in writing, to assume and perform the obligations of Manager hereunder. Upon any such assignment of Manager’s rights and obligations under this Agreement, Manager will be deemed to have been released from all of its obligations hereunder. Manager shall have the right to contract with third parties and affiliates to carry out all or any part of its responsibilities under this Agreement. MHI Hotels Services, LLC will manage the Hotel Unit (as defined in the Declaration of Condominium) and the units in the Condominium participating in the Rental Management Program (collectively, the “Hotel”), and MHI Hospitality TRS, LLC will have a leasehold interest in the Hotel Unit subject to this Agreement. As currently contemplated, this Agreement would not be assigned to MHI Hospitality TRS, LLC. 13. Term and Termination of Agreement. This Agreement shall be enforceable as of the Effective Date and will have the term and will be subject to termination by Owner and Manager in accordance with the provisions set forth on Exhibit F to this Agreement and those set forth above in Paragraph 12. 14. Other Covenants of Owner. (a) Rules and Procedures. Owner agrees to comply with all rules, regulations, procedures and requirements established by Manager relating to the operation of the Rental Management Program and the occupancy and maintenance of the Unit. (b) Condominium Documents. During the term of this Agreement, Owner will not vote to amend or otherwise alter the condominium association documents or the Master Association (as defined in the Declaration of Condominium) documents governing the Unit or any similar documents relating to the Unit that would adversely affect, prevent or restrict (i) the rental of the Unit by the Manager through the Rental Management Program, or (ii) the management or operation of the Condominium, the Hotel Unit, the Hotel or the Property (as defined in the Master Association documents) to the Standards and in accordance with this Agreement or any applicable franchise or license agreement, or to support any action by the Condominium association for the Unit that would prevent or restrict the rental of the Unit by the Manager through the Rental Management Program. If any such documents are amended or actions taken that in any way prevent or restrict Manager’s rental of the Unit through the Rental Management Program (whether Owner votes for such amendment or action or not), such amendment or action shall be deemed a breach of this Agreement and Manager may seek any remedies available to it at law or in equity and, Manager may, at its option, terminate this Agreement. (c) Taxes and Assessments. Owner agrees to pay promptly, and before delinquency, all taxes, insurance premiums, condominium maintenance and other fees, charges and assessments (including without limitation any special Condominium association and Master Association assessments) levied on or with respect to the Unit, including, without limitation, Owner’s share of Shared Costs (as defined in the Declaration of Condominium). Owner will provide Manager proof of payment of any such Taxes and Assessments (as defined in Exhibit E) upon request therefor. If Owner fails to pay any such amounts, Manager may (but will not be required to) pay any such amounts and bill   -4- -------------------------------------------------------------------------------- Owner therefor or deduct the cost thereof from the Gross Owner’s Revenue (as defined in Exhibit E). In addition, a ten percent (10%) service charge per occurrence shall be charged to Owner by Manager for any recurring expenses paid by Manager on behalf of Owner. (d) Expenses and Charges. Manager will deduct from Gross Owner’s Revenue (as defined in Exhibit E) certain expenses incurred in connection with the participation of the Unit in the Rental Management Program including Commissions and Hotel Expenses (as such terms are defined in Exhibit E) allocable to the Unit and the Base Fee. Manager may, in its discretion, also deduct from the Gross Owner’s Revenue, the Refurbishment Reserve, Taxes and Assessments and Unit Owner Expenses (as defined in Exhibit E) payable by Owner pursuant to this Agreement (“Expenses and Charges”), to the extent such expenses are not paid directly by Owner. In the alternative, Manager may elect to bill Owner for such Expenses and Charges. Owner will be required to pay increases in the Expenses and Charges for those services provided by Manager, as the Expenses and Charges may be modified from time to time by Manager. Owner agrees to accept all modifications to such Expenses and Charges; provided, however, that the Expenses and Charges for services provided by Manager may not be increased by Manager in any year by an amount in excess of the greater of (x) the percentage increase in the Consumer Price Index or such other nationally recognized price index as may be selected by Manager in its sole discretion or (y) any increase in Manager’s actual costs and expenses of providing the applicable service(s). Manager shall not have the right to revise the percentage split of Net Rental Income as the basis for the Manager’s Base Fee during the term of this Agreement without the written consent of Owner (e) Refund. Manager may offer a refund of the rent paid to any Rental Guest due to adverse weather conditions, failures of heating, air conditioning or other systems, major appliance failures, or other problems or circumstances affecting the Rental Guest’s stay or use and enjoyment of the Unit or related facilities and amenities, if Manager deems this action necessary to promote Rental Guest satisfaction. Rental Guest transfers, or refunds, as a result of the dissatisfaction of the Rental Guest, are to be made at the sole discretion of Manager and shall be considered as a deduction from Gross Rental Revenue. (f) Forfeiture of Reservation Deposits. All forfeited reservation deposits and all other related cancellation charges pursuant to the cancellation policy adopted by Manager, in its sole discretion, shall be applied first to pay Manager the full amount of the Base Fee that Manager would have earned if the reservation had not been cancelled. Any remaining forfeited deposit shall be credited to Owner. (g) Further Assurances. Upon the request of Manager, Owner will promptly execute any additional documents and take any additional action necessary or advisable to give effect to the terms hereof, including without limitation the execution and filing of a Declaration or other document in the Public Records of Broward County, Florida with respect hereto.   -5- -------------------------------------------------------------------------------- (h) Risk of Loss. Owner assumes all risk for the loss of personal property kept in the Unit. Manager shall not incur liability for the loss or damage of any such personal property. In addition, Manager shall not be liable or responsible for, or in any manner a guarantor or insurer of, the health, safety or welfare of any Rental Guest, Owner and/or any occupant or user of any portion of the Unit, including, without limitation, Owner and Owner’s guests, invitees, agents, servants, contractors or subcontractors or for any property of any such persons. 15. Representations and Warranties of Owner. (a) Understanding and Professional Review of Agreement. OWNER HAS READ AND UNDERSTANDS THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ALL OF THE EXHIBITS A, B, C, D, E, F, G AND H HERETO, EACH OF WHICH CONSTITUTES AN INTEGRAL PART OF THIS AGREEMENT. OWNER ACKNOWLEDGES THAT HE HAS HAD THE OPPORTUNITY TO REVIEW THIS AGREEMENT WITH HIS LEGAL COUNSEL, FINANCIAL AND TAX ADVISERS, AND OTHER PROFESSIONAL ADVISERS. (b) Use and Occupancy of Unit. OWNER UNDERSTANDS THAT HE IS NOT REQUIRED TO ENTER INTO THIS AGREEMENT OR TO MAKE THE UNIT AVAILABLE FOR RENTAL THROUGH THE RENTAL MANAGEMENT PROGRAM. OWNER UNDERSTANDS THAT BY ENTERING INTO THIS AGREEMENT HE WILL GRANT MANAGER THE EXCLUSIVE RIGHT TO RENT THE UNIT TO RENTAL GUESTS. (c) Other Available Methods of Rental. OWNER ACKNOWLEDGES THAT HE HAS BEEN INFORMED THAT THERE ARE OTHER AVAILABLE METHODS FOR THE RENTAL OF THE UNIT, INCLUDING WITHOUT LIMITATION LOCAL RENTAL AGENTS. (d) No Pooling of Rental Amounts. OWNER UNDERSTANDS THAT ANY NET MONTHLY PAYMENT (AS DEFINED ON EXHIBIT E HERETO) PAID TO HIM THROUGH HIS PARTICIPATION IN THE RENTAL MANAGEMENT PROGRAM WILL BE BASED SOLELY ON THE ACTUAL RENTAL OF HIS UNIT RATHER THAN ANY POOLING OF RENTAL AMOUNTS FROM UNITS PARTICIPATING IN THE RENTAL MANAGEMENT PROGRAM. (e) No Representations, Estimates or Guarantees. OWNER ACKNOWLEDGES THAT NEITHER MANAGER, NOR DEVELOPER, NOR ANY OF MANAGER’S OR DEVELOPER’S EMPLOYEES, AGENTS OR REPRESENTATIVES, NOR ANY OTHER PERSON OR ENTITY, HAS MADE ANY REPRESENTATIONS, SUGGESTIONS, IMPLICATIONS, STATEMENTS OR ESTIMATES AS TO ANY REQUIREMENT THAT OWNER PARTICIPATE IN THE RENTAL MANAGEMENT PROGRAM, OR THE NUMBER OF TIMES THE UNIT WILL BE RENTED OR THE RENTAL INCOME, IF ANY, OWNER MIGHT RECEIVE THROUGH HIS PARTICIPATION IN THE RENTAL MANAGEMENT PROGRAM, OR THE PARTICIPATION OF THE HOTEL AS PART OF ANY FRANCHISE SYSTEM.   -6- -------------------------------------------------------------------------------- OWNER ACKNOWLEDGES THAT HE HAS NOT IN ANY MANNER BEEN INDUCED TO PURCHASE THE UNIT BY REASON OF THE RENTAL MANAGEMENT PROGRAM, OR ANY EXPECTED OR ANTICIPATED RENTAL INCOME TO BE DERIVED FROM HIS PARTICIPATION IN SUCH PROGRAM, OR THE ASSURANCE, STATEMENT OR REPRESENTATION OF PARTICIPATION OF THE HOTEL AS PART OF ANY FRANCHISE SYSTEM. OWNER ACKNOWLEDGES THAT HIS PARTICIPATION IN THE RENTAL MANAGEMENT PROGRAM MAY IN FACT RESULT IN A NET LOSS TO OWNER. OWNER ACKNOWLEDGES THAT NEITHER MANAGER, NOR DEVELOPER, NOR ANY OF MANAGER’S OR DEVELOPER’S EMPLOYEES, AGENTS OR REPRESENTATIVES, NOR ANY OTHER PERSON OR ENTITY, OTHER THAN OWNER’S TAX ADVISOR (IF AT ALL), HAS GIVEN OWNER ANY ADVICE WITH RESPECT TO ANY TAX STRUCTURES OR TAX IMPLICATIONS. (f) Waiver Of Jury Trial. BY ACCEPTANCE AND EXECUTION HEREOF THE PARTIES AGREE, THAT NEITHER PARTY, NOR ANY ASSIGNEE, SUCCESSOR, HEIR, OR LEGAL REPRESENTATIVE OF EITHER OF THEM (ALL OF WHOM ARE HEREINAFTER REFERRED TO AS THE “PARTIES”) SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER INSTRUMENT EVIDENCING, SECURING OR RELATING TO THIS AGREEMENT, OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG THE PARTIES, OR ANY OF THEM. NONE OF THE PARTIES WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY NEGOTIATED BY THE PARTIES, ARE A MATERIAL INDUCEMENT FOR THIS AGREEMENT, AND SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THE VENUE OF ANY ACTION SHALL BE IN THE COUNTY AND STATE OF THE LOCATION OF THE UNIT UNLESS THE PARTIES AGREE TO SOME OTHER LOCATION. (g) Franchise And Certification. THE HOTEL IS NOT CURRENTLY OPERATED (AND MAY NOT BE OPERATED) AS A FRANCHISE UNDER A NATIONAL HOTEL BRAND. HOWEVER, IF AT ANY TIME DURING THE TERM OF THIS AGREEMENT, THE HOTEL IS OPERATED AS PART OF A FRANCHISE SYSTEM OF A NATIONAL HOTEL BRAND (A “FRANCHISE SYSTEM”), WHICH SHALL BE AT THE SOLE DISCRETION OF MANAGER, THE PROVISIONS SET FORTH IN EXHIBIT H TO THIS AGREEMENT WILL APPLY AUTOMATICALLY, WITHOUT REQUIREMENT OF NOTICE TO OR CONSENT OF OWNER, AND OWNER EXPRESSLY ACKNOWLEDGES AND AGREES TO ALL OF THE TERMS AND PROVISIONS OF SUCH EXHIBIT H AND AGREES TO EXECUTE ANY DOCUMENTATION THAT MAY BE REQUESTED BY ANY FRANCHISOR TO CONFIRM SUCH ACKNOWLEDGEMENTS AND AGREEMENTS (ALTHOUGH   -7- -------------------------------------------------------------------------------- OWNER EXPRESSLY RECOGNIZES THAT NO SUCH CONFIRMATION IS NECESSARY FOR THE TERMS AND PROVISIONS OF EXHIBIT H TO BE BINDING ON OWNER). OWNER ACKNOWLEDGES THAT ON THE EXECUTION DATE OF THIS AGREEMENT AND AT SUCH OTHER TIME AS REQUESTED BY MANAGER, OWNER SHALL BE OBLIGATED TO EXECUTE ACKNOWLEDGEMENT CERTIFICATES IN FAVOR OF MANAGER AND ANY FRANCHISOR IN THE FORM OF EXHIBIT G. OWNER UNDERSTANDS AND AGREES THAT, IN EXECUTING ANY FRANCHISE OR LICENSE AGREEMENT WITH MANAGER, A FRANCHISOR WILL BE RELYING ON THE ACKNOWLEDGEMENTS AND AGREEMENTS OF OWNER SET FORTH IN THIS AGREEMENT AND THE ACKNOWLEDGEMENT CERTIFICATES. 16. Agreement As Easement And Covenant Running With The Unit. THIS AGREEMENT, INCLUDING ALL EXHIBITS HERETO, WILL CONSTITUTE AN EASEMENT DURING THE TERM OR EXTENSION HEREOF WITH RESPECT TO THE UNIT, AND THE TERMS OF THIS AGREEMENT WILL CONSTITUTE A COVENANT RUNNING WITH THE UNIT. THIS AGREEMENT WILL BE BINDING UPON AND WILL INURE TO THE BENEFIT OF THE PARTIES HERETO AND ALL SUBSEQUENT OWNERS OF THE UNIT TO THE EXTENT PROVIDED IN PARAGRAPH 12 OR EXHIBIT F TO THIS AGREEMENT. OWNER UNDERSTANDS AND AGREES THAT THIS AGREEMENT OR A DECLARATION OR OTHER INSTRUMENT WITH RESPECT HERETO MAY BE RECORDED BY MANAGER IN THE PUBLIC RECORDS OF BROWARD COUNTY, FLORIDA. UPON THE REQUEST OF MANAGER, OWNER WILL PROMPTLY EXECUTE AND DELIVER TO MANAGER ALL SUCH DOCUMENTS, AND WILL TAKE ALL SUCH ACTION, AS MANAGER MAY DEEM NECESSARY OR APPROPRIATE TO EFFECT SUCH RECORDING AND/OR TO CONFIRM THAT THE RESTRICTIONS CONTAINED HEREIN CONSTITUTE AN EASEMENT WITH RESPECT TO THE UNIT AND A COVENANT RUNNING WITH THE UNIT. 17. Miscellaneous. (a) Notices. All notices, demands or other writings contemplated by this Agreement will be in writing and will be deemed given if delivered by hand or three days after deposit in the United States mail, by registered or certified mail, postage prepaid, addressed to the parties as follows: If to Owner, to the mailing address for Owner set forth on the signature page hereto.   If to Manager, to:    MHI Hollywood, LLC    814 Capitol Landing Road    Williamsburg, VA 23690    Telephone 757-229-5648    Attention: Chief Executive Officer   -8- -------------------------------------------------------------------------------- With a copy to:    MHI Hollywood, LLC    6411 Ivy Lane, Suite 510    Greenbelt, MD 20770    Telephone 301-220-5400    Attention: Chief Financial Officer Owner understands that he cannot rely on verbal or telephonic instructions or notifications to Manager regarding reservations, maintenance or any other matter whatsoever unless confirmed in writing. (b) No Joint Venture. Nothing in this Agreement will constitute or be construed to create a partnership or joint venture between Manager and Owner. (c) Entire Agreement; Amendments. This Agreement (including without limitation the Exhibits hereto) contains the entire agreement of the parties with respect to the subject matter hereof, and there are no other agreements or understandings, oral or written, between the parties with respect to the subject matter hereof. This Agreement may be amended, modified or supplemented only by a writing signed by both parties. Notwithstanding the foregoing or any other term or provision of this Agreement to the contrary, Manager shall have the right to unilaterally amend this Agreement to the extent of any inconsistency or conflict between this Agreement and any license or franchise agreement that may be executed by Manager in the future with respect to the Hotel in order to comply with the terms of any such franchise. The foregoing includes, without limitation, any necessary changes to the insurance requirements, amount, types and additional insureds. (d) Binding Effect. All of the terms and conditions of this Agreement (including, without limitation, the Exhibits hereto) will be binding upon, inure to the benefit of, and be enforceable by the parties hereto and their respective administrators, executors, legal representatives, heirs, successors and permitted assigns. (e) Headings. The headings contained in this Agreement are for convenience of reference only, and will not limit or otherwise affect in any way the meaning or interpretation hereof. (f) Severability. If any part of this Agreement (including, without limitation, any part of any Exhibit hereto) is deemed invalid under any applicable laws, such provision will be inapplicable and will be deemed omitted to the extent of such invalidity, but the remainder of this Agreement will not be invalidated thereby and will be given full force and effect. (g) Waivers. The failure or delay of any party at any time to require performance by the other party of any provision of this Agreement, even if known, will not affect the right of such party to require performance of that provision or to exercise any rights,   -9- -------------------------------------------------------------------------------- powers or remedies hereunder, and any waiver by any party of any breach of any provision of this Agreement will not be construed as a waiver of any continuing or succeeding breach of such provision or any other provision of this Agreement or as a waiver of any rights, powers or remedies hereunder. No notice to or demand on any party in any case shall, of itself, entitle such party to any other or further notice or demand in similar or other circumstances. (h) Governing Law. This Agreement will be governed by, and construed and enforced in accordance with, the applicable laws of the State of Florida without regard to principles of conflicts of laws, but this Agreement will not be governed by the provisions of Chapter 718 of the Florida Statutes (the Florida Condominium Act). (i) Counterparts. This Agreement may be executed in multiple counterparts, each of which when executed and delivered will be deemed to be an original and all of which counterparts taken together will constitute one and the same document. (j) Attorneys’ Fees and Venue. If any action at law or in equity will be brought to enforce any provision of this Agreement, the prevailing party will be entitled to recover from the other party, as part of the prevailing party’s costs, reasonable attorneys’ fees, the amount of which will be fixed by the court and will be made a part of any judgment or decree rendered, in addition to any damages or other relief awarded by the court. Both parties agree that venue for any such action will be Broward County, Florida and that the laws of the State of Florida will apply, without giving effect to the conflicts of laws principles thereof. (k) Effective Date. If Owner has not closed on title to the Unit at the time Owner executes this Agreement, then the “Effective Date” shall be the date Owner closes on title to the Unit. If Owner has closed on title to the Unit at the time Owner executes this Agreement, then the “Effective Date” shall be the date that Manager executes this Agreement. (l) Gender, Singular and Plural. In this Agreement, the use of any gender shall be deemed to include all genders, and the use of the singular shall include the plural and vice versa, wherever it appears appropriate from the context.   -10- -------------------------------------------------------------------------------- COUNTERPART SIGNATURE PAGE TO BE EXECUTED BY MANAGER IN WITNESS WHEREOF, MANAGER HAS SIGNED THIS AGREEMENT AS OF THE DATE SET FORTH BELOW.         MHI HOLLYWOOD, LLC       (“Manager”) Date:        , 2005     By:              Title:        -11- -------------------------------------------------------------------------------- COUNTERPART SIGNATURE PAGE TO BE EXECUTED BY OWNER(S) IN WITNESS WHEREOF, OWNER(S) HAVE SIGNED THIS AGREEMENT AS OF THE DATE SET FORTH BELOW.         NAME(S) AND MAILING ADDRESS OF OWNER(S): [CONTACT PERSON]: Date:        , 2005              SIGNATURE(S) OF OWNER(S)       NAME(S) AND MAILING ADDRESS OF OWNER(S): Date:        , 2005              SIGNATURE(S) OF OWNER(S)                                  MAILING ADDRESS   -12- -------------------------------------------------------------------------------- Exhibit A Limitations on Occupancy of Unit 1. Limited Occupancy of Unit. Owner and his guests may use the Unit for the maximum number of nights reserved by Owner, which use may be further limited during the period between December 15 and May 1, as set forth in Exhibit E to this Agreement. In addition, Owner may request additional occupancy of the Unit for Owner’s own personal use on an “as available” basis (as determined by Manager) subject to certain limitations imposed by Manager. Notwithstanding anything to the contrary herein, Owner’s use of the Unit shall in all cases comply with all zoning ordinances which may effect or apply to the Unit. Owner recognizes and understands that personal use will reduce the availability of the Unit and negatively affect potential rentals and the Owner’s remuneration from rental of the Unit. This is especially true on weekends and holidays throughout the year. Owner and his personal guests shall: (a) comply with any applicable arrival / departure requirements established by Manager for use of the Unit during holidays, special events, and peak occupancy periods; (b) comply with any established check-in and check-out procedures and times; and (c) pay for daily linen and housekeeping service fee of $30.00 (subject to change by Manager from time to time), if such service is requested. In the event the daily cleaning service is not requested, a $30.00 departure cleaning charge will be charged per visit (subject to change by Manager from time to time). Owner recognizes and understands that Manager is not affiliated in any way with the developer/seller of the Condominium or the Units. Manager has not made, and makes, no promises or representations as to future income from the Unit and has provided no projections or estimates regarding financial performance or the tax effect of participating in the Rental Management Program. The Manager will retain the services of an experienced manager of hotel properties and agrees to use reasonable efforts consistent with the efforts of managers of similar properties to market and promote the Hotel operation. Owner agrees to abide by the standard check-in and check-out times established by Manager during periods of occupancy of the Unit by Owner or his guests. At other times, Owner will not enter the Unit or permit any other person (including any family member, repairman or guest) to enter the Unit without prior notification to, approval of, and coordination by, Manager. Manager approval shall be granted to permit Owner to perform periodic inspections of the Unit so long as Owner requests approval more than 24 hours in advance, such inspections do not unduly interfere with the operation of the resort, or the rental of the Unit and the Unit is unoccupied at the time of inspection. During the term of the Unit Rental Management Agreement, Owner may have access to the Unit only through a key card maintained by Manager. 2. Reservation of Unit by Owner. To assist Owner in making timely reservations and to minimize reservation conflicts, Manager will contact Owner, at least once per year, requesting Owner to specify, as far in advance as possible, the dates during which Owner desires that the Unit be available for him or his guests (the “Reserved Owner Occupancy”). Subject to any limitations on use by Owner as provided in Exhibit E, Manager will accommodate Owner’s Reserved Owner Occupancy requested occupancy dates provided Manager receives such written notice at least 360 days prior to the requested periods of occupancy; provided, however, in the   -1- -------------------------------------------------------------------------------- event Owner’s Unit is out of order or if Manager is precluded by law from allowing Owner occupancy of the Unit, then Owner shall not be entitled to occupy the Unit, and Manager shall use reasonable efforts to accommodate Owner in comparable accommodations. Owner agrees that, other than (i) during periods of occupancy of the Unit by Owner or his guests and (ii) in Owner’s storage areas designated by Manager, Owner will not store any personal belongings in the Unit (other than the standard furnishings and the standard housewares contained in the Unit as provided in this Agreement). Owner understands that any personal property or possessions stored in or left in the Unit should not be left unsecured and Manager assumes no liability for the loss or damage thereto.   -2- -------------------------------------------------------------------------------- Exhibit B Maintenance and Cleaning of Units; Administration of Units 1. Unit and Contents. Manager intends to market the rental of the Unit as part of a consistent, top quality resort experience and in accordance with the Standards. Owner acknowledges that uniformity in the appearance and contents of the condominium units participating in the Rental Management Program, including, without limitation, the Unit and its contents, is absolutely essential to the successful marketing and rental of the Unit by Manager. Owner, therefore, agrees not to modify in any way the design, appearance, furnishings, standard housewares or other contents of the Unit from the design, appearance, furnishings and other contents specified or established by Manager from time to time in its sole discretion or to remove or alter any equipment in the Unit without notifying and receiving the prior written approval of the Manager. 2. Standard Unit Appearance; Standard Furnishings. Owner will (i) maintain at Owner’s expense the standard furnishings for the Unit as determined by Manager from time to time for purposes of complying with the Standards (as the same may be required and modified from time to time by Manager in its sole discretion) (the “Furnishings Standard”), and (ii) be responsible for all costs and expenses associated with the periodic refurbishment of the Unit which refurbishment will occur in such manner and at such times as Manager may determine from time to time in its sole discretion. It is anticipated that the Unit will be completely refurbished approximately once every 7 years, but this is an estimate only, and such refurbishment may occur more frequently if any inspection of the Unit reveals that the painting, carpeting, furnishings, appliances, electronic equipment or other contents are inadequate, excessively worn or damaged. Manager will make reasonable efforts to notify Owner at least 90 days prior to the commencement of any required refurbishment which exceeds the funds available in the Refurbishment Reserve. The list of initial standard furnishings for a Unit are set forth on Attachment 1 hereto. 3. Refurbishment Reserve. The term “Refurbishment Reserve” will mean any reserve account established by Manager and funded by Owner either directly or through deductions by Manager from the Gross Owner’s Revenue (as defined on Exhibit E) for the periodic refurbishment of the Unit. Unless otherwise determined by Manager, Manager shall, immediately following the date on which Owner takes title to the Unit, deduct from the Gross Owner’s Revenue a Refurbishment Reserve payment equal to 5% of Gross Owner’s Revenue. Manager may, in its reasonable discretion, from time to time withdraw funds from the Refurbishment Reserve to pay for the refurbishment of the Unit or for the cost of bringing the Unit into conformity with the Furnishings Standard (“Refurbishment Costs”), but Owner will remain liable for any refurbishment costs and expenses in excess of the funds withdrawn from the Refurbishment Reserve. Such excess costs may be charged, at Manager’s discretion, as a Unit Owner’s Expense for purposes of Exhibit E, to the extent not paid directly by Owner. 4. Repairs and Replacements. Manager will at Owner’s expense make or contract for such repairs and replacements to the Unit, to the furnishings, appliances, electronic equipment or other contents of the Unit, as Manager deems appropriate in its reasonable discretion. Manager may maintain an inventory of, and restock expendables in the Unit to ensure a complete   -1- -------------------------------------------------------------------------------- inventory for all Rental Guests. Owner will pay Manager the following amounts for replacement:     •   Housewares and Expendables Replacement - Invoice plus 10%     •   Linen Replacement (sheets, towels and pillow cases only) - Paid by Manager     •   Bedspreads and other durable bed elements - Replaced every two years at Owner expense. If damaged prior to the end of two (2) years - Invoice plus 10%     •   Softgoods: Cost plus 10% (blankets, pillows, etc.)     •   Small appliances: Cost plus10% If the cost of any individual repair or replacement is expected to exceed $500, Manager will use commercially reasonable efforts to advise Owner in advance, except that under emergency conditions, as determined by Manager, such repairs and replacements will be performed without prior notice to Owner. The cost of such repairs and replacements (“Repair and Replacement Charges”) shall be Unit Owner Expenses for purposes of Exhibit E. 5. Cleaning. Manager shall perform or contract for the deep cleaning of the Unit on an annual or more frequent basis as Manager may require. Owner will pay Manager $175.00 per deep cleaning (subject to adjustment by Manager from time to time) if performed by Manager, which charge does not include charges for services performed by outside vendors. If the Owner elects to have his/her Unit cleaned daily while occupying his/her own Unit, a daily cleaning charge of $30.00 (subject to adjustment by Manager from time to time) may be assessed. After Owner has occupied his/her Unit, the Owner may be assessed a departure charge of $30.00 (subject to adjustment by Manager from time to time) for the expense of cleaning the Unit upon departure. The deep cleaning, daily cleaning and departure cleaning charges are subject to change at the discretion of the Manager, subject to the restrictions set forth herein. Such cleaning expenses (“Cleaning Charges”) shall be Unit Owner Expenses for purposes of Exhibit E. 6. Standard Housewares. Owner agrees to maintain in the Unit, at Owner’s expense, the standard housewares required pursuant to the Standards, as such housewares package may be modified by Manager from time to time in its sole discretion. Such expenses shall be Unit Owner Expenses for purposes of Exhibit E. The initial list of standard housewares for a Unit is set forth on Attachment 2 hereto. 7. Removal of Unit from Rental Management Program. Manager reserves the right to remove the Unit from the Rental Management Program upon written notice to Owner if Manager deems the Unit or the contents thereof to be unsatisfactory, and, upon written notification by Manager, Owner fails to cure or authorize the cure of such defects within 30 days thereof, in   -2- -------------------------------------------------------------------------------- which event Owner will be deemed to have breached this Agreement, and Manager will be entitled to terminate this Agreement or to exercise any and all rights and remedies available to Manager at law or in equity. Any decision to remove the Unit from the Rental Management Program will be at the sole discretion of Manager. Manager reserves the right to cure the subject defects, enter the Unit back into the Rental Management Program, and bill the Owner at cost plus a 15% service charge via a deduction to the Owner’s Net Monthly Payment. Notwithstanding the foregoing, if the cost of such repairs and replacements is expected to exceed $500, Manager will use commercially reasonable efforts to advise Owner in advance, except that under emergency conditions, as determined by Manager, such repairs and replacements will be performed without prior notice to Owner. Upon rectification of all defects by Owner to the satisfaction of Manager, the Unit may be returned to the Rental Management Program at the option of Manager. 8. General Maintenance Services. Manager will provide the minor maintenance services for the Unit described on Attachment 3 to this Exhibit B for which Owner will be charged the annual fee specified in Attachment 3. In addition, Manager will provide for the investigation or repair of minor problems other than “Minor Maintenance,” for which the Owner will be charged at the standard rate established by Manager for the personnel involved, which charge does not include the cost of parts or other out-of-pocket expenses such as labor charges by independent contractors. This charge will be incurred even if Manager does not perform any work beyond an investigation of the problem. Such charges (the “Maintenance Charges”) shall be Unit Owner Expenses for purposes of Exhibit E. 9. Administration. Owner shall pay Manager an annual administrative charge of $500.00 (the “Annual Administration Charge”) for computerized reservation services, accounting services, and property management inspections, State of Florida Licensing fees and telephone connection to the switchboard used by the general public to make reservations at the resort. Such charge shall be Unit Owner Expenses for purposes of Exhibit E.   -3- -------------------------------------------------------------------------------- Attachment 1 to Exhibit B Standard Furnishings KING/DOUBLE UNIT   BEDROOM AREA    KITCHEN AREA 1  King or 2 Double Beds w/ Headboards    1  Cabinet w/bar sink & granite counter top 2  Standard or    1  Microwave 1  Large Nightstand    1  Refrigerator 1  Dresser    1  Coffee Maker 1  Desk    2  Coffee Mugs 1  Ergonomic Desk Chair    1  Lounge Chair    1  Floor Lamp    2  Single or    1  Double Nightstand Lamp    1  Desk Lamp    BATH AREA 1  Television    1  Telephone on Nightstand    1  Granite vanity w/ under mount bowl and cabinet 1  Telephone w/ Speaker on Desk    1  Framed mirror 1  Drapery w/ blackout & sheers 2/3 Framed Artwork    2  Towel holders 1  Framed Full Length Mirror    2  Wall sconces 1  Closet rack    1  Shower w/ glass doors OR Bathtub (Both in suites) 1  Luggage Rack    1  Toilet 1  CD Player/Alarm Clock/Radio    2  Toilet paper holders 1  Ironing Board    1  Framed Artwork 1  Iron    5  Skirt Hangers    5  Standard Hangers    BALCONY    LIVING ROOM (IN SUITE UNITS ONLY) 1  Cocktail Table    1  Sofa 2  Chairs    2  Lounge Chairs 1  Safety Glass Ashtray    1  Coffee Table    1  Console Table    2  Side Tables    2  Table Lamps    1  Telephone    1  Dining Table    4  Dining Chairs    1  Floor Lamp   * All listed items must meet or exceed Standards.   B-4 -------------------------------------------------------------------------------- Attachment 2 to Exhibit B Standard Housewares   LINENS (PER BED)    4  Standard Pillows w/ pillowcase    2  Euro Pillows w/ Sham    1  Decorative Pillow    1  Blanket    1  Fitted Sheet    2  Flat Sheets    1  Duvet Comforter    1  Mattress Pad    1  Bed Skirt    TERRY (PER UNIT) 3 Bath Towels 3 Hand Towels 3 Wash Cloths 1 Bath Mat 2 Dish Towels 2 Dish Cloths HOUSEWARES (PER UNIT) 2 Trash Cans 1 Corkscrew/Bottle Opener 1 Cutting Board 1 Paring Knife 1 Ice Bucket w/ Tray 4 Glass Tumblers   * All listed items must meet or exceed Standards.   B-5 -------------------------------------------------------------------------------- Attachment 3 to Exhibit B Minor Maintenance Services For purposes hereof, the term “Minor Maintenance” will mean any of the following maintenance tasks, which will be performed by Manager on an “as needed” basis:     •   Replacement of light bulbs.     •   Flushing or plunging of toilets.     •   Quick examination of air conditioning unit prior to calling contractor.     •   Unlocking interior doors.     •   Guest service calls (e.g., to assist with TV’s or VCR’s).     •   Resetting or turning on circuit breakers.     •   Resetting button on garbage disposal.     •   Examination of air conditioner thermostats.     •   Instruction of guests on operation of equipment and appliances.     •   Adjustment of sliding doors or screen doors.     •   Inspection of the Unit.     •   Lubrication of door locks or other mechanisms.     •   Replacement of drapery hooks and glides. In addition. Manager will provide the following parts and supplies at no additional cost to Owner as part of Manager’s Minor Maintenance services:     •   Air conditioner filters.     •   Light bulbs other than fluorescent tubes.     •   Standard curtain hooks, pins and glides.     •   Toilet seats.     •   Moen cartridges.     •   Sliding glass door handle.     •   Standard light switch.     •   Electrical wall plate covers.     •   Batteries for TV remote control.     •   Minor lock adjustments and lubrication.     •   Door stop.     •   Fluid master valve.     •   Tile grout/tub caulking.   B-6 -------------------------------------------------------------------------------- Any items of maintenance, repair or replacement which are not specifically listed above will not be covered by the Minor Maintenance charge. Without limiting the generality of the foregoing, the following items will not be covered by the Minor Maintenance charge:     •   Television(s), clock radio(s) or other electronic devices.     •   Dishwasher or other appliances.     •   Ceiling fan(s).     •   Hot water heaters.     •   Wall coverings, floor coverings and furnishings.     •   Ceilings and interior walls.     •   Window glass, screens and framing.     •   Air conditioner air handler and condensing units.     •   Electrical or plumbing system repair.     •   Door glass, screens or roller replacement.     •   Damages resulting from excessive wear and tear of furnishings.     •   Interior spot painting.     •   Third party charges (including plumbing or electrician fees or expenses). Owner shall pay Manager an annual charge of $300 in consideration of Manager’s agreement to perform the Minor Maintenance set forth on this Attachment 3.   B-7 -------------------------------------------------------------------------------- Exhibit C Utilities and Services 1. In General. Owner will promptly pay all other costs and expenses of any kind whatsoever relating to the use, operation and maintenance of the Unit during the term of the Agreement (other than any such costs and expenses paid for by the condominium association for the Unit and any services which Manager expressly agrees to provide without cost to Owner in the Agreement) including electricity, telephone, cable television, internet access and other utilities and services of every kind furnished to the Unit. Manager may pay delinquent bills for the Unit to avoid the interruption of any utilities or other services to the Unit, in which event Manager may bill Owner for such charges plus a $25.00 surcharge. Expenses described in this Exhibit C are referred to as “Utility and Services Expenses.” Manager reserves the right to contract for, or to otherwise provide or obtain for the Unit, utilities or other services and to re-sell such utilities or other services to Owner, Owner’s guests or renters of the Unit for a profit so long as the terms and rates charged Owner for such utilities or other services do not exceed the prevailing rates generally charged individual consumers of such utilities or services. 2. Telephone Service. Manager will maintain a telephone switchboard and related facilities for telephone service to the Unit, and Owner will not install or permit any other telephone lines in the Unit during the term of the Agreement. Owner will install and maintain in the Unit, two (2) telephones (of the type specified by Manager) connected to Manager’s telephone switchboard. All long distance and local telephone calls will be charged to the registered occupant of the Unit at the rates determined by Manager in its sole discretion, and will be collected at check-out. Free local calls will be provided to the Unit Owner while Owner is occupying the Unit. All interior wiring and cabling shall be the responsibility of Owner. 3. Television Service. Owner agrees that the television(s) in the Unit will be connected to a cable and on-demand movie system operated by Manager or by the condominium association for the Unit. Manager may repair or modify such television(s), at Owner’s expense, if deemed appropriate by Manager. 4. Utility and Management Systems. Manager may, at Owner’s expense, install, replace or modify various utility or management systems for the Unit, including without limitation security and energy management systems, if deemed appropriate by Manager and approved by a majority of the Units in the Rental Management Program. 5. Internet Service. Owner agrees that the Unit will be connected to a wired or wireless internet access service via an internet service provider (ISP) to be selected by Manager or by the condominium association. Manager may repair or modify such at Owner’s expense, if deemed appropriate by Manager.   C-1 -------------------------------------------------------------------------------- Exhibit D Insurance Requirements 1. Required Insurance Coverages. Owner shall, at Owner’s expense, acquire and maintain in effect throughout the term of this agreement, bodily injury and property damage limited liability insurance with a combined single limit of not less than $1,000,000.00 per occurrence. Additionally, Owner will be solely responsible for acquiring and maintaining business interruption insurance for Owner’s portion of the Gross Income derived from this Agreement. All such policies and coverages shall be underwritten by an insurance company reasonably acceptable to Manager. Manager shall notify Owner immediately of any incident that might give rise to a liability claim, Owner is solely responsible for acquiring insurance covering the contents of the Unit. Manager shall not be liable for any damage to or destruction of Owner’s property, including but not limited to damage to furniture, equipment, appliances or any other property used or retained by Owner in the Unit. 2. Certificates of Insurance. Owner will deliver to Manager certificates of insurance certifying that (i) the above-described insurance coverages are in full force and effect, (ii) Manager and any franchisor will receive at least 30 days advance written notice before any such insurance policy is canceled for any reason, including without limitation any failure by Owner to pay any premium or to renew any insurance policy, and (iii) Manager, MHI Hotels Services, LLC, MHI Hospitality TRS, LLC, and their respective affiliates and the applicable franchisor (if any) will be named as additional insureds on such policies. Such certificates of insurance will be delivered to Manager within 10 days following the execution of the Agreement and on an annual basis thereafter. Failure to provide the required insurance coverages with an insurance company reasonably acceptable to Manager will be considered a material breach of the Agreement, and Manager may, at its option, obtain such insurance coverages at Owner’s expense, terminate the Agreement or exercise any other rights thereunder.   D-1 -------------------------------------------------------------------------------- Exhibit E Base Fee, Revenue Split 1. Owners Revenue Split. Owner will pay to Manager a base management fee (“Base Fee”) determined in the following manner:   Level    Description    Restrictions    Net Income    Rental    Manager’s Base Fee    Owner’s Commitment* (select one only) #1    337 Day Commitment No more than 7 days use 12/15-5/1    None    50% to Owner    50% of Net Rental Income          No more than 21 days use between 5/2-12/14             #2    323 Day Commitment No more than 14 days use 12/15-5/1    None    45% to Owner    55% of Net Rental Income          No more than 28 days use between 5/2-12/14               * Owner must initial next to the Commitment Level desired for Rental Management Program. If Owner fails to select one of the foregoing Commitment Levels, Commitment Level #1 will automatically be selected. 2. Definitions. The following terms will have the meanings set forth below: (a) Gross Rental Income. The term “Gross Rental Income” means actual collections by Manager solely from the rental of the Unit through the Rental Management Program and the Unit’s portion of any forfeited reservation deposits (i.e. the amount remaining from any forfeited reservation deposit paid with respect to that Unit after the Manager is paid its Base Fee from the forfeited deposit amount) but shall not include revenues generated by Manager through the sale of food, beverages, telephone services or other goods or services. (b) Commissions. The term “Commissions” means any commissions, fees, payments or other amounts paid to entities or individuals in connection with the   -1- -------------------------------------------------------------------------------- generation or collection of rental income, including, without limitation, travel agent and intermediary commissions and fees, credit card commissions and fees and marketing costs incurred by Manager pursuant to the Standards or any applicable Franchise System. Marketing expenses incurred by Manager other than pursuant to the Standards or Franchise System will be borne by the Manager. Total Commissions incurred by Manager in the operation of the Rental Management Program shall be allocated to Owner based upon the ratio of the Unit’s Gross Rental Income before Commissions to the aggregate Gross Rental Income from the rental of all units and rooms at the Hotel, multiplied by the total Commissions paid from the rental of all units and rooms at the Hotel. (c) Refurbishment Reserve. The term “Refurbishment Reserve” will mean any reserve account established by Manager and funded by Owner either directly or through deductions by Manager for the periodic refurbishment of the Unit as more particularly described in Section 3 of Exhibit B. (d) Hotel Expenses. The term “Hotel Expenses” means any Hotel franchise fees and charges, and credit card fees and bank charges relating to the Rental Management Program. Hotel Expenses incurred by Manager in the operation of the Hotel shall be allocated to Owner based on the ratio of the Unit’s Gross Rental Income before Commissions to the aggregate Gross Rental Income from all Units in the Rental Management Program. (e) Taxes and Assessments. All taxes, insurance premiums, condominium maintenance and other fees, charges and assessments (including without limitation any special Condominium association and Master Association assessments) levied on or with respect to the Unit including, without limitation, Shared Costs (as defined in the Declaration of Condominiums) unless paid directly by Owner. Manager shall be entitled to add a 10% service charge per occurrence for any taxes, premiums, maintenance or other charges or assessments paid by Manager on behalf of Owner. (f) Unit Owner Expenses. Any and all expenses and charges payable by a particular Owner to Manager pursuant to this Agreement, including, without limitation, Utility and Services Expenses, Repair and Replacement Charges, Cleaning Charges, unpaid housekeeping services provided to the Unit, Annual Administration Charge, Maintenance Charges, any Refurbishment costs in excess of the Refurbishment Reserve and expenses incurred by Manager in maintaining the standard housewares for the Unit. (g) Net Rental Income. Gross Rental Income less Commissions and Hotel Expenses allocated to the Unit. (h) Gross Owner’s Revenue. Net Rental Income less the Manager’s Base Fee. (i) Net Monthly Payment. The term “Net Monthly Payment” means the Gross Owners Revenue minus the Refurbishment Reserve, any unpaid Taxes and Assessments and Unit Owner Expenses.   -2- -------------------------------------------------------------------------------- 3. Payment of Net Monthly Payment to Owner. By the 20th day of each month, commencing in the month immediately following the first month in which the Unit is rented to a third party through the Rental Management Program, Manager shall (i) provide an accounting of the Gross Owner’s Revenue and Net Monthly Payment showing the Gross Rental Income from the rental of the Unit during such prior month, the deductions payable by Owner to Manager with respect to such month hereunder, any additions to or withdrawals from the Refurbishment Reserve (if a Refurbishment Reserve has been established by Manager), and any other applicable charges or expenses payable by Owner, and (ii) pay the Net Monthly Payment to Owner. In the event that the Net Monthly Payment for any month is negative, Owner shall, no later than the first of the following month, pay to Manager an amount equal to such negative amount 4. Sale or Transfer. Upon the expiration or earlier termination of the Agreement and if Manager does not in its discretion transfer confirmed reservations to other units in the Rental Management Program, Owner will be required to reach an agreement in writing with the purchaser or other transferee of the Unit regarding the allocation of the Net Monthly Payment between such parties; provided, however, that in the absence of any such written agreement, the Net Monthly Payment will be allocated between Owner and such purchaser or transferee on a pro rata basis based on the date of actual transfer of possession of the Unit. Upon transfer, the Refurbishment Reserve shall remain with Manager for the benefit of the transferee if the transferee elects to participate in the Rental Management Program with Manager. Owner shall coordinate times to show the Unit for purposes of a sale of the Unit with Manager. Manager shall attempt to accommodate such showings in a manner that does not adversely affect Rental Guest use. 5. Overdue Amounts. Any fees, charges, expenses or amounts payable by Owner hereunder which are not paid when due shall, commencing thirty (30) days following the due date, accrue interest at the rate of one and one-half percent (l 1/2%) per month (or such lesser rate as may be the highest permissible rate under applicable law) until paid by Owner. 6. Failure of Owner to Maintain Commitment Level. In addition to all other remedies provided by this Agreement, if Owner fails to make the Unit available in accordance with the Commitment Level selected and initialed above by Owner, upon such occurrence, Owner’s percentage of Net Rental Income set forth above in the revenue split illustration shall automatically be reduced to thirty five percent (35%) for the remainder of the Term of this Agreement. Owner shall abide by its initial Commitment Level notwithstanding a reduction in Net Rental Income described herein.   -3- -------------------------------------------------------------------------------- Exhibit F Term and Termination 1. Initial Term with Automatic Extensions. This Agreement will continue in full force and effect for a period of [Owner must initial one box]:     ¨ six (6) years*       OR     ¨ four (4) years from the date upon which the Owner obtains title to the Unit.   * As an incentive for selecting the six (6) year initial term, Owner will not be charged for minor maintenance services to the Unit for the first two (2) years of this Agreement. IF NO BOX IS CHECKED, THE INITIAL TERM WILL BE FOR SIX (6) YEARS COMMENCING ON THE DATE UPON WHICH THE OWNER OBTAINS TITLE TO THE UNIT. NOTWITHSTANDING THE FOREGOING, ON AN ANNUAL BASIS, THE TERM OF THIS AGREEMENT AUTOMATICALLY WILL BE EXTENDED FOR ADDITIONAL ONE-YEAR PERIODS UNLESS EITHER PARTY NOTIFIES THE OTHER PARTY IN WRITING AT LEAST 30 DAYS PRIOR TO THE NEXT ANNIVERSARY OF THE DATE THE OWNER FIRST OBTAINS TITLE TO THE UNIT THAT IT DOES NOT WISH TO SO EXTEND THE TERM HEREOF. IN EFFECT, UNLESS EITHER PARTY NOTIFIES THE OTHER PARTY IN WRITING THAT IT DOES NOT WISH TO EXTEND THE TERM OF THIS AGREEMENT, THE TERM OF THIS AGREEMENT AUTOMATICALLY WILL BE EXTENDED SUCH THAT THE TERM REMAINS AT ALL TIMES A 6-YEAR TERM OR 4-YEAR TERM, AS THE CASE MAY BE. By way of example, if neither party notifies the other party at least 30 days prior to the end of the first anniversary of the date the Owner first obtains title to the Unit, then the 6-year initial term or 4-year initial term of this Agreement, as the case may be, automatically will be extended for an additional 1-year period, and the same automatic extension of the term will occur in subsequent years during the term of this Agreement (as the same may be extended from time to time). NOTWITHSTANDING THE FOREGOING, THIS AGREEMENT SHALL NOT COME INTO EFFECT AND SHALL EXPIRE IN THE EVENT THAT THE OWNER HAS NOT OBTAINED TITLE TO THE UNIT ON OR BEFORE DECEMBER 31, 2008. 2. Termination upon Breach by Manager. If for any reason Manager violates any of the material terms of this Agreement and fails to correct such violation within 30 days after written notice thereof (or, if such violation cannot reasonably be cured within 30 days, fails to commence efforts to correct such violation within such 30 day period), Owner will have the right to terminate this Agreement immediately, in which event Manager will be given an additional 30 days to remove any Manager-owned contents from the Unit. IF OWNER TERMINATES THIS AGREEMENT FOLLOWING ANY SUCH UNCURED BREACH BY MANAGER, THEN MANAGER WILL BE LIABLE TO OWNER FOR ANY AND ALL GROSS OWNER’S   -1- -------------------------------------------------------------------------------- REVENUE EARNED WITH RESPECT TO RENTAL OF THE UNIT THROUGH THE DATE OF TERMINATION AND OWNER SHALL HAVE ALL RIGHTS AND REMEDIES TO RECOVER SUCH INCOME. 3. Termination upon Breach by Owner. If for any reason Owner violates any of the terms of this Agreement and fails to correct such violation within 30 days after written notice thereof, Manager will have the right, but is not required, to terminate this Agreement immediately. IF MANAGER TERMINATES THIS AGREEMENT FOLLOWING ANY SUCH UNCURED BREACH BY OWNER, THEN OWNER WILL BE LIABLE TO MANAGER FOR ANY AND ALL DAMAGES RESULTING FROM SUCH BREACH AND MANAGER SHALL HAVE ALL RIGHTS AND REMEDIES TO RECOVER SUCH DAMAGES. 4. Termination by Manager Upon Amendment to Condominium Documents. As set forth above in Paragraph 14 of the Agreement, if any condominium association documents or documents relating to the Master Association governing the Unit or any similar documents relating to the Unit are amended or actions taken that would adversely affect, prevent or restrict (i) the rental of the Unit by the Manager through the Rental Management Program or (ii) the management or operation of the Condominium, the Hotel Unit, the Hotel or the Property to the Standards and in accordance with the Agreement or any applicable Franchise or License Agreement or if Unit Owner supports any action by the Condominium association that would prevent or restrict the rental of the Unit by the Manager through the Rental Management Program (whether Owner votes for such amendment or action or not), such amendment or action shall be deemed a breach of the Agreement and Manager may seek any remedies available to it at law or in equity and Manager may, at its option, terminate this Agreement. 5. Termination by Manager. Manager shall be entitled to terminate this Agreement upon sixty (60) days prior written notice at any time prior to December 31, 2008.   -2- -------------------------------------------------------------------------------- SCHEDULE 1 The Owners of the Condominium Unit are: Owner:                                                                                                                                                                                                                                                        Address:                                                                                                                                                                                                                                                       Owner:                                                                                                                                                                                                                                                        Address:                                                                                                                                                                                                                                                       Owner:                                                                                                                                                                                                                                                        Address:                                                                                                                                                                                                                                                       Owner:                                                                                                                                                                                                                                                        Address:                                                                                                                                                                                                                                                       Owner:                                                                                                                                                                                                                                                        Address:                                                                                                                                                                                                                                                       The above named Owners hereby designate the person named below as the Primary Contact Person for Sian Resort Residences I Condominium (the “Condominium”), Unit Number:                     , to act as agent for the Owners, to make and receive all payments, and to make all elections and decisions of the Owners as authorized by this Agreement. Owner:                                                                                                                                                                                                                                                        Address:                                                                                                                                                                                                                                                      Home                                          Phone:                                          (    )                                                                                                                                 Work                                          Phone:                                          (    )                                                                                                                                 E-mail    address:                                                                                                                                                         Social Security or Taxpayer ID #:                                            -1- -------------------------------------------------------------------------------- Exhibit G Unit Owner Certification and Acknowledgement The undersigned, owner or contract purchaser of a condominium unit at the Sian Resort Residences I Condominium (“Owner”), hereby acknowledges, warrants, represents and agrees in connection with the execution of the Unit Rental Management Agreement (the “Agreement”) as follows: (a) Understanding and Professional Review of Agreement. Owner has read and understands the Agreement, including, without limitation, all of the Exhibits thereto, each of which constitutes an integral part of the Agreement. Owner acknowledges that he has had the opportunity to review the Agreement with his legal counsel, financial and tax advisers, and other professional advisers. (b) Use and Occupancy of Unit. Owner understands that he is not required to enter into the Agreement or to make the Unit (as that term is defined in the Agreement) available for rental through the Rental Management Program (as that term is defined in the Agreement). Owner understands that by entering into the Agreement he will grant manager the exclusive right to rent the Unit to Rental Guests (as that term is defined in the Agreement). (c) Other Available Methods of Rental. Owner acknowledges that he has been informed that there are other available methods for the rental of the Unit, including without limitation local rental agents. (d) No Pooling of Rental Amounts. Owner understands that any net monthly payment (as defined on Exhibit E to the Agreement) paid to him through his participation in the Rental Management Program will be based solely on the actual rental of his Unit rather than any pooling of rental amounts from units participating in the Rental Management Program. (e) No Representations, Estimates or Guarantees. Owner acknowledges that none of Manager (as that term is defined in the Agreement), developer or seller of the Unit, any franchisor of the Hotel (as that term is defined in the Agreement), nor any of their respective employees, agents or representatives, nor any other person or entity, has made any representations, suggestions, implications, statements or estimates as to any requirement that Owner participate in the Rental Management Program, or the number of times the Unit will be rented or the rental income, if any, Owner might receive through his participation in the Rental Management Program, or the participation of the Hotel as part of any franchise system. Owner acknowledges that he has not in any manner been induced to purchase the Unit by reason of the Rental Management Program, or any expected or anticipated rental income to be derived from his participation in such program, or the assurance, statement or representation of participation of the Hotel as part of any hotel franchise system. Owner acknowledges that his participation in the Rental Management Program may in fact result in a net loss to Owner. Owner acknowledges   -1- -------------------------------------------------------------------------------- that none of Manager, developer or seller of the Unit, any franchisor of the Hotel, nor any of their respective employees, agents or representatives, nor any other person or entity, other than Owner’s tax advisor (if at all), has given Owner any advice with respect to any tax structures or tax implications. This certification is executed by the Owner for the benefit of Manager and any franchisor of the Hotel and may be relied upon by such. The delivery of this certification is a condition to Manager’s execution and performance of the Agreement and Manager has relied on the acknowledgments set forth above in executing such Agreement. This certification will survive the termination or expiration of the Agreement and will be binding on the successors, heirs and assigns of Owner. In Witness Whereof this certification and acknowledgement is executed and delivered by the undersigned this              day of                     , 2006.   OWNER       -2- -------------------------------------------------------------------------------- Exhibit H The Owner hereby expressly understands, acknowledges, warrants, represents and agrees: (1) Any franchise or license agreement with respect to the Hotel (the “Franchise”) is between the Manager, as Franchisee, and the named franchisor under such Franchise (the “Franchisor”) only. (2) The Franchisor is not the owner, developer, operator, manager, seller, builder, broker, offer or, sponsor or lessor of the Unit, the Hotel, the Rental Management Program (as defined in the Agreement), the Condominium or the Property (as defined in the Agreement), and is not an affiliate of any of such persons or entities. (3) Any right to use the Franchisor’s licensed trademarks, service marks, systems or other intellectual property (collectively “Trademarks”) in connection with the Hotel is a right of the Manager under the Franchise and is limited strictly by the Franchise. The Owner has no right, title or interest whatsoever in or to the Trademarks or any other rights that are licensed to the Manager and may not use in any manner any of such Trademarks, and the Manager’s rights to use the Trademarks is subject to the terms, provisions, limitations and obligations of the Franchise, which may be terminated or expire in accordance with its terms without notice or liability to, or consent of, the Owner. The Franchisor has no obligation to renew or extend the Franchise and the Owner has no right, title or interest whatsoever in or to the Franchise or any of the rights or licenses granted therein and is not a third party beneficiary thereof and shall not object to or defend or take any other action against, delaying or impeding in any way any termination, expiration, modification or non-renewal of the Franchise. In the event that there is a change in Franchisor or any of the Franchise standards, Owner’s Unit must at all times comply with the standards of the new franchisor or the revised standards, as the case may be. (4) The Franchisor has no duty, obligation or responsibility of any kind (including, but not limited to, any contractual or fiduciary duty or obligation, express or implied) to the Owner or any mortgagee of a Unit under the Agreement, the Franchise, or otherwise. The Franchisor does not assume nor does it have any liability or responsibility for any financial statements, projections, or other financial information provided to an Owner by any person or entity. Owner agrees to look solely and exclusively to the Manager or developer with respect to any claims relating to the Hotel, Rental Management Program, the Agreement, Condominium, Property or their Unit. (5) Any Franchise will provide that it may be amended and modified from time to time by the Franchisor and the Manager, and the Franchisor may from time to time modify or change the Franchise System and any standards and requirements of such Franchise System without requirement of any consent from or notice to the Owner.   -3- -------------------------------------------------------------------------------- (6) The Franchisor is making no representation, warranty or guaranty or providing any assurances or promises with respect to the Hotel, the Units, the Rental Management Program, the Agreement, the Condominium, the Property, the developer or the Manager or any aspect thereof (including without limitation the Condominium and Property governing and disclosure documents), and the Franchisor is not acting as a principal, guarantor or surety with respect to the design, development, construction, sales, maintenance, rental, operation or management of the Hotel, Condominium, Property, Rental Management Program, the Agreement or any Unit or any aspect thereof. The Franchisor is not a partner or joint venturer with Manager, any developer or the Owner. (7) The Manager and any developer are not acting, nor do they have any authority to act, as an agent, representative or otherwise on behalf of the Franchisor with respect to the Hotel, the Condominium, the Rental Management Program, the Property, the Unit or the Trademarks or any aspect thereof. Nothing contained in this Agreement or otherwise shall modify the terms and conditions of the Franchise or any other agreement that is entered into between the Manager and a Franchisor. (8) The rights of the Franchisor under any Franchise will be solely and exclusively for the benefit of the Franchisor and its affiliates and shall not be deemed to create any right in or obligation or liability to any other person, including, but not limited to, the Owner, any condominium or other association, any developer or any governmental authority. No approval or consent by the Franchisor pursuant to its rights will constitute any assurance or promise of any sort by the Franchisor that any actions of Manager, the developer or any other person are in compliance with any legal or contractual obligations. (9) Pursuant to any Franchise, the Manager will require that the Owner maintain and authorize Manager to manage Owner’s Unit in accordance with the brand standards and requirements of the Franchise System, as such may be changed by the Franchisor from time to time. In addition to any rights of entry granted by Owner authorizing Manager to enter the Unit, Owner hereby grants to Franchisor and any independent contractors of Franchisor the right to enter into Owner’s Unit for the purpose of assessing compliance of the Unit with the brand standards and requirements of the Franchise System. The Owner shall cooperate and in no way interfere with or impede Manager in its operation and management of the Hotel and Rental Management Program in accordance with the Franchise and the Franchise System and any brand standards and requirements of such Franchise System. (10) The Franchisor will have the right to cause Manager to terminate any Unit from the Rental Management Program which is not in compliance with the Franchise System and each standard and requirement of such Franchise System. (11) Owner will indemnify and hold harmless Franchisor and its affiliates from and against any claims, demands, costs, expenses (including, without limitation,   -4- -------------------------------------------------------------------------------- attorneys’ fees) and damages incurred by Franchisor or any of its affiliates arising out of any incident, action, omission, fact or circumstance relating to the Unit, the Hotel, the Rental Management Program, the Condominium, the Property or the Agreement which occurs or exists at any time, whether during, before or after the term of the Agreement, including without limitation injury or death to any person or damage or destruction to property in, on or about the Unit, the Hotel, the Condominium or the Property, or otherwise related to or arising out of this Agreement, the Franchise, the Rental Management Program (as defined in the Agreement), the Unit, the Hotel, the Property or any aspect of any of same. (12) Owner acknowledges and agrees that where there is a conflict between the terms of this Exhibit and the remainder of the Agreement, the terms of this Exhibit shall control. (13) It is intended by Owner, and Owner agrees, that Franchisor, while not a party to this Agreement, is to be a third party beneficiary of the provisions of this Exhibit and Exhibit “G” and of Paragraph 15(g) and any other provisions of the Agreement inserted for the benefit of Franchisor and shall have the right to directly assert all available rights and remedies against Owner, including, without limitation, the enforcement of the indemnity and hold harmless provisions set forth above. (14) The understandings, acknowledgements, representations, warranties, agreements and obligations of Owner set forth in this Exhibit H, including without limitation the indemnity and hold harmless obligations contained in Paragraph 11 above, will survive termination or expiration of the Agreement and will be binding on the successors, heirs and assigns of Owner.   -5- -------------------------------------------------------------------------------- EXHIBIT I Site Plan   26 -------------------------------------------------------------------------------- LOGO [g79817img11.jpg] -------------------------------------------------------------------------------- EXHIBIT J Master Association Amendment The Master Association Documents shall be amended to incorporate the following changes: 1. Reflect that the Master Association assessments payable by the owner of a Hotel Unit, as defined in the Master Association Documents, will be twenty (20) times the assessment charged to the owner of a residential unit. 2. Revise the schedules to reflect Item 1 above.   27 -------------------------------------------------------------------------------- EXHIBIT K Management Agreement   28 -------------------------------------------------------------------------------- FACILITIES MANAGEMENT AGREEMENT THIS FACILITIES MANAGEMENT AGREEMENT (the “Agreement”) is made as of the              day of             , 2006, by and between SIAN OCEAN RESIDENCES & RESORT MASTER ASSOCIATION, INC., a Florida not-for-profit corporation (hereinafter referred to as the “Association”), whose address is 4001 South Ocean Drive, Hollywood, Florida 33409 and MHI Hospitality TRS, L.L.C., a Delaware limited liability company (hereinafter referred to as “Manager”), having its principal office at 6411 Ivy Lane, Suite 510, Greenbelt, Maryland 20770. RECITALS: WHEREAS, the Association consists of the condominium units which are a part, and which may be made a part following the date hereof, of the Sian Ocean Residences & Resort, South Ocean Drive, Hollywood, Florida (the “Community”). The function of the Association is the operation and management of the Common Property of the Community and all such other duties as are set forth in the Declaration of Easements, Covenants, Conditions and Restrictions for Sian Ocean Residences and Resort Master Association, as amended from time to time (“Declaration”). WHEREAS, the Association desires to employ Manager as the sole and exclusive operator and manager of the swimming pool to be located along the intracoastal waterway and identified as the Resort Pool on the site plan attached as Exhibit 1 (the “Site Plan”), the walkway between the Resort Pool and the Sian Resort Residences I Condominium (the “Condominium Hotel”), the service road leading from South Ocean Drive to the Condominium Hotel and the turnaround to be located at the end of such service road (the “Service Road”), the parking facility on the West Side of South Ocean Drive and the related landscaping along the Service Road and such walkway (collectively, the “Managed Elements”). WHEREAS, Manager is the lessee of the commercial unit of the Condominium Hotel (the “Hotel Unit”) and has entered into a management agreement pursuant to which the Condominium Hotel will be operated as a hotel (the “Hotel”). WHEREAS, the Managed Elements will be an integral part of the experience of the guests of the Condominium Hotel and the Association acknowledges and agrees that the Managed Elements will be managed and operated hereunder in a manner to facilitate their use by hotel guests as well as the members of the Association in accordance with the terms and provisions of the Declaration. WHEREAS, in consideration of Manager’s agreement to provide the Management Services (as hereinafter defined) the Association has agreed to grant to Manager the sole and exclusive right to provide food and beverage and other services to patrons of the Resort Pool pursuant to the terms and conditions of a Concession Agreement dated the date hereof (the “Concession Agreement”).   1 -------------------------------------------------------------------------------- WHEREAS, the Association has retained a third party to operate and manage the Common Property other than the Managed Elements (the “Coral Managed Property”) and Manager shall have no responsibilities or obligations with respect to the Coral Managed Property. NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE I Management Section 1.1 Sole Operator and Manager. The Association hereby appoints Manager as the sole and exclusive manager of the Managed Elements to supervise and direct the management, operation, maintenance and repair or replacement of the Managed Elements in the manner as set forth in the Declaration. All services and actions provided under this Agreement shall be performed on the Association’s behalf and at the Association’s expense, and Manager hereby accepts such position on the terms and conditions set forth herein. Subject to Section 1.10 and the requirements of the budget, the Manager shall have discretion and control in all matters relating to the management and operation of the Managed Elements, including, without limitation, hours and scope of operations, security, life and safety issues, procedures for access to the Resort Pool, employment policies, procurement of inventories, supplies and services and, generally, all activities necessary for the operation of the Managed Elements. The Manager shall not have any responsibility for the management or supervision of individual Units or the Coral Managed Property. The activities of Manager with respect to the operation of the Condominium Hotel shall not be considered to be a conflict of interest or otherwise obligate Manager to take any action. The Association represents and warrants that no person or entity other than Manager is presently under contract to manage or operate the Managed Elements. The Manager shall have the exclusive authority for keeping and maintaining the Managed Elements fully equipped and maintained in accordance with the Hotel Standards (as defined in the Declaration), subject to construction, fire and safety standards and any applicable budgets. Section 1.2 Cost of Operations. The Association shall bear the entire cost and expense incurred by Manager in connection with the management, operation, maintenance and repair or replacement of the Managed Elements. The Association shall also bear the cost of acquiring and maintaining pool chairs and lounges and other inventory for the Resort Pool consistent with the Hotel Standards. Section 1.3 Budgets and Reserves. In accordance with the Association Documents, the Manager shall prepare an annual budget for the management, operation and maintenance of the Managed Elements, including the amounts to be allocated for reserves for replacement, repair and upgrading of the Managed Elements as may be reasonably necessary to cause the Managed Elements to comply with Hotel Standards and the Declaration (“Reserve Amounts”). Such budgets and the Reserve Amounts shall include, without limitation, amounts necessary to maintain and replace, as reasonably determined by Manager, pool chairs and lounges, repair and replace pool and deck lighting, repair and resurface the pool and pool deck and repair and replace pool equipment including pumps, filters and the like regardless of whether such costs and   2 -------------------------------------------------------------------------------- expenses are capital costs or operating costs. Such budgets and Reserve Amounts shall be submitted for approval by the Board of Directors of the Association (the “Board”) pursuant to the Declaration. The Manager will consult with the Association whenever there are deviations between actual and budget line items. The Association shall disburse funds to the Manager pursuant to the approved budgets as provided in such budgets. The Association also shall allocate from Annual Assessments (as defined in the Declaration) the Reserve Amounts approved by the Board and as necessary for purposes of maintaining the Managed Elements consistent with the Hotel Standards and the Declaration. Section 1.4 Bookkeeping. Manager agrees to handle the bookkeeping for the Association with respect to the Managed Elements; said bookkeeping will include all monthly disbursements in connection with maintaining and operating of the Managed Elements. Not later than the twentieth (20th) day of each month, the Manager will render a detailed financial report to the Association’s Board. Section 1.5 Books and Records. Manager agrees that all books and records will be available during normal business hours for the purpose of an audit of said books and records and shall assist the manager of the Coral Managed Property in the preparation of the annual audit in accordance with the provisions of Chapter 720 of the Florida Statutes, and any other applicable rules and regulations, at the Association’s expense. Section 1.6 Repair and Maintenance. Manager is authorized at the expense of the Association to make, or cause to be made, such routine repair work or normal maintenance work to the Managed Elements as may be required for the operation or physical protection of the Managed Elements. The expenditures to be incurred for any one item or replacement shall be in accordance with the approved budget or the reserves set aside for such purpose, unless authorized specifically by the Association’s President or his duly authorized representative, which authorization shall not be unreasonably held or delayed and which authorizations shall be given if such expenditure or replacement is necessary to maintain compliance with Hotel Standards. Under such circumstances as Manager shall deem to be an emergency, the Manager will cause emergency repairs to be made for the following reasons: (i) to avert danger to life and/or property; (ii) when such repairs are necessary immediately for the preservation and safety of the property; (iii) for the safety of the members of the Association; or (iv) when such repairs are required to be made to avoid the suspension of any service to the Association. Such emergency repairs may be made by the Manager irrespective of the budget limitation imposed herein. Notwithstanding this authority as to emergency repairs, it is agreed that the Manager, if at all possible, will notify the President of the Association, or his designated representative, immediately concerning the ordered emergency repairs. Supervision of extraordinary repairs (such as fire, flood or windstorm) and significant capital improvements (such as building or roofing) will be billed at the rate of $50.00 per hour. Section 1.7 Subcontractors. Subject to the approval of the Board and consistent with the approved budget, the Manager is hereby authorized to enter into contracts, equipment leases, agreements or arrangements pertaining to or otherwise reasonably necessary for the management, operation, maintenance, repair and or replacement of the Managed Elements on behalf of the Association with the prior approval of the Board. Such arrangements may relate to,   3 -------------------------------------------------------------------------------- without limitation, re-surfacing the Resort Pool and surrounding deck, maintenance, repair and replacement of pool equipment and lighting, pool deck cleaning and maintenance, routine landscape maintenance, janitorial maintenance (where applicable), refuse collection, vermin exterminating and such other necessary service or services as the Board shall deem advisable. Such contracts will be signed by the Association’s President or his designated representative. Section 1.8 Inspections. Manager will conduct regular inspections of the Managed Elements on a not less than weekly basis and will take action to correct any deficiencies of the service performed for the Association and report such irregularities to the Association’s President or his designated representative. Other management inspections will include overseeing and supervising duly authorized routine work being performed on the Managed Elements on behalf of the Association. Section 1.9 Compliance. Manager will take such action as may be necessary to comply promptly with any and all orders or requirements affecting the Managed Elements placed thereon by any governmental authority having jurisdiction, and orders of the Board of Fire Underwriters, or other similar bodies subject to the same limitation. The Manager, however, shall not take any action under this paragraph so long as the Association is contesting or has affirmed its intention to contest any such order or requirement. The Manager shall promptly, and in no event later than seventy-two (72) hours from the time of their receipt, notify the Association in writing of all such orders and requirements. Section 1.10 Rules and Regulations. Manager shall be entitled to establish and modify from time to time, with the prior approval of the Board, rules, regulations and notices with respect to the Managed Elements and ensure that all Members, Members Permittees (as defined in the Declaration) and guests using the Managed Elements (“Pool Patrons”) comply therewith. Such rules and regulations may relate to, among others, the hours and scope of operation of the Resort Pool, the use of the Resort Pool for private functions, the behavior of patrons of the Resort Pool and the use of the Resort Pool by Persons other than Pool Patrons provided that such rules, regulations and notices do not discriminate among members of the Association and are consistent with the Declaration. Manager shall propose to the Board, and recommend such modifications from time to time as it deems reasonable and appropriate, a fee schedule and reservation and use protocol for private use of the Resort Pool deck for private functions by Members, Members Permittees or guests. The Association hereby authorizes Manager to enforce any such rules and regulations so adopted by Manager as permitted by the Declaration. Section 1.11 Required Filings. Manager will prepare for execution and filing by the Association’s Board of Directors any forms, reports and returns which may be required by law in connection with the operation of the Managed Elements. Section 1.12 Posting of Rules. Manager shall see that all Members, Members Permittees (as defined in the Declaration) and guests are informed with respect to such rules, regulations and notices as may be promulgated by the Association from time to time and ensure that said Members, Member Permittees (as defined in the Declaration) and guests conform thereto.   4 -------------------------------------------------------------------------------- Section 1.13 Relationships with Members. Manager shall maintain business like relations with Members, whose service requests shall be received, considered and recorded in a systematic fashion in order to show the action taken with respect to each. Manager shall report complaints of a serious nature to the Board with appropriate recommendations. Section 1.14 Association. All actions taken by Manager under the foregoing paragraphs (the “Management Services”) shall be done as the agent of the Association, and all obligations or expenses incurred thereunder shall be for the account, on behalf, and at the expense of the Association. Manager shall not be obliged to make any advance to or for the account of the Association or to pay any sum, except out of the funds held or provided as aforesaid, nor shall Manager be obliged to incur any liability or obligations for the account of the Association without the assurance that the necessary funds for the discharge thereof will be provided. ARTICLE II [Intentionally Omitted] ARTICLE III Term Section 3.1 Term. The initial term of this Agreement shall be for a period of ten (10) years, commencing on the date first referenced above. The term shall automatically renew for successive additional five (5) year terms unless either party serves notice with cause at least ninety (90) days prior to the expiration of the applicable term of its intent not to renew. Section 3.2 Insolvency. In the event a petition in bankruptcy is filed by or against the Manager or Association, or in the event that the Manager or Association shall make an assignment for the benefit of creditors, either party hereto may terminate this Agreement effective upon written notice to the other. Section 3.3 Breach and Cure. In the event that Manager or the Association fails to perform its obligations under this Agreement or otherwise defaults hereunder, the non-defaulting party shall give the other party written notice specifying the default, and the defaulting party shall have thirty (30) days from the date of such notice to cure the default. If the defaulting party has not cured such default within thirty (30) days then the non-defaulting party may terminate this Agreement. Section 3.4 Termination. Either party may terminate this Agreement on ninety (90) days prior written notice to the other in the event Manager is neither the licensee of a hotel franchise for the Condominium Hotel nor the owner or lessee of the Hotel Unit. Section 3.5 Accounting Upon Termination. Upon termination, the parties shall account to each other with respect to all matters outstanding as of the date of termination, and the   5 -------------------------------------------------------------------------------- Association shall furnish the Manager security, satisfactory to the Manager, against any outstanding obligations or liabilities which the Manager may have incurred hereunder and all management fees through the date of termination shall be paid in full. ARTICLE IV Compensation Section 4.1 Compensation of Manager. In consideration for the exclusive right to provide food and beverage and other services and amenities at the Resort Pool pursuant to the Concession Agreement, Manager’s compensation for services rendered and as described in this Agreement shall be ten dollars ($10.00) per month. Section 4.2 Reimbursement by Association. It is specifically understood and agreed that Manager shall perform all of the Management Services hereunder at no cost and expense whatsoever to itself, but solely at the cost and expense of the Association. All of the Management Services shall be rendered on the basis of “out-of-pocket” costs and expenses, and the Association shall pay or reimburse Manager for all costs and expenses incurred by Manager in providing services, materials and supplies to the Association or otherwise under this Agreement, including specifically, but not limited to: the cost of all employees of Manager for the time spent upon performance of matters required by the terms of this Agreement. Without limiting the foregoing, the Association will pay or reimburse Manager separately for the following services or costs:     (a) Postage, telephone calls, office supplies, and all costs necessary in the performance of obligations under this Agreement.     (b) All costs expended by Manager for materials, supplies and services including the management and overhead expenses of Manager’s office operations, in addition to the employees that Manager may secure, for the performance of the maintenance, repair and operations, and expenses, such as mileage, tolls, air fare, and similar expenses.     (c) All applicable sales taxes.     (d) Any other amount expended by Manager at the direction and request of the Association, or for the benefit of the Association. Section 4.3 Employees. Manager is authorized to subcontract such duties as it in its reasonable discretion deems to be efficient or necessary provided, however, that the salaries, wages and other compensation and fringe benefits, union dues, insurance, employer’s and employees’ taxes, and vacation (collective, “Wages”) of such employees and personnel shall be negotiated by Manager and subject to the Association’s approval (except in the event of an engagement where the total obligation of the Association is less than $500). Additionally, at the expense of Manager, executive personnel of Manager shall be charged with the performance of Manager’s obligations under this Agreement and with the general supervision, direction and control of on-site personnel performing services in respect of the Managed Elements. Employees of Manager who have signing authority in respect of any accounts shall be subject to   6 -------------------------------------------------------------------------------- the Association’s approval. All employees who are responsible for the handling of the Association’s money shall be bonded by a fidelity bond, at the expense of the Association. Notwithstanding anything to the contrary in this Section 4.3 or elsewhere in this Agreement, the Association acknowledges and agrees that Manager may subcontract with MHI Hotels Services LLC, the manager of the Hotel, to perform any or all of the Management Services. ARTICLE V Indemnity Section 5.1 Indemnification by the Association. The Association shall indemnify Manager and save it harmless from and against all claims, damages, losses and liabilities, including all costs, fees and reasonable attorneys’ fees and expenses in connection therewith, arising out of acts or omissions of the Association, its officers and directors, including, without limitation any damage to property, or injury to, or death of persons (including the property and persons of the parties hereto, and their agents, subcontractors and employees) occasioned by or in connection with gross negligence and willful misconduct of the Association or Association’s agents (other than the Manager or the Manager’s agents). Section 5.2 Indemnification by Manager. Manager shall indemnify Association and save it harmless from and against all claims, damages, losses, liabilities, including all costs, fees and reasonable attorneys’ fees and expenses in connection therewith, arising out of acts or omissions of the Manager or its employees or agents including without limitation any damage to property, injury to, or death of persons (including the property and persons of the parties hereto and their agents, subcontractors and employees) occasioned by or in connection with the gross negligence or willful misconduct of the Manager or the Manager’s agents or employees. ARTICLE VI Remedies Section 6.1 Failure to Provide Funds. In the event Association (i) fails to disburse funds requested by Manager relating to the operation of the Managed Elements pursuant to the budget or in respect of Reserve Amounts (ii) fails to reimburse Manager for actual expenses incurred by Manager in connection with the Management Services or (iii) fails to adopt a budget at levels sufficient to permit Manager to maintain the Managed Elements in a manner consistent with the Hotel Standards and such breach is not cured within thirty (30) days after written notice from Manager to the Association, the Manager shall be entitled to either submit the dispute to arbitration in accordance with Section 6.3 below, pursue its remedies under Section 6.2 below or to expend its own funds for such purpose and seek reimbursement from the Association for such costs, together with interest thereon, from the date of demand for reimbursement on the Association until repayment at the interest rate published in the Wall Street Journal money rates section (eastern edition) from time to time as the prime rate plus two percent (2%). If the Wall Street Journal ceases to publish the prime rate, and such prime rates are no longer generally published or are in limited, regulated or administered by a governmental or quasi-governmental body, Manager, at its reasonable discretion, shall select a comparable interest rate index. In the event the Association fails to pay the reimbursement, together with interest thereon, within thirty (30) days of written demand, then Manager shall be entitled to recover reasonable attorney fees   7 -------------------------------------------------------------------------------- and costs of collection. Manager shall be entitled to pursue its equitable and legal remedies in state or federal court in the event the Association fails to pay the reimbursement and interest thereon as demanded by Manager and shall not be required to arbitrate such issue unless a Dispute (as hereinafter defined) is submitted by the Association to binding arbitration pursuant to Section 6.3 below within thirty (30) days of receipt by the Association of Manager’s demand for payment. If the Association or the Manager disputes the failure of the Association to comply with the requirements of Section 6.1(iii) (a “Dispute”), either party may submit the dispute to arbitration in accordance with Section 6.3 of this Agreement. If the Association fails to submit a Dispute to arbitration pursuant to Section 6.3 within the thirty (30) day period specified above, it shall be deemed to have irrevocably waived its right to arbitrate such Dispute. In the event the Association elects to submit the Dispute to arbitration in accordance with Section 6.3 of this Agreement, Manager may elect to expend funds in a manner consistent with Hotel Standards and the Association shall be required to reimburse Manager for such advances, together with interest thereon, unless the arbitrator determines that the expenditure of such funds was not required to maintain the Managed Elements in a manner consistent with the Hotel Standards. Section 6.2 Equitable Remedies. The parties hereto recognize and agree that an award of damages may be insufficient to compensate Manager for a breach of this Agreement and, in particular, a breach arising from a failure by the Association to comply with its obligations under Article I hereof and the obligations of the Board to operate the Managed Property in accordance with the Hotel Standards as required by the Declaration. Accordingly, the parties agree that in the event of a breach by the Association, Manager shall be entitled to avail itself of any available equitable remedy including, without limitation, specific performance and injunctive relief. Section 6.3 Arbitration. The Association may elect to pursue binding arbitration to resolve a Dispute provided such Dispute is submitted to arbitration within thirty (30) days of the Association’s receipt of written demand for payment from Manager. The Manager may elect to pursue binding arbitration at any time in the event of a dispute arising under 6.1 (iii). Any such arbitration shall be administered by the American Arbitration Association in accordance with the current Commercial Arbitration Rules of the American Arbitration Association. Any Dispute to be settled by arbitration shall be submitted to the American Arbitration Association in Broward County, Florida and may be initiated by means of written notice to the other party and the American Arbitration Association. The parties to the dispute shall attempt to designate one arbitrator from the American Arbitration Association who has not less than ten (10) years experience in the hospitality industry. If they are unable to do so within thirty (30) days after written demand thereof, the American Arbitration Association may designate an arbitrator who has not less than ten (10) years experience in the hospitality industry. The arbitration shall be final and binding and enforceable in any court of competent jurisdiction. In any such arbitration proceeding an inspection report from Holiday Hospitality Franchising, Inc. (the “Licensor”) regarding the Hotel indicating that any aspect of the Managed Elements are not in compliance with the Hotel Standards, shall be conclusive and irrebutable evidence of the failure of the Association to adopt a budget at levels sufficient to permit Manager to maintain the Managed Elements in a manner consistent with the Hotel Standards if the Manager has included such items in the proposed budget and such items were not included in the budget approved by the Board and the arbitrator shall render an award in favor of Manager and shall require the Association to reimburse Manager for any expenditures made in respect of the matter which is   8 -------------------------------------------------------------------------------- the subject of such Dispute, together with interest thereon and the costs of collection including all costs associated with the arbitration. The arbitrator shall award attorneys’ fees (including those for in-house counsel) and costs to the prevailing party. ARTICLE VII Miscellaneous Provisions Section 7.1 Amendment and Modification. This Agreement cannot be amended or modified except in writing signed by both parties. Section 7.2 Fees and Costs. In the event that either party brings a legal action to enforce its rights hereunder the prevailing party will be entitled to be reimbursed for attorneys fees and costs whether arising before or at trial, on appeal, in bankruptcy or in post judgment collection. Section 7.3 Notices. All notices required hereunder shall be sent via first class mail or hand delivery to the addresses indicated on the first page of this Agreement or to such other address as directed by the parties from time to time. The parties hereto have executed this Facilities Management Agreement on the day and year first above written.   SIAN OCEAN RESIDENCES & RESORT MASTER ASSOCIATION, INC. By:      Name:      Title:      MHI HOSPITALITY TRS, L.L.C. By:      Name:      Title:        9 -------------------------------------------------------------------------------- EXHIBIT L Rental Program Fees for Use of Unsold Units and Other Terms Purchaser shall pay to Seller a fee with respect to any Unit owned by Seller and which Seller makes available to Purchaser for use as a hotel room and which offer Purchaser accepts from Seller for such purpose provided such Unit meets Franchisor’s brand standards and Purchaser receives confirmation of such from Franchisor (each such Unit a “Seller Unit”) determined as follows: 60% of Net Rental Income received by Purchaser from the rental of such Seller Unit less any Unit Owner Expenses; Net Rental Income shall equal Gross Rental Income of the Seller Unit less Commissions and Hotel Expenses; Seller shall be responsible for all Taxes and Assessments; Seller shall make Units that have not been conveyed to unaffiliated third parties available to Purchaser to comply with 200 minimum Unit threshold contained in License Agreement. Seller can withdraw such Seller Units at any time as they are sold and Seller can withdraw the units that have not been conveyed to unaffiliated third parties at any time provided a sufficient number of units are in the Rental Program to comply with 200 unit minimum. Once a Seller Unit is conveyed by Seller to an unaffiliated third party, such Seller Unit shall no longer be part of the Rental Program unless the purchaser of such unit elects, in its sole discretion, to execute a Rental Agreement; and Terms used in this Exhibit and not defined herein or in the Agreement shall have the meaning ascribed to such terms in the form Rental Agreement attached hereto as Exhibit H. All other terms of the form Rental Agreement attached hereto as Exhibit H that are not inconsistent with the terms of this Exhibit L shall apply to the Seller Units, including, without limitation, the terms and provisions set forth in Exhibit H of the form Rental Agreement. Without limiting the foregoing, Seller agrees that as long as the License Agreement remains in effect, whether or not Seller physically signs a Rental Agreement for each participating Seller Unit, the provisions set forth in Exhibit H to the form Rental Agreement will apply automatically to each participating Seller Unit, without requirement of notice to or consent of Seller, and Seller expressly acknowledges and agrees to all of the terms and provisions of such Exhibit H to the Rental Agreement.   30 -------------------------------------------------------------------------------- EXHIBIT M Declaration of Condominium   31 -------------------------------------------------------------------------------- PROSPECTUS FOR SIAN RESORT RESIDENCES I CONDOMINIUM THIS PROSPECTUS CONTAINS IMPORTANT MATTERS TO BE CONSIDERED IN ACQUIRING A CONDOMINIUM UNIT. THE STATEMENTS CONTAINED HEREIN ARE ONLY SUMMARY IN NATURE. A PROSPECTIVE PURCHASER SHOULD REFER TO ALL REFERENCES, ALL EXHIBITS HERETO, THE CONTRACT DOCUMENTS, AND SALES MATERIALS. ORAL REPRESENTATIONS CANNOT BE RELIED UPON AS CORRECTLY STATING THE REPRESENTATIONS OF THE DEVELOPER. REFER TO THIS PROSPECTUS AND ITS EXHIBITS FOR CORRECT REPRESENTATIONS.   1 -------------------------------------------------------------------------------- THIS CONDOMINIUM WILL BE CREATED AND UNITS WILL BE SOLD IN FEE SIMPLE INTERESTS. See Section 1 of this Prospectus and Attachment “C” to this Prospectus (Purchase and Sale Agreement). RECREATIONAL FACILITIES MAY BE EXPANDED OR ADDED WITHOUT CONSENT OF UNIT OWNERS OR THE CONDOMINIUM ASSOCIATION. See Section 2 of this Prospectus and Section IX(C) of the Declaration of Condominium for Sian Resort Residences I Condominium (“Declaration”). THE UNITS MAY BE TRANSFERRED SUBJECT TO A LEASE. See Section 4 of this Prospectus and Section XVII(H) of the Declaration THE DEVELOPER HAS THE RIGHT TO RETAIN CONTROL OF THE CONDOMINIUM ASSOCIATION AFTER A MAJORITY OF THE UNITS HAVE BEEN SOLD. See Section 5 of this Prospectus, Section 718.301, Florida Statutes, and Section 4.15 of the Bylaws of the Association. THERE WILL BE A CONTRACT FOR THE MANAGEMENT OF THE CONDOMINIUM PROPERTY. See Section 4 of this Prospectus. THE SALE, LEASE OR TRANSFER OF UNITS IS RESTRICTED OR CONTROLLED. See Section 6 of this Prospectus and Section XVII(H) of the Declaration. THE HOTEL OPERATOR HAS A LIEN RIGHT AGAINST EACH UNIT TO SECURE THE PAYMENT OF SHARED COSTS OR OTHER EXACTIONS COMING DUE FOR THE USE, MAINTENANCE, OPERATION, UPKEEP AND REPAIR OF THE SHARED COMPONENTS, ALL AS DEFINED IN THE DECLARATION OF CONDOMINIUM. THE FAILURE TO MAKE THESE PAYMENTS MAY RESULT IN FORECLOSURE OF THE LIEN ON THE INDIVIDUAL UNITS. See Section 9 of this Prospectus and Article XIII of the Declaration attached hereto as Exhibit “A”.   2 -------------------------------------------------------------------------------- INDEX SUMMARY OF CERTAIN ASPECTS OF THE OFFERING             Page 1.    Description of Condominium    1 2.    Expansion of Recreational Facilities    1 3.    Leasing of Developer-Owned Units    1 4.    Management of Condominium Property    2 5.    Transfer of Control of the Association    3 6.    Restrictions on Use of Units and Common Elements and Alienability    3 7.    Utilities and Certain Services    8 8.    Apportionment of Common Expenses and Ownership of the Common Elements    9 9.    Shared Costs    9 10.    Development Fee; The Agreement for Sale; Escrow Deposits    9 11.    Sales Commissions    11 12.    Identity of Developer    11 13.    Contracts to be Assigned by Developer    11 14.    Estimated Operating Budget for Condominium Association    11 15.    Easements Located or to be Located on the Condominium Property    12 16.    Disclosures    12 17.    Sian Ocean Residences & Resort Master Association    16 18.    Evidence of Ownership    16 19.    Conversion    16 20.    General    17 21.    Definitions    17 22.    Effective Date    17 Schedule “A” (Number of Bathrooms and Bedrooms in each Unit)   3 -------------------------------------------------------------------------------- EXHIBITS TO THE PROSPECTUS   A. Declaration of Condominium     1. Introduction and Submission     2. Definitions     3. Description of Condominium     4. Restraint Upon Separation and Partition of Common Elements     5. Ownership of Common Elements and Common Surplus and Share of Common Expenses; Voting Rights     6. Easements     7. Amendments     8. Maintenance and Repairs     9. Additions, Alterations or Improvements by Unit Owner     10. Operation of the Condominium by the Association; Powers and Duties     11. Determination of Common Expenses Fixing of Assessments Therefore     12. Collection of Assessments     13. Obligation for Expenses Relating to the Hotel Unit     14. Insurance     15. Reconstruction or Repair After Fire or Other Casualty     16. Condemnation     17. Use and Occupancy Restrictions and Hotel Disclosures     18. Compliance, Enforcement and Default     19. Termination of Condominium     20. Additional Rights of Mortgagees and Others     21. Covenant Running with the Land     22. Disclosures     23. Sian Ocean Residences & Resort Master Association     24. Additional Provisions     Exhibit “1”   Legal Description     Exhibit “2”   Boundary Survey-Plot Plan     Exhibit “3”   Schedule of Percentage Shares of Ownership of Common Elements and Common Surplus and Responsibility for Common Expenses     Exhibit “4”   Bylaws of Condominium Association                            Rules and Regulations – Schedule A to Bylaws     Exhibit “5”   Articles of Incorporation of Condominium Association   B. Estimated Operating Budget   C. Form of Purchase Agreement   D. Evidence of Ownership   E. Maintenance and Service Contracts   F. Conversion Inspection Report   4 -------------------------------------------------------------------------------- G. Certificates of Occupancy/Completion   H. Termite Inspection Report   I. Letter from Municipality   J. Escrow Agreement   K. Receipt for Condominium Documents   L. Management Agreement   M. Government Permits   N. Sian Ocean Residences & Resort Master Association Documents   O. Additional Restrictions and Easements   5 -------------------------------------------------------------------------------- SUMMARY OF CERTAIN ASPECTS OF THE OFFERING   1. Description of Condominium The name of the condominium is Sian Resort Residences I Condominium (the “Condominium”). The Condominium will contain one (1) building having a total of three hundred ten (310) Units, including three hundred nine (309) Residential Units and one (1) Hotel Unit, located at 4000 South Ocean Drive, Hollywood, Florida 33019. MCZ/Centrum Florida XIX, L.L.C., a Delaware limited liability company (the “Developer”), is the owner of the unsold Units in the Condominium which are being offered for sale pursuant to this Prospectus. The number of bedrooms and bathrooms in each Unit in the Condominium is set forth on Schedule “A” attached hereto. The Condominium will consist of the Units described herein, the Common Elements described in the Declaration of Condominium attached hereto as Attachment “A”. As described in greater detail, many of the recreational and other commonly used facilities are not part of the Common Elements, but rather are part of the Shared Components (which are part of the Hotel Unit). Accordingly, control of those facilities is vested in the Hotel Operator, rather than the Association and the recreational facilities described in the section hereof entitled “Recreational and Certain Other Commonly Used Facilities Constructed Within the Condominium Property”. The Condominium is being created by conversion of previously existing improvements which were completed approximately in 1973 as a residential apartment complex. All of the Improvements and Units have been previously occupied. THE CONDOMINIUM WILL BE CREATED AND UNITS WILL BE SOLD IN FEE SIMPLE INTERESTS. Title to the Units will be conveyed by Special Warranty Deed.   2. Expansion of Recreational Facilities RECREATIONAL FACILITIES MAY BE ADDED WITHOUT CONSENT OF UNIT OWNERS OR THE ASSOCIATION. See Section IX(C) of the Declaration for further details. The Developer reserves the right at any time to add recreational facilities to the Common Elements of the Condominium and the Hotel Operator reserves the right at any time to eliminate, provide, alter or expand recreational facilities of the Hotel Unit as the Hotel Operator deems appropriate. The consent of the Unit Owners or the Condominium Association shall not be required for any such construction, expansion or other determination. The cost of any such construction or expansion shall be borne exclusively by the Developer or the Hotel Operator, as applicable. The Developer and the Hotel Operator are not obligated, however, to so expand any facilities or provide additional facilities.   3. Leasing of Developer-Owned Units THE UNITS MAY BE TRANSFERRED SUBJECT TO A LEASE. See Section XVII(H) of the Declaration for further details. As it is intended that the Units may be used for transient and/or hotel rentals, the Developer reserves the right to rent or lease unsold Units upon such terms as Developer shall approve and as   1 -------------------------------------------------------------------------------- permitted by the Act and the rules promulgated thereunder. In the event any Unit is sold prior to the expiration of the term of a lease (which may occur during an indefinite period), title to such Unit (or Units) will be conveyed subject to the lease (or leases) and buyers will succeed to the interests of the applicable lessor. If any Unit is sold subject to a lease, a copy of the executed lease will be attached to the Purchase and Sale Agreement in accordance with the terms of Section 718.503(l)(a)(4) Florida Statutes. All Units have been previously occupied.   4. Management of the Condominium Property THERE WILL BE A CONTRACT FOR THE MANAGEMENT OF THE CONDOMINIUM PROPERTY. At the time of this Prospectus, there is no contract for the management of the Condominium Association; however, the Condominium Association may enter into an agreement for such management at a later date. Any fees which may be payable by the Association to the Manager shall be part of the Common Expenses of the Condominium that are included in the Assessments payable by Unit Owners. The compensation the manager receives (in addition to reimbursements for certain expenses incurred) for the management of the Condominium is set forth in the estimated operating budget attached as Attachment “B” to this Prospectus. Any such management agreement which will be entered into, in addition to the means of termination which may be provided in the agreement, may be canceled by unit owners pursuant to Section 718.302, Florida Statutes. Section 718.302(l)(a), Florida Statutes, provides in relevant part that: If... unit owners other than the developer have assumed control of the association, or if unit owners other than the developer own not less than 75 percent of the units in the condominium, the cancellation shall be by concurrence of the owners of not less than 75 percent of the units other than the units owned by the developer. If a grant, reservation or contract is so canceled and the unit owners other than the developer have not assumed control of the association, the association shall make a new contractor otherwise provide for maintenance, management or operation in lieu of the canceled obligation, at the direction of the owners of not less than a majority of the units in the condominium other than the units owned by the developer. Any fees which may be payable by the Association to the Manager shall be part of the Common Expenses of the Condominium that are included in the Assessments payable by Unit Owners. Currently, except for the maintenance and/or service contracts attached hereto as composite Attachment “E”, there are no other maintenance or service contracts affecting the Condominium having a non-cancelable term in excess of one (1) year. The Association is empowered at any time and from time to time, to enter into a additional maintenance and/or service contracts for valuable consideration and upon such terms and conditions as the Board of Directors shall approve without the consent of Unit Owners. Any maintenance and/or service contracts may be subject to cancellation by the Association and by Unit Owners directly in accordance with the aforesaid Section 718.302, Florida Statutes. Similarly, the Hotel Operator is empowered at any time, and from time to time, to enter into maintenance and/or service contracts affecting the Shared Components for valuable   2 -------------------------------------------------------------------------------- consideration and upon such terms and conditions as the Hotel Operator shall approve without the consent of the Condominium Association or the Unit Owners.   5. Transfer of Control of the Association The initial officers and directors of the Condominium Association are or will all be designees of the Developer. THE DEVELOPER HAS THE RIGHT TO RETAIN CONTROL OF THE CONDOMINIUM ASSOCIATION AFTER A MAJORITY OF THE UNITS HAVE BEEN SOLD. See Section 718.301, Florida Statutes, and Section 4.15 of the Bylaws. The Directors of the Condominium Association designated by the Developer will be replaced by Directors elected by Unit Owners other than the Developer in accordance with the applicable provisions of the Florida Condominium Act, Section 718.301, Florida Statutes, and Section 4.15 of the Bylaws.   6. Restrictions on Use of Units and Common Elements and Alienability. The following is a summary of certain of the restrictions which affect the Units. The Developer and certain other parties are exempt from many of the restrictions. See Article XVII of the Declaration and the Rules and Regulations attached hereto as Schedule “A” to the Bylaws for further restrictions and for detail regarding the applicability of these restrictions. (A) Children. Children shall be permitted to be occupants of Units, but are restricted in certain activities. (B) Pets. All pets are prohibited. (C) Flags. Notwithstanding the provisions of Section IX(A) of the Declaration, any Unit Owner may display one (1) portable, removable United States flag in a respectful way, and, on Armed Forces Day, Memorial Day, Flag Day, Independence Day, September 11 and Veterans Day, may display in a respectful way portable, removable official flags, not larger than 4 1/2 feet by 6 feet, that represent the United States Army, Navy, Air Force, Marine Corps or Coast Guard. (D) Window Coverings. Curtains, blinds, shutters, levelors, or draperies (or linings thereof) which face the exterior windows or glass doors of Units shall be white or off-white in color and shall be subject to disapproval by the Association, Master Association and Hotel Operator, in which case they shall be removed and replaced with acceptable items. (E) Parking. Each Owner, by acceptance of a deed or other conveyance of a Unit, shall be deemed to understand and agree that there is no parking contained within the Condominium Property and that all parking shall be located within the common property of the Sian Ocean Residences & Resort Master Association (the “Master Association”) and shall be subject to such rules and regulations as are adopted by the Master Association from time to time. It is anticipated that all parking will be mandatory valet parking. (F) Patios and/or Balconies Appurtenant to Units. Nothing shall overhang or be mounted to the balcony rail including flower boxes and decorative adornment. No Unit Owner shall be permitted to store any items or decorative adornments whatsoever on balconies, patios, or terraces, including, without limitation, bicycles, motor bikes, grills or any other open flame cooking device, or any other item that extends above the height of the balcony railing. The foregoing shall not prevent, however, placing and using patio-type furniture, planters and other items in such areas   3 -------------------------------------------------------------------------------- if same are normally and customarily used for a residential balcony or terrace area, but all such patio furniture planters and other items must be acceptable to the Hotel Operator. In the event of any doubt or dispute as to whether a particular item is permitted hereunder, the decision of the Hotel Operator shall be final dispositive. No gas or barbecue grills of any type are permitted on the balcony or in any other area of the Condominium Property. No Unit Owner shall display, hang, or use any signs, clothing, sheets, blankets, laundry or other articles outside his or her Unit, or which may be visible from the outside of the Unit (other than draperies, curtains or shades of a customary nature and appearance in the light, neutral colors). Items which are not permitted to overhang windows, doors or balcony include, but are not limited to window sized air-conditioning units, linens, cloths, clothing, shoes, bathing suits or swimwear, curtains, rugs, mops or laundry of any kind, or any articles. To the extent permitted by applicable law, no Owner may install any antenna, satellite dish or other transmitting or receiving apparatus in or upon his or her Unit (and/or areas appurtenant thereto), without the prior written consent of the Hotel Operator. (G) Nuisances. No nuisances (as defined by the Association) shall be allowed on the Condominium, nor shall any use or practice be allowed which is a source of annoyance to occupants’ of Units or which interferes with the peaceful possession or proper use of the Condominium by its residents, occupants or members. No activity specifically permitted by this Declaration shall be deemed a nuisance, regardless of any noises and/or odors emanating therefrom (except, however, to the extent that such odors and/or noises exceed limits permitted by applicable law). No improper, offensive, hazardous or unlawful use shall be made of the Condominium or any part thereof, and all valid laws, zoning ordinances and regulations of all governmental bodies having jurisdiction thereover shall be observed. Violations of laws, orders, rules, regulations or requirements of any governmental agency having jurisdiction thereover, relating to any portion of the Condominium, shall be corrected by, and at the sole expense of, the party obligated to maintain or repair such portion of the Condominium Property, as elsewhere herein set forth. All portions of the Condominium shall be managed and maintained in accordance with the Hotel Standards. Notwithstanding the foregoing, rental and property management activities for the operation of the Hotel may be conducted at all times, twenty-four (24) hours a day, and such activity shall not be considered a nuisance. (H) Leases. THE SALE, LEASE, OR TRANSFER OF UNITS IS RESTRICTED OR CONTROLLED. See Section XVII(H) of the Declaration for further details. It is intended that the Residential Units may be used for rentals. As such, leasing of Residential Units shall not be subject to the approval of the Association and/or any other limitations, other than as expressly provided herein. No portion of a Residential Unit (other than an entire Residential Unit) may be rented. There shall be no minimum lease term for the rental of Residential Units, nor shall there a maximum number of times that a Residential Unit may be leased. All leases are subject to local rules, regulations and ordinances. Every lease of a Residential Unit shall specifically provide (or, if it does not, shall be automatically deemed to provide) that a material condition of the lease shall be the tenant’s full compliance with the covenants, terms, conditions and restrictions of the Declaration (and all Exhibits hereto), the Master Association Declaration (and all Exhibits thereto) and with any and all rules and regulations adopted by the Hotel Operator and/or the Association from time to time (before or after the execution of the lease), including, without limitation, any and all regulations and/or procedures established by applicable Florida law and/or adopted by the Hotel Operator regarding mandatory check-in for   4 -------------------------------------------------------------------------------- Owners and residents, coordination of charging privileges and other matters reasonable necessary to allow Owners and hotel guests to be well integrated into a unified structure and operation. The Unit Owner will be jointly and severally liable with the tenant to the Association and/or the Hotel Operator for any amount which is required by the Association and/or the Hotel Operator to repair any damage to the Common Elements, the Hotel Unit and/or the Shared Components resulting from acts or omissions of tenants (as determined in the sole discretion of the Association and/or the Hotel Operator) and to pay any claim for injury or damage to property caused by the negligence of the tenant and Special Assessments may be levied against the Residential Unit therefore. All leases are hereby made subordinate to any lien filed by the Association, the Master Association or the Hotel Operator, whether prior or subsequent to such lease. When a Unit is leased, a tenant shall have all use rights in those Common Elements otherwise readily available for use generally by Unit Owners, and the Owner of the leased Unit shall not have such rights, except as a guest, unless such rights are waived in writing by the tenant. The lease of a Residential Unit for a term of six (6) months or less is subject to a tourist development tax assessed pursuant to Section 125.0104, Florida Statutes. A Unit Owner leasing his or her Unit for a term of six (6) months or less agrees, and shall be deemed to have agreed, for such Owner, and his or her heirs, personal representatives, successors and assigns, as appropriate, to hold the Association, the Master Association, the Hotel Operator, the Developer and all other Unit Owners harmless from and to indemnify them for any and all costs, claims, damages, expenses or liabilities whatsoever, arising out of the failure of such Unit Owner to pay the tourist development tax and/or any other tax or surcharge imposed by the State of Florida with respect to rental payments or other charges under the lease, and such Unit Owner shall be solely responsible for and shall pay to the applicable taxing authority, prior to delinquency, the tourist development tax and/or any other tax or surcharge due with respect to rental payments or other charges under the lease. The authorization of a Unit Owner (as set out in Section XVIII(H) of the Declaration) to lease its Unit shall refer solely to rentals to the public conducted by the Unit Owner directly or through rental agents and shall exclude the use or occupancy of Units under timeshare, fractional ownership or interval exchange programs (whether the exchange is based on direct exchange of occupancy rights, cash payments, reward programs or other point or accrual systems) or other membership plans or arrangements (collectively, “Occupancy Plans”) through which a participant in the plan or arrangement acquires an ownership interest in the Unit with attendant rights of periodic use and occupancy or acquires contract rights to such periodic use and occupancy of the Unit or a portfolio of accommodations including the Unit, and use of a Unit for or under any such Occupancy Plans is prohibited; provided, however, that the foregoing prohibition shall not apply, and use in connection with Occupancy Plans shall be permitted (i) for any Unit owned by Developer, Hotel Operator or their respective affiliates, so long as the Occupancy Plan is managed by Hotel Operator or its affiliates, or (ii) if the Occupancy Plan consists of an interval exchange program based on direct exchange of occupancy rights (that is, excluding interval exchange programs in which the Unit Owner receives any cash payments or consideration other than a right to periodic exchange of occupancy rights and related privileges) and such permitted interval exchange program is operated by the Hotel Operator or its affiliates or by the then-current management agent. (I) Hotel Disclosures. It is intended that the Hotel Unit will be used and operated for purposes specifically required by the terms and conditions of a hotel franchise agreement wherein the Hotel Operator will own, occupy and/or operate all of the Hotel Unit to conduct Hotel operations within the Condominium project. There are no assurances that the Hotel will be operated under any other brand hotel “flag.” Any hotel license company, may change the Hotel Standards from time to time, and such changes may impact the financial obligations of the Association.   5 -------------------------------------------------------------------------------- Common Elements and Participating Residential Units will be operated, maintained and repaired in accordance with the Hotel Standards and the budget of the Association will include costs and expenses necessary to maintain the Condominium project in accordance with the Hotel Standards. If the Association fails to maintain the Condominium project in accordance with the Hotel Standards, pursuant to the terms of Section VIII(C) of the Declaration set forth herein, the Hotel Operator has the right to perform such maintenance obligations and to charge the Association for the expenses incurred in connection therewith. No Unit Owner shall have any right, title or interest in the brand name of the Hotel or the Hotel Operator in any manner except as may be specifically set forth by separate agreement between the Hotel Operator and Owner. No Unit may be identified or affiliated in any way with any hotel “flag” (that is, the brand name of any hotel management or franchise company, such as Crowne Plaza, Westin, Marriott, Hyatt or Hilton), other than the brand name (if any) by which the Hotel is identified; provided that the foregoing restriction shall not be construed to prevent the identification or affiliation of a Unit with a local, regional or national rental management company that is not a hotel “flag”. (J) Weight. Sound and other Restrictions. No hard and/or heavy surface floor coverings, such as tile, marble, wood, terrazo and the like will be permitted unless (i) installed by, or at the direction of, the Developer, or (ii) first approved in writing by the Hotel Operator. Even once approved by the Hotel Operator, the installation of insulation materials shall be performed in a manner that provides proper mechanical isolation of the flooring materials from any rigid part of the building structure, whether of the concrete subfloor (vertical transmission) or adjacent walls and fittings (horizontal transmission). Additionally, the floor coverings (and insulation and adhesive material therefore) installed on any patio and/or balcony shall not exceed a thickness that will result in the finish level of the patios and/or balcony being above the bottom of the scuppers or diminish the required height of the rails (as established by the applicable building code). Also, the installation of any improvement or heavy object must be submitted to and approved by the Board of Directors and the Hotel Operator, and be compatible with the overall structural design of the building. All areas within a Unit other than foyers, kitchens and bathrooms, unless to receive floor covering approved by the Board of Directors and the Hotel Operator, are to receive sound absorbent, less dense floor coverings, such as carpeting or hard surface floor coverings meeting the specifications described above. The Board of Directors and the Hotel Operator will have the right to specify the exact material to be used on patios and/or balcony. Any use guidelines set forth by the Association shall be consistent with good design practices for the waterproofing and overall structural design of the Building. Owners will be held strictly liable for violations of these restrictions and for all damages resulting therefrom and the Association has the right to require immediate removal of violations. Applicable warranties of the Developer, if any, shall be voided by violations of these restrictions and requirements. Each Owner agrees that sound transmission in a multi-story building such as the Condominium is very difficult to control, and that noises from adjoining or nearby Units, the plumbing systems and/or mechanical equipment can often be heard in another Unit. The Developer does not make any representation or warranty as to the level of sound transmission which may be detectable in a particular Unit and in other portions of the Condominium Property, and each Owner shall be deemed to waive and expressly release any such warranty and claim for loss or damages resulting from sound transmission. (K) Mitigation of Dampness and Humidity. No Unit Owner shall install, within his or her Unit, or upon the Common Elements, non-breathable wall-coverings or low-permeance paints. Additionally, any and all built-in casework, furniture, and or shelving in a Unit must be installed over floor coverings to allow air space and air movement and shall not be installed with backboards flush against any gypsum board, masonry block or concrete wall. Additionally, all Unit Owners,   6 -------------------------------------------------------------------------------- whether or not occupying the Unit, shall periodically run the air conditioning system to maintain the Unit temperature, whether or not occupied, at 78°F, and to keep the humidity in the Unit below sixty percent (60%). Leaks, leaving exterior doors or windows open, wet flooring and moisture will contribute to the growth of mold, mildew, fungus or spores. Each Unit Owner, by acceptance of a deed, or otherwise acquiring title to a Unit, shall be deemed to have agreed that neither the Developer nor the Hotel Operator is responsible, and each hereby disclaims any responsibility for any illness, personal injury, death or allergic reactions which may be experienced by the Unit Owner, its family members and/or its or their guests, tenants and invitees and/or the pets of all of the aforementioned persons, as a result of mold, mildew, fungus or spores. It is the Unit Owner’s responsibility to keep the Unit clean, dry, well-ventilated and free of contamination. While the foregoing are intended to minimize the potential development of molds, fungi, mildew and other mycotoxins, each Unit Owner understands and agrees that there is no method for completely eliminating the development of molds or mycotoxins. The Developer does not make any representations or warranties regarding the existence or development of molds or mycotoxins and each Unit Owner shall be deemed to waive and expressly release any such warranty and claim for loss or damages resulting from the existence and/or development of same. In furtherance of the rights of the Association, as set forth in the Declaration, in the event that the Association and/or Hotel Operator reasonably believes that these provisions are not being complied with, then, the Association and/or the Hotel Operator shall have the right (but not the obligation) to enter the Unit (without requiring the consent of the Unit Owner or any other party) to turn on the air conditioning in an effort to cause the temperature of the Unit to be maintained as required hereby (with all utility consumption, costs to be paid and assumed by the Unit Owner). To the extent that electric service is not then available to the Unit, the Association shall have the further right, but not the obligation (without requiring the consent of the Unit Owner or any other party) to connect electric service to the Unit (with the costs thereof to be borne by the Unit Owner, or if advanced by the Association, to be promptly reimbursed by the Unit Owner to the Association, with all such costs to be deemed charges hereunder). Each Unit Owner, by acceptance of a deed or other conveyance of a Unit, holds the Developer harmless and agrees to indemnify the Developer from and against any and all claims made by the Unit Owner and the Unit Owner’s guests, tenants and invitees on account of any illness, allergic reactions, personal injury and death to such persons and to any pets of such persons, including all expenses and costs associated with such claims including, without limitation, inconvenience, relocation and moving expenses, lost time, lost earning power, hotel and other accommodation expenses for room and board, all attorneys fees and other legal and associated expenses through and including all appellate proceedings with respect to all matters mentioned in this paragraph. (L) Association Access to Units. No Unit Owner shall change the locks to his or her Unit (or otherwise preclude access to the Hotel Operator). The Hotel Operator shall have the right to adopt reasonable regulations from time to time regarding access control and check-in, check-out procedures which shall be applicable to both hotel guests and Unit Owners, which may include, without limitation, an obligation for each Owner, and each Owner’s guests, to register and/or pick up keys to the Owner’s Unit at the front desk each time the Owner or the Owner’s guests begin new occupancy of the Unit. Each Participating Residential Unit Owner understands and agrees that the Hotel Operator may, on a regular or periodic basis, deactivate keys to the Units to enforce the registration obligation set forth herein. (M) Rules and Regulations. Rules and regulations concerning the use of the Condominium Property may be promulgated, modified, amended or terminated from time to time by the Board of Directors and/or the Hotel Operator, provided such rules and regulations do not conflict with the Hotel Standards. Copies of such rules and regulations and amendments thereto shall be furnished by the Association or Hotel Operator to all Unit Owners and residents of the Condominium upon request. The Association and/or Hotel Operator (as applicable) shall have the right to enforce all restrictions set forth in Article XVII of the Declaration and any rules and   7 -------------------------------------------------------------------------------- regulations, as established by the Board of Directors and/or the Hotel Operator, in any manner it deems necessary, including, without limitation, injunctions, suits for damages or fines. (N) Exterior Storm Shutters. The Hotel Operator shall, from time to time, establish exterior storm shutter specifications which comply with the applicable building code, and establish permitted colors, styles and materials for exterior storm shutters. The Hotel Operator may install exterior storm shutters, and may maintain, repair or replace such approved shutters, whether on or within Shared Components or Units; provided, however, that if laminated glass or window film, in accordance with all applicable building codes and standards, architecturally designed to serve as hurricane protection, is installed with Hotel Operator consent, the Hotel Operator may not install exterior storm shutters in accordance with this provision. All shutters shall remain open unless and until a storm watch or storm warning is announced by the National Weather Center or other recognized weather forecaster. All shutters must be opened or removed within two (2) days after the storm has passed. Developer shall have no obligations with respect to the installation of the shutters, and/or for the repair, replacement and/or upgrade of the shutters.   7. Utilities and Certain Services Utilities and certain other services will be furnished to the Condominium as follows:   Electricity    Florida Power & Light Company Telephone    BellSouth Water    City of Hollywood Public Utility Company Sanitary Sewage and Waste Disposal    Tropical Sanitation Gas    TECO Peoples Gas Solid Waste Removal    City of Hollywood Public Works Storm Drainage    Private system of natural and artificial percolation and run-off All telephone service within the Units is intended to operate through a central switchboard controlled by the Hotel Operator (and which shall be deemed part of the Shared Components). Each Unit Owner, in addition to payment of the allocable share of the Shared Costs, shall also be obligated for payment of such usage charges as may be established from time to time by the Hotel Operator in connection with usage of the switchboard, which may include, without limitation, long distance charges, long distance and local access surcharges and/or per call or per minute fees. All other utilities are anticipated to be billed to the Association (as to the Common Elements) or the Hotel Unit Owner (as to the Shared Components) and shall be paid for through Assessments or the Shared Costs. The Developer and/or Hotel Operator reserves the right to enter into a bulk service agreement for the provision of access control services, internet access service, cable and/or satellite television services. Buyer agrees to be bound by any such bulk service agreement and to sign an individual subscriber agreement to the extent required by the bulk agreement.   8 -------------------------------------------------------------------------------- 8. Apportionment of Common Expenses and Ownership of the Common Elements The Owner(s) of each Unit will own an undivided interest in the Common Elements of the Condominium and Common Surplus of the Condominium Association and shall be obligated for a proportionate share of the Common Expenses. The proportionate share was determined by comparing the square footage of the Unit, to the aggregate square footage of all Units in the Condominium. Generally speaking, the Common Elements consist of all parts of the Condominium Property not included in the Units. The Common Expenses include all expenses and assessments properly incurred by the Association for the Common Elements, which are to be shared by the Unit Owners, including, without limitation, (a) all reserves required by the Act or otherwise established by the Association, regardless of when reserve funds are expended; (b) if applicable, insurance for directors and officers; (c) the real property taxes, Assessments and other maintenance expenses attributable to any Units acquired by the Association and/or rental or other expenses owed in connection with any Units leased by the Association; and (d) any unpaid share of Common Expenses or Assessments extinguished by foreclosure of a superior lien or by deed in lieu of foreclosure. Common Expenses shall not include any separate obligations of individual Unit Owners, including without limitation, any sums payable to the Hotel Operator (as hereinafter defined). Each Unit’s percentage interest in the general Common Elements and Common Surplus and percentage share of the Common Expenses will be as set forth in Exhibit “3” to the Declaration, same having been computed based upon the total square footage of the Unit in uniform relationship to the total square footage of each other unit.   9. Shared Costs In addition to the Assessments payable to the Association, each Unit Owner shall be obligated for payment of sums to the Hotel Operator for use and enjoyment of the Shared Components. The Hotel Unit will grant to the Residential Unit Owners within the Condominium, an easement to use and enjoy all portions of the Condominium that are designated as Shared Components in the Declaration of Condominium, such as hallways, stairwells, elevators, building structure, roof, lobby area, etc. In consideration of the granting of this easement, each Residential Unit Owner will be obligated to pay to the Hotel Operator, the applicable unit’s pro-rata share of the costs relating to the operation, upkeep, maintenance, repair and replacement of the Shared Components. The Shared Components expenses are set forth in the Shared Costs budget. THE HOTEL OPERATOR HAS A LIEN RIGHT AGAINST EACH UNIT TO SECURE THE PAYMENT OF SHARED COSTS OR OTHER EXACTIONS COMING DUE FOR THE MAINTENANCE, OPERATION, UPKEEP AND REPAIR OF THE SHARED COMPONENTS, ALL AS DEFINED IN THE DECLARATION OF CONDOMINIUM. THE FAILURE TO MAKE THESE PAYMENTS MAY RESULT IN FORECLOSURE OF THE LIEN ON THE INDIVIDUAL UNITS.   10. Development Fee; The Agreement for Sale; Escrow Deposits At the time of closing of title, the buyer will pay: (i) the costs of officially recording the deed in the Public Records of the County (presently, recording fees are $10.00 for the first page of an instrument and $8.50 for each additional page), (ii) the documentary stamp taxes payable in connection with the deed conveying the Unit to Buyer (presently, documentary stamp taxes are $.70 for each $100.00 of consideration), (iii) for the premium on the owner’s title insurance policy, at the minimum promulgated risk rates promulgated by the Florida Insurance Commissioner (taking into account applicable reissue rates and new home credits, if any), and (iv) a “development fee” equal to one and three quarters percent (1.75%) of the Purchase Price (and of any charges for options or extras now or hereafter contracted for which are not included in the Purchase Price). The “development fee” shall be retained by Developer as additional revenue and to offset certain of its   9 -------------------------------------------------------------------------------- conversion expenses, including without limitation, certain of Developer’s administration expenses and Developer’s attorneys’ fees in connection with conversion of the Condominium. Accordingly, buyer understands and agrees that the development fee is not for payment of closing costs or settlement services, but rather represents additional funds to Developer which are principally intended to provide additional revenue and to cover various out-of-pocket and internal costs and expenses of Developer associated with conversion of the Condominium. At the time of closing of title, the buyer will also make a contribution to the funds of the Condominium Association in an amount equal to twice the monthly assessment amount in effect on the date of closing (which contribution is not to be credited against regular assessments). This sum shall be deposited in the Association’s account for the intended purpose of establishing initial operating funds and working capital and for initial, non-recurring expenses. Purchaser must also pay at the time of closing a working capital contribution in an amount equal to twice the monthly maintenance charge owed to the Master Association, which is payable directly to the Master Association to provide it with initial capital and shall not be credited against regular assessments. Contributions to the Master Association may be used by the Master Association for any purpose. Buyers shall also be required to pay, at closing: (a) a reimbursement to Developer for any utility, cable or interactive communication deposits or hook-up fees which Developer may have advanced prior to closing for the Unit, (b) any charge for any options or upgrading of standard items included, or to be included, in the Unit, (c) a reimbursement for charges incurred in connection with coordinating closing with buyer or buyer’s lender, and (d) late charges, if applicable, all as provided in the Purchase Agreement. Expenses relating to the buyer’s Unit (for example, taxes and governmental assessments and current maintenance assessments due the Condominium Association) will be apportioned between the Developer and the buyer as of closing. However, payments or credits for tax prorations will not be made until the actual tax bill is received by the buyer, and any proration based on an estimate of the current year’s taxes shall be subject to reproration upon request of either party, provided, however, that (i) the actual amount of taxes is at least 10% higher or lower than the estimate used for prorations, and (ii) any request for reproration is made within six (6) months following the issuance of the actual tax bill for the Unit (it being assumed, for purposes hereof, that tax bills are issued on November 1 of each tax year). No request for proration of amounts less than the threshold set forth above or made beyond the six (6) month period shall be valid or enforceable. If the Developer permits a closing to be rescheduled from the originally scheduled closing date at the request of a buyer, such buyer shall pay to the Developer, at the time of rescheduling, a late funding charge as more particularly described in the Purchase Agreement. In addition, all closing prorations shall be made as of the originally scheduled closing date. Developer is not obligated to consent to any such delay. All buyers obtaining a mortgage also will pay any loan fees, closing costs, escrows, appraisals, credit fees, lender’s title insurance premiums, prepayments and all other expenses charged by any lender giving the buyer a mortgage, if applicable. If the purchase of the Unit is a transaction without a mortgage, and buyer elects to use the title company designated by Developer (the “Designated Title Agent”), which may be a title company affiliated with Developer, as title agent, then Developer shall give buyer a credit at closing equal to the cost of the premium for the owner’s title insurance policy, the cost of the documentary stamp taxes on the deed, and the cost to record the deed. If buyer finances the purchase of the Unit and buyer elects to use both the Designated Title Agent and any mortgage broker or lender designated by Developer (the “Designated Mortgage Lender”), which may be an affiliate of Developer, as buyer’s lender, then Developer shall give buyer a credit at closing equal to the cost of the premium for the owner’s title insurance policy, the cost of the documentary stamp taxes on the deed and the cost to record the deed.   10 -------------------------------------------------------------------------------- Notwithstanding the foregoing, and regardless of whether Buyer elects to utilize the services of the Designated Mortgage Broker, nothing herein shall be deemed to qualify or otherwise condition buyer’s obligation to close “all cash” on the purchase of the Unit. The form of Purchase Agreement set forth as Attachment “C” hereto may be modified in any manner in any particular case or cases without the consent of any other buyer or Unit Owner (provided, however, that no amendment may conflict with the provisions of Chapter 718, Florida Statutes). The modification of any such Purchase Agreement or Purchase Agreements shall not vest any buyer or Unit Owner whose Purchase Agreement was not so modified with any rights of any sort. Deposits under the Purchase Agreement will be held and disbursed in accordance with the Purchase Agreement.   11. Sales Commissions The Developer will pay the sales commissions, if any, of the Developer’s exclusive listing agent and/or Developer’s on-premises sales agents in connection with the sale of the Units. The buyer will be responsible for the commission of any other broker or salesperson with whom buyer may have dealt, unless Developer otherwise agrees in writing.   12. Identity of Developer MCZ/Centrum Florida XIX, L.L.C., a Delaware limited liability company, is the Developer of the Condominium. MCZ/Centrum Florida XIX, L.L.C. was created to acquire and develop this property and as such it has no prior experience in the area of condominium or other real estate development. Mr. Michael Lerner is affiliated with the developer as the principal directing the creation and sale of the Condominium and has approximately twenty five (25) years’ experience in real estate development and administration, including experience with the development of the Wave Condominium and The Tides on Hollywood Beach Condominium in Hollywood, Florida. The information provided above as to Mr. Lerner is given solely for the purpose of complying with Section 718.504(22), Florida Statutes, and is not intended to create or suggest any personal liability on the part of Mr. Lerner.   13. Contracts to be Assigned by Developer Upon or before closing of title to the first Unit, Developer shall assign to the Association all of Developer’s right, title and interest in and to all contracts relating to the provision of insurance services to the Condominium, and from and after such date, all benefits and burdens thereunder shall accrue and apply to the Association.   14. Estimated Operating Budget for Condominium Association Attached hereto as Attachment “B” is the Estimated Operating Budget for the Condominium Association’s Common Expenses. Purchaser understands that the Estimated Operating Budget provides only an estimate of what it will cost to run the Association during the period of time stated in the Budget and the Budget is not guaranteed to accurately predict actual expenditures. Developer may make changes in the Budget at any time to cover increases or decreases in actual expenses or in estimates. In accordance with Section 718.112(2)(f)(2), Florida Statutes, the budget includes reserve accounts for capital expenditures and deferred maintenance. It is intended that the Developer, as the sole Unit Owner upon the formation of the Condominium, will vote to waive reserves for the initial fiscal year of the Association. During the second fiscal year of the Association’s operation (and   11 -------------------------------------------------------------------------------- prior to turnover), it is intended that the Seller, as the developer the Condominium, will vote to waive or reduce funding of reserves for the second fiscal year of the Association. Thereafter, reserves may be waived or reduced only upon the voting majority of the non-developer unit owners of the Condominium, at a duly called meeting of the Condominium Association; provided however that if a meeting of the unit owners is called to determine whether to waive or reduce the funding of reserves, and no such result is achieved or a quorum is not attained, the reserves will go into effect. If an election is in fact made to waive reserves, the assessments per unit will be as set forth in the Estimated Operating Budget as “Assessments per Unit - Without Reserves”. If no such election is made, the assessments per Unit will be as set forth in the Estimated Operating Budget as “Assessments per Unit - With Reserves”. The amount due to the Master Association for the fiscal year 2005 is set forth in the 2005 Master Association budget attached as Attachment “B” to this Prospectus.   15. Easements Located or to be Located on the Condominium Property In addition to the various easements to be provided for in the Declaration of Condominium attached hereto as Attachment “A”, the Condominium Property may be made subject to easements in favor of various public or private utilities. Any easement in favor of a public or private utility or similar company or authority may be granted by the Developer or the Association on a “blanket” basis or by use of a specific legal description. See the Section hereof entitled “Utilities and Certain Services” for the names of the suppliers of certain utilities to the Condominium. For more details, refer to the Declaration of Condominium. The easements provided for in the Declaration of Condominium and the Florida Condominium Act are not summarized here.   16. Disclosures Under the laws of the State of Florida, each prospective buyer is hereby advised as follows:     •   RADON GAS: Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county health department. The foregoing notice is provided in order to comply with state law and is for informational purposes only. Developer does not conduct radon testing with respect to the Condominium and specifically disclaims any and all representations or warranties as to the absence of radon gas or radon producing conditions in connection with the Condominium.     •   Notice Regarding Defective Construction Lawsuits: Chapter 558, Florida Statutes contains important requirements you must follow before you may bring any legal action for an alleged construction defect in your home. Sixty (60) days before you bring any legal action, you must deliver to the other party to this contract, a written notice referring to Chapter 558 of any construction conditions you allege are defective and provide such person the opportunity to inspect the alleged construction defects and to consider making an offer to repair or pay for the alleged construction defects. You are not obligated to accept any offer which may be made. There are strict deadlines and procedures under this Florida law which must be met and followed to protect your interests.   12 --------------------------------------------------------------------------------   •   PROPERTY TAX DISCLOSURE SUMMARY. In accordance with Section 689.261, Florida Statutes. Buyer should not rely on the seller’s current property taxes as the amount of property taxes that the Buyer may be obligated to pay in the year subsequent to purchase. A change of ownership or property improvements triggers reassessments of the property that could result in higher property taxes. If you have any questions concerning valuation, contact the county property appraiser’s office for information.     •   Given the climate and humid conditions in South Florida, molds, mildew, spores, fungi and/or other toxins may exist and/or develop within the Unit, Building and/or the Condominium Property. In April, 2004, a mold investigation was performed on the property by AirQuest Environmental Inc., which found widespread mold growth throughout the building caused by several sources of moisture intrusion into the building including water from asbestos abatement activities, inadequate or malfunctioning climate control and roof leaks. It is expected that the extensive renovations performed to convert the property to a condominium will resolve or repair the sources of moisture intrusion and that the Condominium Property will no longer have widespread mold growth throughout the building. Buyer is hereby advised that certain molds, mildew, spores, fungi and/or other toxins may be, or if allowed to remain for a sufficient period may become, toxic and potentially pose a health risk. By executing and delivering this Agreement and closing, Buyer shall be deemed to have assumed the risks associated with molds, mildew, spores, fungi and/or other toxins and to have released and indemnified Seller and Seller’s affiliates from and against any and all liability or claims resulting from same, including, without limitation, any liability for incidental or consequential damages (which may result from, without limitation, the inability to possess the Unit, inconvenience, moving costs, hotel costs, storage costs, loss of time, lost wages, lost opportunities and/or personal injury and death to or suffered by the Unit Owner, pets, its family members and/or its or their guests, tenants, invitees or any other person). Without limiting the generality of the foregoing, leaks, leaving exterior doors or windows open, wet flooring and moisture will contribute to the growth of mold, mildew, spores, fungi or other toxins. Buyer understands and agrees that Seller is not responsible for, and Seller hereby disclaims any responsibility for, any illness or allergic reactions, personal injury or death which may be experienced by Buyer, pets, its family members and/or its or their guests, tenants and invitees as a result of mold, mildew, spores, fungi or other toxins. It is solely the Buyer’s responsibility to keep the Unit clean, dry, well-ventilated and free of contamination. The thermostats in each Unit are an integral part of the Life Safety Systems and are intended to assist in monitoring the accumulation of moisture in the Units to prevent same from reaching levels which may accelerate the development of molds, spores or other natural growths which if allowed to accumulate may become toxic or otherwise create health risks. Each buyer understands and agrees that the thermostats may have recording and/or monitoring features which can report back to the Association the temperature settings and readings in the Units. The thermostats shall be operated and kept operable at all times and there shall be no alteration of or to the thermostats without the prior written approval of the Association. The Unit Owner’s failure to operate at all times any thermostats installed in the Unit will contribute to the development of molds, spores or other natural growths. It is solely the Unit Owner’s responsibility to keep any thermostats installed in the Unit operable at all times.     •   Each Unit Owner understands and agrees that for some time in the future, it, and its guests, tenants and invitees may be disturbed by the noise, commotion and other unpleasant effects of nearby construction activity and as a result Owner and its   13 --------------------------------------------------------------------------------   guests, tenants and invitees may be impeded in using portions of the Condominium Property by that activity. Because the Condominium is located in an urban area, demolition or construction of buildings and other structures within the immediate area or within the view lines of any particular Unit or of any part of the Condominium (the “Views”) may block, obstruct, shadow or otherwise affect Views, which may currently be visible from the Unit or from the Condominium. Therefore, each Owner, for itself, its successors and assigns, agrees to release Developer, its partners and its and their officers, members, directors and employees and every affiliate and person related or affiliated in any way with any of them (“Developer’s Affiliates”) from and against any and all losses, claims, demands, damages, costs and expenses of whatever nature or kind, including attorney’s fees and costs, including those incurred through all arbitration and appellate proceedings, related to or arising out of any claim against the Developer or Developer’s Affiliates related to Views or the disruption, noise, commotion, and other unpleasant effects of nearby development or construction. As a result of the foregoing, there is no guarantee of view, natural light, security, privacy, location, design, density or any other matter.     •   Each Unit Owner, by acceptance of a deed or other conveyance of a Unit, understands and agrees that there are various methods for calculating the square footage of a Unit, and that depending on the method of calculation, the quoted square footage of a Unit may vary by more than a nominal amount. Additionally, as a result of in the field construction, other permitted changes to the Unit, and settling and shifting of improvements, actual square footage of a Unit may also be affected. Accordingly, during the pre-closing inspection, each buyer should, among other things, review the size and dimensions of the Unit. By closing, each buyer shall be deemed to have conclusively agreed to accept the size and dimensions of the Unit, regardless of any variances in the square footage from that which may have been disclosed at any time prior to closing, whether included as part of Developer’s promotional materials or otherwise. Developer does not make any representation or warranty as to the actual size, dimensions or square footage of any Unit, and each Unit Owner shall be deemed to have fully waived and expressly released any such warranty and claim for losses or damages resulting from any variances between any represented or otherwise disclosed square footage and the actual square footage of the Unit.     •   Every buyer of any interest in residential real property on which a residential dwelling was built prior to 1978 is notified that such property may present exposure to lead from lead-based paint that may place young children at risk of developing lead poisoning. Lead poisoning in young children may produce permanent neurological damage, including learning disabilities, reduced intelligence quotient, behavioral problems, and impaired memory. Lead poisoning also poses a particular risk to pregnant women. The seller of any interest in residential real property is required to provide the buyer with any information on lead-based paint hazards from risk assessments or inspections in the seller’s possession and notify the buyer of any known lead-based paint hazards. A risk assessment or inspection for possible lead-based paint hazards is recommended prior to purchase. Developer has no knowledge of lead based paint or lead based paint hazards in the Unit or the Building. Developer has no reports or records pertaining to lead based paint or lead based paint hazards in the Unit or the Building. Buyer acknowledges having been advised of the foregoing information and acknowledges having received the pamphlet “Protect Your Family from Lead in your Home.” In as much as Buyer is provided with a fifteen (15) day rescission period pursuant to the Act, Buyer hereby waives the opportunity   14 --------------------------------------------------------------------------------   to conduct a risk assessment or inspection for the presence of lead based paint or lead based paint hazards.     •   Each Unit Owner understands and agrees that the Building and the Improvements constitute existing non-conforming uses, which could not necessarily be replicated in the event of a casualty or other circumstances requiring rebuilding. Accordingly, each Unit Owner agrees that there will be limitations on what may be reconstructed under such circumstances and on the number of units that may be reconstructed, and there is no assurance that the Building or Improvements may be restored. In the event the existing Improvements cannot be restored, the property insurance carried by the Association insures, subject to policy limitations and qualifications, the replacement cost of any new structure, or if a new structure is not built, the replacement cost less depreciation of the original Building. By executing and delivering a Purchase Agreement and closing, each Unit Owner, for itself, its successors and assigns shall be deemed to have assumed the risks that the Building and Improvements may not be fully restored and to have fully waived and released any claim against the Developer as a result of the limitation on reconstruction resulting from current regulations.     •   Each Unit Owner shall be deemed to understand and agree that the parking facilities within the Master Association common property may be located below the federal flood plain, and, accordingly, in the event of flooding, any automobiles and/or personal property stored therein is susceptible to water damage. Additionally, insurance premiums, both for the Master Association in insuring the parking, and for owners, may be higher than if the parking structure was above the federal flood plain. By acquiring title to, or taking possession of, a Unit, each Unit Owner shall be deemed to have agreed to assume any responsibility for loss, damage or liability resulting therefrom and waives any and all liability of Developer or Master Association.     •   Each Unit Owner acknowledges and agrees that the Units, the Building and other portions of the Condominium Property may be located in coastal areas partially or totally seaward of the coastal construction control line as defined in Section 161.053, Florida Statutes. Unit Owner is fully apprised of the character of the regulation of property in such coastal areas and thereby expressly waives and releases any claim against the Developer as a result of the limitation on improvements or reconstruction resulting from the regulation of property in such coastal areas.     •   An environmental investigation was performed on the Condominium Property prior to Developer’s purchase. The investigation discovered petroleum products in the groundwater above state cleanup target levels. The source of the petroleum products in the groundwater is believed to be either the former Hallandale Citgo gas station that was located partially on the Condominium Property years ago or the 7-Eleven adjacent to the Condominium Property. The investigation also identified soils which may have been impacted by the former Hallandale Citgo gas station. Cleanup of soil and groundwater has not been required by a government agency but may be required in the future. If conducted on the Condominium Property by the Maseter Association, the soil cleanup is estimated to cost approximately $250,000 and groundwater cleanup is estimated to cost approximately $500,000.     •   Purchaser understands and agrees that prior to conversion to a condominium, certain portions of the Condominium Property, including some, but not all, of the Units, contained fully encapsulated asbestos containing material (“ACM”). Prior to   15 --------------------------------------------------------------------------------   or during conversion of the condominium from an apartment complex, extensive renovations were undertaken. During those renovations, most, if not all, of the ACM was removed. To the extent that the completed renovations have not removed all of the ACM, and in order to minimize the impact of the ACM and the potential harm that may result therefrom, the Association shall adopt an operations and maintenance plan in accordance with the specifications set forth in an operation and maintenance plan (the “O&M Plan”) established by the Board, together with a licensed asbestos consulting firm, from time to time. The O&M Plan shall be held in the office of the Association and made available to Unit Owners in accordance with Section 17 of the Bylaws. Buyer further understands and agrees that, in accordance with the O&M Plan, absolutely no penetration or other invasive disturbance shall be made to any portions of the Condominium Property that may contain ACM, without the prior written consent of the Board of Directors and that any and all such penetration and/or other invasive disturbance, if first approved by the Board as set forth herein, shall be made in strict compliance with the O&M Plan requirements. Buyer shall be deemed to: (i) have assumed the risks associated with the ACM, and (ii) agrees that any use of the Unit in violation of the O&M Plan may increase the potential harm that may result from the ACM. Buyer releases the Developer, its partners, contractors, architects, engineers, and its and their officers, directors, shareholders, employees and agents, from and against any and all liability resulting from the (i) existence of the ACM, (ii) the failure to maintain the Unit and/or Common Elements in accordance with the O&M Plan, and/or (iii) any unauthorized or improper penetrations and/or other disturbances to the Unit.   17. Sian Ocean Residences & Resort Master Association The Condominium Property is subject to the terms and conditions of the Declaration of Covenants, Conditions and Easements for Sian Ocean Residences & Resort Master Association, to be recorded in the public records of Broward County, Florida (the “Master Association Declaration”). The Master Association Declaration provides that the Master Association is responsible for the operation, management, maintenance, repair, replacement of and taking title to the common property of the Master Association, including without limitation certain open areas, surface parking areas, parking garages, paved areas and pools and pool areas. The Master Association Declaration contains certain use restrictions, architectural review criteria and certain easements affecting all property subject to the Master Association Declaration. It is contemplated that all parking is within the Master Association common property, and is intended to be subject to mandatory valet parking. Each owner of a condominium unit is a member of the Master Association, and each member of the Master Association is obligated to pay an assessment fee to the Master Association. As an automatic member of the Master Association, each Unit Owner will have the right to use the common property of the Master Association. All Unit Owners will have rights of use and obligations to share in the cost of maintenance of these facilities in accordance with the Master Association Declaration.   18. Evidence of Ownership Developer is the owner of the property which is intended to be created as the Condominium. Attached as Attachment “D” to this Prospectus is evidence of the Developer’s ownership interest in the Condominium Property.   19. Conversion The Condominium has been created by converting a previously existing apartment complex, and, accordingly, the Improvements have been previously occupied. In connection with the conversion, please refer to and review the following: (i) a copy of a conversion inspection report which discloses the condition of the condominium improvements, which report is attached hereto as Attachment “F”:   16 -------------------------------------------------------------------------------- (ii) a copy of the Certificates of Occupancy for the improvements on the Condominium Property, which are attached as part of Attachment “G”: (iii) a copy of a termite inspection report prepared by a Florida licensed pest operator, which report is attached as part of Attachment “H”: and (iv) a copy of a letter from the City of Hollywood Beach regarding the conversion, which is attached as part of Attachment “I”. Notwithstanding that this Condominium is a conversion of previously occupied premises and was not constructed by Developer, Developer has elected to warrant the improvements solely to the extent provided in Section 718.618, Florida Statutes. Except only for those warranties provided in Section 718.618, Florida Statutes (and only to the extent applicable and not yet expired), to the maximum extent lawful Developer hereby disclaims any and all and each and every express or implied warranties, whether established by statutory, common, case law or otherwise, as to the design, construction, sound and/or odor transmission, existence and/or development of molds, mildew, toxins or fungi, furnishing and equipping of the Condominium Property, including, without limitation, any implied warranties of habitability, fitness for a particular purpose or merchantability, compliance with plans, all warranties imposed by statute (other than those imposed by Sections 718.618, Florida Statutes, and then only to the extent applicable and not yet expired) and all other express and implied warranties of any kind or character. Developer has not given and buyer has not relied on or bargained for any such warranties. Each buyer recognizes and agrees that the Unit and Condominium are not new construction. Each buyer shall be deemed to represent and warrant to Developer that in deciding to acquire the Unit, the Unit Owner relied solely on such Unit Owner’s independent inspection of the Unit and the Condominium as well as the conversion inspection reports included in the Prospectus. Buyer has not received nor relied on any warranties and/or representations from Developer of any kind, other than as expressly provided herein. As to any implied warranty which cannot be disclaimed entirely, all secondary, incidental and consequential damages are specifically excluded and disclaimed (claims for such secondary, incidental and consequential damages being clearly unavailable in the case of implied warranties which are disclaimed entirely above).   20. General The foregoing is not intended to present a complete summary of all of the provisions of the various documents referred to herein, but does contain a fair summary of certain provisions of said documents. Statements made as to the provisions of such documents are qualified in all respects by the content of such documents.   21. Definitions The definitions set forth in the Declaration of Condominium shall be applicable to this Prospectus, unless otherwise specifically stated or unless the context would prohibit.   22. Effective Date This Prospectus is effective September 2005.   17 -------------------------------------------------------------------------------- SCHEDULE “A” Schedule of Bedrooms and Bathrooms   Unit Type    Bedrooms    Bathrooms A    1    1 B    1    1 C    1    1 D    1    1 E (Suite)    1    1 F (Suite)    1    1 G (Suite)    1    1 For a description of Units by Unit Type, see Exhibit “2” to the Declaration.   18 -------------------------------------------------------------------------------- This instrument prepared by, or under the supervision of (and after recording, return to):     Melissa S. Turra, Esq. Holland & Knight LLP 50 North Laura Street, Suite 3900 Jacksonville, Florida 32202      (Reserved for Clerk of Court)   DECLARATION OF SIAN RESORT RESIDENCES I CONDOMINIUM -------------------------------------------------------------------------------- TABLE OF CONTENTS   Title         Page No. I.    Introduction and Submission    1 II.    Definitions    1 III.    Description of Condominium    6 IV.    Restraint Upon Separation and Partition of Common Elements    7 V.    Ownership of Common Elements and Common Surplus and Share of Common Expenses; Voting Rights    7 VI.    Easements    8 VII.    Amendments    10 VIII.    Maintenance and Repairs    12 IX.    Additions, Alterations or Improvements by Unit Owner    13 X.    Operation of the Condominium by the Association; Powers and Duties    15 XI.    Determination of Common Expenses and Fixing of Assessments Therefore    17 XII.    Collection of Assessments    17 XIII.    Obligation for Expenses Relating to the Hotel Unit    20 XIV.    Insurance    23 XV.    Reconstruction or Repair After Fire or Other Casualty    26 XVI.    Condemnation    27 XVII.    Use and Occupancy Restrictions and Hotel Disclosures    29 XVIII.    Compliance, Enforcement and Default    34 XIX.    Termination of Condominium    36 XX.    Additional Rights of Mortgagees and Others    37 XXI.    Covenant Running With the Land    38 XXII.    Disclosures    38 XXIII.    Sian Ocean Residences & Resort Master Association    41 XXIV.    Additional Provisions    42   i -------------------------------------------------------------------------------- DECLARATION OF SIAN RESORT RESIDENCES I CONDOMINIUM MCZ/Centrum Florida XIX, L.L.C., a Delaware limited liability company, hereby declares:   I. Introduction and Submission. (A) The Land. The Developer (as hereinafter defined) is the owner of that certain land located in Broward County, Florida, as more particularly described in Exhibit “1” attached hereto (the ”Land”). (B) Submission Statement. Except as set forth in this Section I(B), the Developer hereby submits the Land and all improvements erected or to be erected thereon and all other property, real, personal or mixed, now or hereafter situated on or within the Land—but excluding all public or private (e.g. cable television and/or other receiving or transmitting lines, fiber, antennae or equipment) utility installations therein or thereon and all leased property therein or thereon - and the rights granted to Developer, to the condominium form of ownership and use in the manner provided for in the Florida Condominium Act as it exists on the date hereof and as it may be hereafter renumbered. Without limiting any of the foregoing, no property, real, personal or mixed, not located within or upon the Land as aforesaid shall for any purposes be deemed part of the Condominium or be subject to the jurisdiction of the Association, the operation and effect of the Florida Condominium Act or any rules or regulations promulgated pursuant thereto, unless expressly provided. (C) Name. The name by which this condominium is to be identified is SIAN RESORT RESIDENCES I CONDOMINIUM (hereinafter called the “Condominium”).   II. Definitions. The following terms when used in this Declaration and in its Exhibits, and as it and they may hereafter be amended, shall have the respective meanings ascribed to them in this Section, except where the context clearly indicates a different meaning: (A) “Act” means the Florida Condominium Act (Chapter 718 of the Florida Statutes) as it exists on the date hereof and as it may be hereafter renumbered. (B) “Articles” or “Articles of Incorporation” mean the Articles of Incorporation of the Association, as amended from time to time. (C) “Assessment” means a share of the funds required for the payment of Common Expenses, which from time to time are assessed against the Unit Owner. (D) “Association” or “Condominium Association” means SIAN RESORT RESIDENCES I CONDOMINIUM ASSOCIATION, INC., a Florida corporation not for profit, the sole entity responsible for the operation of the Condominium. (E) “Board” or “Board of Directors” means the Board of Directors, from time to time, of the Association. Directors must be natural persons who are 18 years of age or older. Any person who has been convicted of any felony by any court of record in the United States and who has not had his or her right to vote restored pursuant to law in the jurisdiction of his or her residence is not eligible for Board of Directors membership (provided, however, that the validity of any Board of Directors -------------------------------------------------------------------------------- action is not affected if it is later determined that a member of the Board of Directors is ineligible for Board of Directors membership due to having been convicted of a felony). (F) “Building” means the structure(s) in which the Units and the Common Elements are located, regardless of the number of such structures, which are located on the Condominium Property. (G) “Bylaws” mean the Bylaws of the Association, as amended from time to time. (H) “Charge” shall mean and refer to the imposition of any financial obligation by the Association which is not an Assessment as defined by Section II(C) above. Accordingly, as to Charges, the Association will not have the enforcement remedies that the Act grants for the collection of Assessments. (I) “Committee” means a group of Unit Owners appointed by the Board of Directors to make recommendations to the Board of Directors regarding the proposed annual budget or to take action on behalf of the Board of Directors. (J) “Common Elements” mean and include: (1) The portions of the Condominium Property which are not included within the Units. (2) An easement of support in every portion of a Unit which contributes to the support of the Building. (3) Any other parts of the Condominium Property designated as Common Elements in this Declaration. The Condominium has been established in such a manner to minimize the Common Elements. Most components which are typically common elements of a Condominium have instead been designated herein as part of the Shared Components of the Hotel Unit, including, without limitation, all property and installations required for the furnishing of utilities and other services to more than one Unit or to the Common Elements, if any. (K) “Common Expenses” mean all expenses incurred by the Association for the operation, maintenance, repair, replacement or protection of the Common Elements, the costs of carrying out the powers and duties of the Association, and any other expense, whether or not included in the foregoing, designated as a “Common Expense” by the Act, the Declaration, the Articles or the Bylaws. For all purposes of this Declaration, “Common Expenses” shall also include, without limitation, (a) all reserves required by the Act or otherwise established by the Association, regardless of when reserve funds are expended; (b) if applicable, insurance for directors and officers; (c) the real property taxes, Assessments and other maintenance expenses attributable to any Units acquired by the Association and/or rental or other expenses owed in connection with any Units leased by the Association; and (d) any unpaid share of Common Expenses or Assessments extinguished by foreclosure of a superior lien or by deed in lieu of foreclosure. Common Expenses shall not include any separate obligations of individual Unit Owners, including without limitation, any sums payable to the Hotel Operator (as hereinafter defined). (L) “Common Surplus” means the amount of all receipts or revenues, including Assessments, rents or profits, collected by the Association which exceeds Common Expenses. (M) “Condominium” shall have the meaning given to it in Section I(C) above.   2 -------------------------------------------------------------------------------- (N) “Condominium Parcel” means a Unit together with the undivided share in the Common Elements which is appurtenant to said Unit. (O) “Condominium Property” means the Land, Improvements and other property or property rights described in Section I(B) hereof, subject to the limitations thereof and exclusions therefrom. (P) “County” means the County of Broward, State of Florida. (Q) “Declaration” or “Declaration of Condominium” means this instrument and all Exhibits attached hereto, as same may be amended from time to time. (R) “Developer” means MCZ/Centrum Florida XIX, L.L.C., a Delaware limited liability company, its successors and such of its assigns as to which the rights of Developer hereunder are specifically assigned. Developer may assign all or a portion of its rights hereunder, or all or a portion of such rights in connection with specific portions of the Condominium. In the event of any partial assignment, the assignee shall not be deemed the Developer, but may exercise such rights of Developer as are specifically assigned to it. Any such assignment may be made on a nonexclusive basis. Notwithstanding any assignment of the Developer’s rights hereunder (whether partially or in full), the assignee shall not be deemed to have assumed any of the obligations of the Developer unless, and only to the extent that, it expressly agrees to do so in writing. The rights of Developer under this Declaration are independent of the Developer’s rights to control the Board of Directors of the Association, and, accordingly, shall not be deemed waived, transferred or assigned to the Unit Owners, the Board of Directors or the Association upon the transfer of control of the Association. All rights which are specified in this Declaration to be rights of the Developer are mortgageable, pledgeable, assignable or transferable. Any successor to, or assignee of, the rights of the Developer hereunder (whether as the result of voluntary assignment, foreclosure, assignment in lieu of foreclosure or otherwise) shall hold or be entitled to exercise the rights of Developer hereunder as fully as if named as such party herein. No party exercising rights as Developer hereunder shall have or incur any liability for the acts of any other party which previously exercised or subsequently shall exercise such rights. (S) “Dispute”, for purposes of Section XVIII(A), means any disagreement between two or more parties that involves: (a) the authority of the Board of Directors, under any law or under this Declaration, the Articles or Bylaws to: (1) require any Owner to take any action, or not to take any action, involving that Owner’s Unit or the appurtenances thereto; or (2) alter or add to a common area or Common Element; or (b) the failure of the Association, when required by law or this Declaration, the Articles or Bylaws to: (1) properly conduct elections; (2) give adequate notice of meetings or other actions; (3) properly conduct meetings; or (4) allow inspection of books and records. “Dispute” shall not include any disagreement that primarily involves title to any Unit or Common Element; the interpretation or enforcement of any warranty; or the levy of a fee or Assessment or the collection of an Assessment levied against a party. (T) “Division” means the Division of Florida Land Sales, Condominiums and Mobile Homes of the Department of Business and Professional Regulation, State of Florida, or its successor. (U) “First Mortgagee” shall have the meaning given to it in Section XII(F) below. (V) “Hotel” means the portion of the Condominium Project operated as a hotel, including but not limited to, the Hotel Unit, the Shared Components and the Participating Residential Units. (W) “Hotel Director” means the director on the Board of Directors elected by the Owner of the Hotel Unit.   3 -------------------------------------------------------------------------------- (X) “Hotel Operator” means collectively, the Owner of the Hotel Unit, together with any tenant of the Hotel Unit, which individually or collectively are licensed or authorized by a franchise, license or other agreement with a hotel management or franchise company to operate the Hotel under a brand name or hotel “flag.” (Y) “Hotel Standards” means the systems, standards and policies which apply to the Hotel and which the Hotel Operator is required to uphold and enforce in order to comply with its own or its licensor’s branding and operating standards, including, but not limited to, standards of upkeep and maintenance for all Common Elements and Shared Components. Provisions of this Declaration that impose or refer to the Hotel Standards may only be amended or modified with the prior, written consent of the Developer (for so long as the Developer is an Owner) and the Hotel Operator. Notwithstanding the foregoing, provisions of this Declaration that impose or refer to Hotel Standards may only be enforced by the Hotel Operator when operating pursuant to a franchise, license or other agreement with a hotel management or franchise company to operate the Hotel under a brand name or hotel “flag”. So long as the Hotel is in operation, a copy of the Hotel Standards will be maintained within the Hotel Unit. (Z) “Hotel Unit” means and refers to the Hotel Unit as identified on Exhibit “2” attached hereto, which includes the Shared Components (as hereinafter defined). References herein to “Unit” shall include the Hotel Unit unless the context would prohibit or it is otherwise expressly provided. (AA) “Improvements” mean all structures and artificial changes to the natural environment (exclusive of landscaping) located on the Condominium Property, including, but not limited to, the Building. (BB) “Institutional First Mortgagee” means a bank, savings and loan association,, insurance company, mortgage company, real estate or mortgage investment trust, pension fund, government sponsored entity, an agency of the United States Government, mortgage banker, the Federal National Mortgage Association (“FNMA”), the Federal Home Loan Mortgage Corporation (“FHLMC”) or any other lender generally recognized as an institutional lender, or the Developer, holding a first mortgage on a Unit or Units. A “Majority of Institutional First Mortgagees” shall mean and refer to Institutional First Mortgagees of Units to which at least fifty one percent (51%) of the voting interests of Units subject to mortgages held by Institutional First Mortgagees are appurtenant. (CC) “Land” shall have the meaning given to it in Section I(A) above. (DD) “Life Safety Systems” mean and refer to any and all emergency lighting, emergency generators, audio and visual signals, safety systems, sprinklers and smoke detection systems, which are now or hereafter installed in the Building, whether or not within the Units. All such Life Safety Systems, together with all conduits, wiring, electrical connections and systems related thereto, regardless of where located, shall be deemed Shared Components. Without limiting the generality of the foregoing, when the context shall so allow, the Life Safety Systems shall also be deemed to include all means of emergency ingress and egress, which shall include all stairways and stair landings. Notwithstanding the breadth of the foregoing definition, nothing herein shall be deemed to suggest or imply that the Building or the Condominium contains all such Life Safety Systems. For purposes of this Declaration, the Life Safety Systems shall also include the thermostats installed in certain of the Units. The thermostats are an integral part of the Life Safety Systems and are intended to assist in monitoring the accumulation of moisture in the Units to prevent same from reaching levels which may accelerate the development of molds, spores or other natural growths which if allowed to accumulate may become toxic or otherwise create health risks. Each Owner, by acceptance of a deed or otherwise acquiring title to a Unit, shall be deemed to understand and agree that the thermostats may have recording and/or monitoring features which can report back to the   4 -------------------------------------------------------------------------------- Hotel Operator the temperature settings and readings in the Units. Without limiting the generality of the other provisions of this Declaration, the thermostats shall be operated and kept operable at all times and there shall be no alteration of or to the thermostats without the prior written approval of the Hotel Operator. (EE) “Master Association” means the Sian Ocean Residences & Resort Master Association, Inc. (FF) “Master Association Declaration” means Declaration of Covenants, Conditions and Easements for Sian Ocean Residences & Resort Master Association. (GG) “Material Amendment” shall have the meaning given to it in Section VII(B) below. (HH) “Participating Residential Unit” means any Residential Unit managed and maintained by the Hotel Operator as a part of the Hotel. (II) “Primary Institutional First Mortgagee” means the Institutional First Mortgagee which owns, at the relevant time, Unit mortgages securing a greater aggregate indebtedness than is owed to any other Institutional First Mortgagee. (JJ) “Residential Director” means the director(s) on the Board of Directors elected by the Owner(s) of the Residential Units. (KK) “Residential Unit” means all Units other than the Hotel Unit. (LL) “Shared Components” means the improvements constituting the Common Elements, Residential Units and the Hotel Unit which have been, or shall be, constructed as a single structure and operated as an integrated project. Given the integration of the structure of those improvements, and notwithstanding anything to the contrary depicted on the survey/plot plan attached hereto as Exhibit “2”, the following components of the Improvements (the “Shared Components”) shall be deemed part of the Shared Components of the Hotel Unit, whether or not graphically depicted as such on said survey/plot plan: any and all structural components of the Improvements, including, without limitation, all exterior block walls and all finishes (glass, paint, stucco, etc.) and balconies, terraces and/or facades attached or affixed thereto; the roof; all roof trusses, roof support elements and roofing insulation; all utility, mechanical, electrical, telephonic, telecommunications, plumbing, telephone switchboard, Life Safety Systems and other systems, including, without limitation, all wires, conduits, pipes, ducts, transformers, cables and other apparatus used in the delivery of the utility, mechanical, telephonic, telecommunications, electrical, plumbing, Life Safety Systems and/or other systems; all heating, ventilating and air conditioning systems, including, without limitation, compressors, air handlers, ducts, chillers, water towers and other apparatus used in the delivery of HVAC services; all elevator shafts, elevator cabs, elevator cables and/or systems and/or equipment used in the operation of the elevators transversing the Condominium Property; and all trash rooms and any and all trash collection and/or disposal systems. In addition, the Shared Components include use rights in and to the following areas and/or facilities (together with a license for reasonable pedestrian access thereto, as determined by the Hotel Operator): the main hotel lobby and the fitness center, if any, which may be located from time to time within the Improvements constructed upon the Hotel Unit. Notwithstanding anything herein, or in any of the exhibits hereto, contained to the contrary, the Shared Components shall be deemed part of the Hotel Unit. The Hotel Operator shall have the right (but not the obligation), by Supplemental Declaration executed by the Hotel Operator alone, to designate additional portions of the Hotel Unit as Shared Components hereunder. Notwithstanding the designation of the Shared Components, the Hotel Operator shall have the right, from time to time, to expand, alter, relocate and or eliminate the portions of the Hotel Unit deemed Shared Components, without requiring the consent or approval of the Association or   5 -------------------------------------------------------------------------------- any Owner, provided that any portions withdrawn are not, in the reasonable opinion of the Hotel Operator essential to the structural integrity of the Residential Units, the provision of utilities and utility services to the Residential Units and/or the provision of pedestrian access to and from the Residential Units and the adjoining public street. In furtherance of the foregoing, the Hotel Operator also reserves the absolute right at any time, and from time to time, to construct additional facilities within the Hotel Unit and to determine whether same shall be deemed Shared Components. It is expressly contemplated that persons other than Unit Owners shall be granted use rights in and to certain of the facilities of the Hotel Unit (such determination to be made in the sole and absolute discretion of the Hotel Operator). (MM) “Shared Components Records” shall have the meaning given in Section XIII(G) below. (NN) “Shared Costs” shall have the meaning given in Section XIII below. The Shared Costs are not Common Expenses. (OO) “Unit” means a part of the Condominium Property which is subject to exclusive ownership. (PP) “Unit Owner” or “Owner of a Unit” or “Owner” means a record owner of legal title to a Condominium Parcel.   III. Description of Condominium. (A) Identification of Units. The Land has constructed thereon one (1) building containing three hundred ten (310) Units, including three hundred nine (309) Residential Units and one (1) Hotel Unit. Each such Unit is identified by a separate numerical or alpha-numerical designation. The designation of each of such Units is set forth on Exhibit “2” attached hereto. Exhibit “2” consists of a survey of the Land, a graphic description of the Improvements located thereon, including, but not limited to, the Building in which the Units are located, and a plot plan thereof. Said Exhibit “2”. together with this Declaration, is sufficient in detail to identify the Common Elements and each Unit and their relative locations and dimensions. There shall pass with a Unit as appurtenances thereto: (a) an undivided share in the Common Elements and Common Surplus; (b) the exclusive right to use such portion of the Common Elements as may be provided in this Declaration, including, without limitation, the right to transfer such right to other Units or Unit Owners; (c) an exclusive easement for the use of the airspace occupied by the Unit as it exists at any particular time and as the Unit may lawfully be altered or reconstructed from time to time, provided that an easement in airspace which is vacated shall be terminated automatically; (d) membership in the Association with the full voting rights appurtenant thereto; and (e) other appurtenances as may be provided by this Declaration. (B) Resort Condominium. The Condominium is classified as a “resort condominium” under Section 509.242, Florida Statutes because the Owners of the Residential Units shall be permitted to lease their Units more than three (3) times in a calendar year for periods of less than thirty (30) days or one (1) calendar month, whichever is less. (C) Unit Boundaries. Each Unit shall include that part of the Building containing the Unit that lies within the following boundaries: (1) Upper and Lower Boundaries. The upper and lower boundaries of the Unit shall be the following boundaries extended to their planar intersections with the perimetrical boundaries: (i) Upper Boundaries. The horizontal plane of the unfinished lower surface of the ceiling (which will be deemed to be the ceiling of the upper story if the Unit is a multi-story Unit, provided that in multi-story Units where the lower boundary extends beyond the upper boundary, the upper boundary shall include that portion of the ceiling of the lower floor for which there is no corresponding ceiling on the upper floor directly above such bottom floor ceiling).   6 -------------------------------------------------------------------------------- (ii) Lower Boundaries. The horizontal plane of the unfinished upper surface of the floor of the Unit (which will be deemed to be the floor of the first story if the Unit is a, multi-story Unit, provided that in multi-story Units where the upper boundary extends beyond’ the lower boundary, the lower boundary shall include that portion of the floor of the upper floor for which there is no corresponding floor on the bottom floor directly, below the floor of such top floor). (iii) Interior Divisions. Except as provided in Section III(C)(l)(i) and Section III(C)(l)(ii) above, no part of the floor of the top floor, ceiling of the bottom floor, stairwell adjoining the multi-floors, in all cases of a multi-story Unit, if any, or nonstructural interior walls shall be considered a boundary of the Unit. (iv) Perimetrical Boundaries. The perimetrical boundaries of the Unit shall be the vertical planes of the unfinished interior surfaces of the walls bounding the Unit extended to their planar intersections with each other and with the upper and lower boundaries. (2) Boundaries of the Hotel Unit. The Hotel Unit shall consist of all of the Condominium Property, including, without limitation, any and all improvements now and hereafter constructed thereon, less and except only the following: (i) the Residential Units and (ii) the portion of the Condominium Property located underneath the Building. Said portion of the Condominium Property located underneath the Building shall be deemed Common Elements hereunder. (3) Apertures. Where there are apertures in any boundary, including, but not limited to, windows, doors, bay windows, skylights and sliding glass doors, such apertures shall not be included in the boundaries of the Unit and shall therefore be deemed part of the Shared Components, and as such, part of the Hotel Unit. (4) Exceptions. In cases not specifically covered above, and/or in any case of conflict or ambiguity, the survey of the Units set forth as Exhibit “2” hereto shall control in determining the boundaries of a Unit, except that the provisions of Section III(C)(2) above shall control unless specifically depicted and labeled otherwise on such survey.   IV. Restraint Upon Separation and Partition of Common Elements. The undivided share in the Common Elements and Common Surplus which is appurtenant to a Unit, shall not be separated therefrom and shall pass with the title to the Unit, whether or not separately described. The appurtenant share in the Common Elements and Common Surplus, except as elsewhere herein provided to the contrary, cannot be conveyed or encumbered except together with the Unit. The respective shares in the Common Elements appurtenant to Units shall remain undivided, and no action for partition of the Common Elements, the Condominium Property, or any part thereof, shall lie, except as provided herein with respect to termination of the Condominium.   V. Ownership of Common Elements and Common Surplus and Share of Common Expenses; Voting Rights. (A) Percentage Ownership and Shares in Common Elements. The undivided percentage interest in the Common Elements and Common Surplus, and the percentage share of the Common Expenses, appurtenant to each Unit, is as set forth on Exhibit “3” attached hereto, same having been   7 -------------------------------------------------------------------------------- determined based upon the total square footage of the applicable Unit in uniform relationship to the total square footage of each other Unit. (B) Voting. Each Unit shall be entitled to the number of votes set forth in Articles of Incorporation and the Bylaws of the Association. Each Unit Owner shall be a member of the Association.   VI. Easements. The following easements are hereby created (in addition to any easements created under the Act and any easements affecting the Condominium Property and recorded in the Public Records of the County: (A) Support. Each Unit and any structure and/or improvement now or hereafter constructed adjacent thereto shall have an easement of support and of necessity and shall be subject to an easement of support and necessity in favor of all other Units and/or the Common Elements. (B) Utility and Other Services: Drainage. Easements are reserved under, through and over the Condominium Property as may be required from time to time for utility, cable television, communications and monitoring systems, Life Safety Systems, digital and/or other satellite systems, broadband communications and other services and drainage in order to serve the Condominium and/or members of the Association. A Unit Owner shall do nothing within or outside his or her Unit that interferes with or impairs, or may interfere with or impair, the provision of such utility, cable television, communications, monitoring systems, Life Safety Systems, digital and/or other satellite systems, broadband communications or other service or drainage facilities or the use of these easements. The Association and Hotel Operator shall have an irrevocable right of access to each Unit to maintain, repair or replace the pipes, wires, ducts, vents, cables, conduits and other utility, cable television, communications, monitoring systems, Life Safety Systems, digital and/or other satellite systems, broadband communications and similar systems, hot water heaters, service and drainage facilities, Common Elements and Shared Components contained in the Unit or elsewhere in the Condominium Property; and to remove any Improvements interfering with or impairing such facilities or easements herein reserved; provided such right of access, except in the event of an emergency, shall not unreasonably interfere with the Unit Owner’s permitted use of the Unit, and except in the event of an emergency, entry shall be made on not less than one (1) days’ notice (which notice shall not, however, be required if the Unit Owner is absent when the giving of notice is attempted). (C) Encroachments. If (i) any portion of the Common Elements and/or the Shared Components encroaches upon any Unit; (ii) any Unit encroaches upon any other Unit or upon any portion of the Common Elements and/or the Shared Components; or (iii) any encroachment shall hereafter occur as a result of (1) construction of the Improvements; (2) settling or shifting of the Improvements; (3) any alteration or repair to the Common Elements and/or the Shared Components made by or with the consent of the Association, Developer or Hotel Operator; as appropriate; or (4) any repair or restoration of the Improvements (or any portion thereof) or any Unit after damage by fire or other casualty or any taking by condemnation or eminent domain proceedings of all or any portion of any Unit or the Common Elements and/or the Shared Components, then, in any such event, a valid easement shall exist for such encroachment and for the maintenance of same so long as the Improvements shall stand. (D) Ingress and Egress. A non-exclusive easement in favor of each Unit Owner and resident, their guests and invitees, and for each member of the Association shall exist for (i) pedestrian traffic over, through and across sidewalks, streets, paths, walks, and other portions of the Hotel Unit as are designated by the Hotel Operator from time to time and intended to provide direct   8 -------------------------------------------------------------------------------- pedestrian access to and from the applicable Residential Unit, (ii) use and enjoyment of the Shared Components, subject to regulations as may be established from time to time by the Hotel Operator and subject to the other provisions of this Declaration, and (iii) for vehicular and pedestrian traffic over, through and across, such portions of the Shared Components as from time to time may be paved and intended for such purposes. The provisions of this section may not be amended without an affirmative vote of not less than 4/5ths of all voting interests of all Unit Owners. None of the easements specified in this Section VI(D) shall be encumbered by any leasehold or lien other than those on the Condominium Parcels. Any such lien encumbering such easements (other than those on Condominium Parcels) automatically shall be subordinate to the rights of Unit Owners and the Association with respect to such easements. (E) Development; Maintenance. The Developer (including its affiliates and its or their designees, contractors, successors and assigns) and the Hotel Operator shall have the right, in its (and their) sole discretion from time to time, to enter the Condominium Property and take all other action necessary or convenient for the purpose of undertaking and completing any renovations thereof and/or any Improvements or Units located or to be located thereon, and/or any improvements located or to be located adjacent thereto and for repair, replacement and maintenance or warranty purposes or where the Developer and/or the Hotel Operator, in its sole discretion, determines that it is required or desires to do so. The Hotel Operator (and its designees, contractors, subcontractors, employees) shall have the right to have access to each Unit from time to time during reasonable hours as may be necessary for pest control purposes and for the maintenance, repair or replacement of any Shared Components or any portion of a Unit, if any, to be maintained by the Hotel Operator, or at any time and by force, if necessary, to prevent damage to the Shared Components or to a Unit or Units, including, without limitation, (but without obligation or duty) to close exterior storm shutters (if any) in the event of the issuance of a storm watch or storm warning. (F) Exterior Building and Roof Maintenance. An easement is hereby reserved on, through and across each Unit in order to afford access to the Hotel Operator (and its contractors) to perform roof repairs and/or replacements, repair, replace, maintain and/or alter rooftop mechanical equipment, to stage window washing equipment and to perform window washing and/or any other exterior maintenance and/or painting of the Building. (G) Sales and Leasing Activity. Until such time as Developer (or any of its affiliates) no longer owns a Unit, the Developer, its designees, successors and assigns, hereby reserves and shall have the right to use any Units owned by Developer (or its affiliates) and all of the Common Elements or Shared Components for guest accommodations, model apartments and sales, leasing, management, administration and construction offices, to provide financial services, to show model Units and/or apartments and the Common Elements, Shared Components and/or any other portions of the Condominium Property or such neighboring property to prospective purchasers and tenants of Units and/or “units” or “apartments” constructed on any neighboring properties, and to erect on the Condominium Property signs, displays and other promotional material to advertise Units or other properties for sale or lease either in the Condominium or such neighboring properties (and an easement is hereby reserved for all such purposes and without the requirement that any consideration be paid by the Developer to the Association or to any Unit Owner). (H) Public Easements. Fire, police, health and sanitation and other public service personnel and vehicles shall have a permanent and perpetual easement for ingress and egress over and across the Common Elements and Shared Components in the performance of their respective duties. (I) Warranty. For as long as Developer remains liable under any warranty, whether statutory, express or implied, for acts or omissions of Developer in the development, construction, sale, resale, leasing, financing and marketing of the Condominium, then Developer and its   9 -------------------------------------------------------------------------------- contractors, agents and designees shall have the right, in Developer’s sole discretion and from time to time and without requiring prior approval of the Association and/or any Unit Owner and without requiring any consideration to be paid by the Developer to the Unit Owners and/or Condominium Association (provided, however, that absent an emergency situation, Developer shall provide reasonable advance notice), to enter the Condominium Property, including the Units, Common Elements, for the purpose of inspecting, testing and surveying same to determine the need for repairs, improvements and/or replacements, and effecting same, so that Developer can fulfill any of its warranty obligations. The failure of the Association or any Unit Owner to grant, or to interfere with, such access, shall alleviate the Developer from having to fulfill its warranty obligations and the costs, expenses, liabilities or damages arising out of any unfulfilled Developer warranty will be the sole obligation and liability of the person or entity who or which impedes the Developer in any way in Developer’s activities described in this Section VI(I). The easements reserved in this Section shall expressly survive the transfer of control of the Association to Unit Owners other than the Developer. Nothing herein shall be deemed or construed as the Developer making or offering any warranty, all of which are disclaimed (except to the extent same may not be or are expressly set forth herein) as set forth in Article XXII below. (J) Additional Easements. The Association, through its Board of Directors, on the Association’s behalf and on behalf of all Unit Owners (each of whom hereby appoints the Association as its attorney in-fact for this purpose), shall have the right to grant such additional general (“blanket”) and specific electric, gas or other utility, cable television, security systems, communications or service easements (and appropriate bills of sale for equipment, conduits, pipes, lines and similar installations pertaining thereto), or modify or relocate any such existing easements or drainage facilities, in any portion of the Condominium, and to grant access easements or relocate any existing access easements in any portion of the Condominium, as the Board of Directors shall deem necessary or desirable for the proper operation and maintenance of the Improvements, or any portion thereof, or for the general health or welfare of the Unit Owners and/or members of the Association, or for the purpose of carrying out any provisions of this Declaration, provided that such easements or the relocation of existing easements will not prevent or unreasonably interfere with the reasonable use of the Units for dwelling purposes. (K) Hotel. The Hotel Operator shall have a general easement over and across the Common Elements (i) to exercise any right or power held by the Hotel Operator under this Declaration; (ii) to monitor and assure maintenance by the Association of the Common Elements in good order and condition in accordance with the Hotel Standards and Section VIII(A)d) below and (iii) to the extent necessary, to perform such maintenance functions on behalf of the Association.   VII. Amendments. Except as elsewhere provided herein, amendments may be effected as follows: (A) By The Association. Notice of the subject matter of a proposed amendment shall be included in the notice of any meeting at which a proposed amendment is to be considered. A resolution for the adoption of a proposed amendment may be proposed by a majority of the Board of Directors of the Association or by not less than one-third (1/3) of the Unit Owners. Except as elsewhere provided, approvals must be by an affirmative vote representing in excess of ninety percent (90%) of the voting interests of all Unit Owners. Directors and members not present in person or by proxy at the meeting considering the amendment may express their approval or disapproval in writing, provided that such approval is delivered to the secretary at or prior to the meeting; however, such approval or disapproval may not be used as a vote for or against the action taken and may not be used for the purpose of creating a quorum.   10 -------------------------------------------------------------------------------- (B) Material Amendments. Unless otherwise provided specifically to the contrary in this Declaration, no amendment shall change the configuration or size of any Unit in any material fashion, materially alter or modify the appurtenances to any Unit, or change the percentage by which the Owner of a Unit shares the Common Expenses and owns the Common Elements and Common Surplus (any such change or alteration being a “Material Amendment”), unless the record Owner(s) thereof, and all record owners of mortgages or other liens thereon, shall join in the execution of the amendment and the amendment is otherwise approved by in excess of ninety percent (90%) of the voting interests of Unit Owners. The acquisition of property by the Association, material alterations or substantial additions to such property or the Common Elements by the Association and installation, replacement, operation, repair and maintenance of approved exterior storm shutters, if in accordance with the provisions of this Declaration, shall not be deemed to constitute a material alteration or modification of the appurtenances of the Units, and accordingly, shall not constitute a Material Amendment. (C) Mortgagee’s Consent. No amendment may be adopted which would eliminate, modify, prejudice, abridge or otherwise adversely affect any rights, benefits, privileges or priorities granted or reserved to mortgagees of Units without the consent of said mortgagees in each instance; nor shall an amendment make any change in the Sections hereof entitled “Insurance”, “Reconstruction or Repair after Casualty”, or “Condemnation” unless the Primary Institutional First Mortgagee shall join in the amendment. Except as specifically provided herein or if required by FNMA or FHLMC, the consent and/or joinder of any lien or mortgage holder on a Unit shall not be required for the adoption of an amendment to this Declaration and, whenever the consent or joinder of a lien or mortgage holder is required, such consent or joinder shall not be unreasonably withheld. (D) Water Management District. No amendment may be adopted which would affect the surface water management and/or drainage systems, including environmental conservation areas, without the consent of the applicable water management district (the “District”). The District shall determine whether the amendment necessitates a modification of the current surface water management permit. If a modification is necessary, the District will advise the Association. (E) By or Affecting the Developer. Notwithstanding anything herein contained to the contrary, during the time the Developer has the right to elect a majority of the Board of Directors of the Association, the Declaration, the Articles of Incorporation or the Bylaws of the Association may be amended by the Developer alone, without requiring the consent of any other party, to effect any change whatsoever, except for an amendment: (i) to permit time-share estates (which must be approved, if at all, by all Unit Owners and mortgagees on Units); or (ii) to effect a Material Amendment which must be approved, if at all, in the manner set forth in Section VII(B) above. The unilateral amendment right set forth herein shall include, without limitation, the right to correct scrivener’s errors. No amendment may be adopted which would eliminate, modify, prejudice, abridge or otherwise adversely affect any rights, benefits, privileges or priorities granted or reserved to the Developer, without the prior written consent of the Developer in each instance. (F) Affecting Hotel Unit. No amendment may be adopted which would eliminate, modify, prejudice, abridge or otherwise adversely affect any rights, benefits, privileges or priorities granted or reserved, from time to time, to the Hotel Operator, without the consent of the Hotel Operator. Notwithstanding anything to the contrary set forth herein, the provisions of this Declaration requiring maintenance of various portions of the Condominium Property in accordance with the Hotel Standards may not be amended without the prior written consent of the Hotel Operator and for so long as the Developer is an Owner, the Developer. (G) Execution and Recording. An amendment, other than amendments made by the Developer alone pursuant to the Act or this Declaration, shall be evidenced by a certificate of the Association, executed either by the President of the Association or a majority of the members of the   11 -------------------------------------------------------------------------------- Board of Directors which shall include recording data identifying the Declaration and shall be executed with the same formalities required for the execution of a deed. An amendment of the Declaration is effective when the applicable amendment is properly recorded in the public records of the County. No provision of this Declaration shall be revised or amended by reference to its title or number only. Proposals to amend existing provisions of this Declaration shall contain the full text of the provision to be amended; new words shall be inserted in the text underlined; and words to be deleted shall be lined through with hyphens. However, if the proposed change is so extensive that this procedure would hinder, rather than assist, the understanding of the proposed amendment, it is not necessary to use underlining and hyphens as indicators of words added or deleted, but, instead, a notation must be inserted immediately preceding the proposed amendment in substantially the following language: “Substantial rewording of Declaration. See provision . . . for present text.” Nonmaterial errors or omissions in the amendment process shall not invalidate an otherwise properly adopted amendment. VIII. Maintenance and Repairs. (A) Units. All maintenance, repairs and replacements of, in or to any Unit, whether structural or nonstructural, ordinary or extraordinary, foreseen or unforeseen, including, without limitation, maintenance, repair and replacement of windows, window coverings, interior nonstructural walls, the interior side of any entrance door and all other doors within or affording access to a Unit, and the electrical (including wiring), plumbing (including fixtures and connections), heating and air-conditioning equipment, fixtures and outlets, appliances, carpets and other floor coverings, all interior surfaces and the entire interior of the Unit lying within the boundaries of the Unit or other property belonging to the Unit Owner, shall be performed by the Owner of such Unit at the Unit Owner’s sole cost and expense, except as otherwise expressly provided to the contrary herein. Notwithstanding anything herein to the contrary, to the extent that any of the foregoing items are part of the Shared Components, then the maintenance of same shall be the obligation of the Hotel Operator, with the costs thereof charged against the Unit Owners in accordance with the terms of Article XIII of this Declaration. (1) With respect to any Participating Residential Unit, if, in the reasonable judgment of the Hotel Operator, an Owner fails to maintain the Participating Residential Unit or the improvements located thereon in good order and repair, and such failure remains uncured for more than thirty (30) days after the delivery of written notice thereof to such Owner by the Hotel Operator, the Hotel Operator may enter upon such Unit and perform such maintenance or repair as the Hotel Operator deems necessary or advisable and charge all costs and expenses incurred by the Hotel Operator in connection therewith to such Owner. The Owner shall pay the same within thirty (30) days after its receipt of an invoice therefore. (B) Common Elements. Except to the extent (i) expressly provided to the contrary herein, or (ii) proceeds of insurance are made available therefore, all maintenance, repairs and replacements in or to the Common Elements, shall be performed by the Association and the cost and expense thereof shall be charged to all Unit Owners as a Common Expense, except to the extent arising from or necessitated by the negligence, misuse or neglect of specific Unit Owners, in which case such cost and expense shall be paid solely by such Unit Owners. Except as otherwise provided in this Declaration, the Association, or its duly designated agent, shall maintain the Common Elements in accordance with the Hotel Standards. The Association shall construct, modify, alter, add to, repair, replace or renovate any Improvements that are located on or constitute a part of any Common Elements as and when required for compliance with Hotel Standards. Any additional construction, modification, addition, repair, replacement or renovation shall be performed by the Association on or with respect to Common Elements and shall be performed subject to, and in accordance with, the Hotel Standards. The Association shall adopt and enforce rules and regulations regulating the use of the Common Elements, which rules and regulations shall not conflict with or contradict the Hotel   12 -------------------------------------------------------------------------------- Standards. The Association shall take any other actions as the Association deems necessary or advisable to protect, maintain, operate, repair, manage or regulate the use of the Common Elements in accordance with the Hotel Standards. If the Association fails to maintain any Common Elements in accordance with the Hotel Standards, the Hotel Operator shall have the right, after giving ten (10) days prior, written notice of any maintenance deficiency to the Association, to correct any such deficiency by performing any necessary maintenance and repairs. The Association shall reimburse the Hotel Operator for all the costs and expenses incurred by the Hotel Operator in correcting any such deficiency within fifteen (15) days after the Hotel Operator’s delivery of an invoice therefore to the Association. If the Association fails to reimburse the Hotel Operator within such 15-day period, the Hotel Operator may offset the amounts owed to the Hotel Operator against Assessments levied against the Hotel Unit. (C) Hotel Unit. The Hotel Operator, from time to time, shall be responsible for the repair, replacement, improvement, maintenance, management, operation, and insurance of the Hotel Unit, which shall be performed in a commercially reasonable manner in the determination of the Hotel Operator (which determination shall be binding). In consideration of the reservation and grant of easement over the Hotel Unit, as provided in Article VI above, each Residential Unit Owner shall be obligated for payment of the expenses incurred by the Hotel Operator in connection with such maintenance, repair, replacement, improvement, management, operation and insurance, all as more particularly provided in Article XIII below. Notwithstanding anything herein to the contrary, to the extent that any of the foregoing items are part of the Shared Components, then the maintenance of same shall be the obligation of the Hotel Operator, with the costs thereof charged against the Unit Owners in accordance with the terms of Article XIII of this Declaration.   IX. Additions. Alterations or Improvements by Unit Owner. (A) Consent. No Unit Owner shall make any addition, alteration or improvement in or to the Unit (which is visible from the exterior of the Unit) and/or any Common Elements or Shared Components, without, in each instance, the prior written consent of the Board of Directors and the Hotel Operator. Further, no Unit Owner shall cause anything to be affixed or attached to, hung, displayed or placed on the exterior walls, doors, balconies or windows of the Building (including, but not limited to, awnings, signs, storm shutters, satellite dishes, screens, window tinting, furniture, fixtures and equipment), without the prior written consent of the Board of Directors, the Master Association and the Hotel Operator. No Unit Owner shall make any addition, alteration or improvement in or to the interior of the Unit without, in each instance, the prior written consent of the Board of Directors (and the Hotel Operator as to Participating Residential Units). No Unit Owner shall make any additions, alterations or improvements in or to the Unit which are visible from the exterior of the Building, without the prior written consent of the Board of Directors, Master Association and Hotel Operator. The Board of Directors shall not permit or consent to any new improvement or any construction, alteration, installation or other work to any existing Improvement that does not conform to the Hotel Standards. Without limiting the generality of this Section IX(A), no Unit Owner shall cause or allow improvements or changes to his or her Unit, or to any Common Elements or any property of the Condominium Association which does or could in any way affect, directly or indirectly, the structural, electrical, plumbing, Life Safety Systems, or mechanical systems, or any landscaping or drainage, of any portion of the Condominium Property without first obtaining the written consent of the Board of Directors and Hotel Operator. No spas, hot tubs, whirlpools, infant portable pools or similar types of products will be permitted to be placed or installed on any patio or balcony which is appurtenant to any Unit. The Board of Directors and the Hotel Operator shall have the obligation to answer, in writing, any written request by a Unit Owner for approval of such an addition, alteration or improvement within forty-five (45) days after such request and after all additional information requested is received, and the failure to do so within the stipulated time shall constitute consent on behalf of that entity. The Board of Directors and/or Hotel Operator may condition the approval in any manner, including, without limitation, retaining   13 -------------------------------------------------------------------------------- approval rights of the contractor, or others, to perform the work, imposing conduct standards on all such workmen, establishing permitted work hours and requiring the Unit Owner to obtain insurance naming the Developer, the Board of Directors and the Hotel Operator as additional named insureds. The proposed additions, alterations and improvements by the Unit Owners shall be made in compliance with all laws, rules, ordinances and regulations of all governmental authorities having jurisdiction, and with any conditions imposed by the Association with respect to design, structural integrity, aesthetic appeal, construction details, lien protection or otherwise. Once approved by the Board of Directors and/or the Hotel Operator, such approval may not be revoked. (1) A Unit Owner making or causing to be made any such additions, alterations or improvements agrees, and shall be deemed to have agreed, for such Unit Owner, and his or her heirs, personal representatives, successors and assigns, as appropriate, to hold the Developer, the Board of Directors, the Master Association and the Hotel Operator (the “Approving Entities”) and all other Unit Owners harmless from and to indemnify them against any liability or damage to the Condominium and expenses arising therefrom, and shall be solely responsible for the maintenance, repair and insurance thereof from and after that date of installation or construction thereof as may be required by the Approving Entities. The Approving Entities’ rights of review and approval of plans and other submissions under this Declaration are intended solely for the benefit of the Association. Neither the Developer, the Approving Entities nor any of the officers, directors, employees, agents, contractors, consultants or attorneys of the Approving Entities shall be liable to any Owner or any other person by reason of mistake in judgment, failure to point out or correct deficiencies in any plans or other submissions, negligence, or any other misfeasance, malfeasance or non-feasance arising out of or in connection with the approval or disapproval of any plans or submissions. Anyone submitting plans hereunder, by the submission of same, and any Owner, by acquiring title to same, agrees not to seek damages from the Developer and/or the Approving Entities arising out of the Approving Entities’ review of any plans hereunder. Without limiting the generality of the foregoing, the Approving Entities shall not be responsible for reviewing, nor shall its review of any plans be deemed approval of, any plans from the standpoint of structural safety, soundness, workmanship, materials, usefulness, conformity with building or other codes or industry standards, or compliance with governmental requirements. Further, each Owner (including the successors and assigns) agrees to indemnify and hold the Developer and the Approving Entities harmless from and against any and all costs, claims (whether rightfully or wrongfully asserted), damages, expenses or liabilities whatsoever (including, without limitation, reasonable attorneys’ fees and court costs at all trial and appellate levels), arising out of any review of plans by the Approving Entities hereunder. (B) Hotel Unit. The Hotel Operator may make any alterations or modifications to the Hotel Unit necessary to comply with the Hotel Standards. (1) Notwithstanding anything to the contrary contained in this Declaration, the Hotel Operator may make Improvements or alterations to the Hotel Unit, including without limitation, the erection of partitions, without the consent of any Owner or the Association, on the condition that: (i) the Improvement or alteration does not impair any other Unit; (ii) the Hotel Operator repairs any damage to any portion of the Common Elements caused thereby at its cost and expense; and (iii) the Improvement or alteration complies with all applicable requirements of the Declaration and Master Association Declaration.   14 -------------------------------------------------------------------------------- (2) If any such Improvement or alteration will impair any other Unit, the Owner of the Hotel Unit may not make the Improvement or alteration without the prior written consent of the Owners of the Units. (3) Notwithstanding anything to the contrary contained in this Declaration, each Unit Owner recognizes and agrees that the Hotel Operator shall be permitted to make the following alterations to each Unit (and shall be permitted access to each Unit for purposes of making the following described alterations): (i) installation of unit location/exiting maps on the interior portion of each Residential Unit’s entry door and (ii) replacement of manually operated doors with doors containing automatic closing devices (i.e. spring hinges or door closers). (C) Improvements, Additions or Alterations by Developer to Developer-Owned Units. Anything to the contrary notwithstanding, the foregoing restrictions of this Article IX shall not apply to Developer-owned Units. The Developer shall have the additional right, without the consent or approval of the Association, the Board of Directors, the Hotel Operator or other Unit Owners, to make alterations, additions or improvements, structural and non-structural, interior and exterior, ordinary and extraordinary, in, to and upon any Unit owned by it or them (including, without limitation, the removal of walls, floors, ceilings and other structural portions of the Improvements and/or the installation of divider walls). (1) Any amendment to this Declaration required by a change made by the Developer pursuant to this Section IX(C)(1) shall be adopted in accordance with Article VII and this Section IX(C)(1). The Developer shall have the right, without the vote or consent of the Association or Unit Owners, to (i) make alterations, additions or improvements in, to and upon Units owned by the Developer, whether structural or non-structural, interior or exterior, ordinary or extraordinary; (ii) change the layout or number of rooms in any Developer-owned Units; and (iii) combine or divide Developer-owned Units while not changing the fractional shares or the size of the legal Unit(s); provided, however, that the percentage interest in the Common Elements and share of the Common Surplus and Common Expenses of any Units (other than the affected Developer-owned Units) shall not be changed by reason thereof unless the Owners of such Units shall consent thereto and, provided further, that Developer shall comply with all laws, ordinances and regulations of all governmental authorities having jurisdiction in so doing. In making the above alterations, additions and improvements, the Developer may relocate and alter Common Elements and/or Shared Components adjacent to or near such Units, incorporate portions of the Common Elements into adjacent Units and incorporate Units, or portions thereof, into adjacent Common Elements, provided that such relocation and alteration does not materially adversely affect the market value or ordinary use of Units owned by Unit Owners other than the Developer. Any amendments to this Declaration required by changes of the Developer made pursuant to this Section, shall be effected by the Developer alone pursuant to Section VII(E), without the vote or consent of the Association or Unit Owners (or their mortgagees) required, except to the extent that any of same constitutes a Material Amendment, in which event, the amendment must be approved as set forth in Section VII(B) above. Without limiting the generality of Section VII(E) hereof, the provisions of this Section may not be added to, amended or deleted without the prior written consent of the Developer.   X. Operation of the Condominium by the Association; Powers and Duties. (1) Powers and Duties. The Association shall be the entity responsible for the operation of the Condominium, but not the Shared Components (which are part of the Hotel Unit). The powers and duties of the Association shall include those set forth in the Bylaws and Articles of Incorporation of the Association (respectively, Exhibits “4” and “5” annexed hereto), as amended from time to time. The affairs of the Association shall be governed by a Board of Directors of not less than three (3) nor more than nine (9) directors. In addition, the Association shall have all the powers and   15 -------------------------------------------------------------------------------- duties set forth in the Act, as well as all powers and duties granted to or imposed upon it by this Declaration. In the event of conflict among the powers and duties of the Association or the terms and provisions of this Declaration and the Exhibits attached hereto, this Declaration shall take precedence over the Articles of Incorporation, Bylaws and applicable rules and regulations; the Articles of Incorporation shall take precedence over the Bylaws and applicable rules and regulations; and the Bylaws shall take precedence over applicable rules and regulations, all as amended from time to time. Notwithstanding anything in this Declaration or its Exhibits to the contrary, the Association shall at all times be the entity having ultimate control over the Condominium, consistent with the Act. (B) Limitation Upon Liability of Association. Notwithstanding the duty of the Association to maintain and repair parts of the Condominium Property, the Association shall not be liable to Unit Owners for injury or damage, other than for the cost of maintenance and repair, caused by any latent condition of the Condominium Property. Further, the Association shall not be liable for any such injury or damage caused by defects in design or workmanship or any other reason connected with any additions, alterations or improvements or other activities done by or on behalf of any Unit Owners regardless of whether or not same shall have been approved by the Association pursuant to Section IX(A) hereof. The Association also shall not be liable to any Unit Owner or lessee or to any other person or entity for any property damage, personal injury, death or other liability on the grounds that the Association did not obtain or maintain insurance (or carried insurance with any particular deductible amount) for any particular matter where: (i) such insurance is not required hereby; or (ii) the Association could not obtain such insurance at reasonable costs or upon reasonable terms. Notwithstanding the foregoing, nothing contained herein shall relieve the Association of its duty of ordinary care, as established by the Act, in carrying out the powers and duties set forth herein, nor deprive Unit Owners of their right to sue the Association if it negligently or willfully causes damage to the Unit Owner’s property during the performance of its duties hereunder. The limitations upon liability of the Association described in this Section X(B) are subject to the provisions of Section 718.111(3) Florida Statutes. (C) Restraint Upon Assignment of Shares in Assets. The share of a Unit Owner in the funds and assets of the Association cannot be assigned, hypothecated or transferred in any manner except as an appurtenance to his Unit. (D) Approval or Disapproval of Matters. Whenever the decision of a Unit Owner is required upon any matter, whether or not the subject of an Association meeting, that decision shall be expressed by the same person who would cast the vote for that Unit if at an Association meeting, unless the joinder of all record Owners of the Unit is specifically required by this Declaration or by law. (E) Acts of the Association. Unless the approval or action of Unit Owners, and/or a certain specific percentage of the Board of Directors of the Association, is specifically required in this Declaration, the Articles of Incorporation or Bylaws of the Association, applicable rules and regulations or applicable law, all approvals or actions required or permitted to be given or taken by the Association shall be given or taken by the Board of Directors, without the consent of Unit Owners, and the Board of Directors may so approve and act through the proper officers of the Association without a specific resolution. When an approval or action of the Association is permitted to be given or taken hereunder or thereunder, such action or approval may be conditioned in any manner the Association deems appropriate or the Association may refuse to take or give such action or approval without the necessity of establishing the reasonableness of such conditions or refusal.   16 -------------------------------------------------------------------------------- (F) Effect on Developer. If the Developer holds a Unit for sale in the ordinary course of business, none of the following actions may be taken after control of the Association has passed to Unit Owners (other than the Developer), without the prior written approval of the Developer: (1) Assessment of the Developer as a Unit Owner for capital improvements; (2) Any action by the Association that would be detrimental to the sales of Units by the Developer; provided, however, that an increase in Assessments for Common Expenses without discrimination against the Developer shall not be deemed to be detrimental to the sales of Units.   XI. Determination of Common Expenses and Fixing of Assessments Therefore. The Board of Directors shall establish and levy annual, special, default and property tax assessments in amounts necessary to fund the expenses of the Association contemplated by the Budget, and meet the Hotel Standards with respect to the Common Elements. The Board of Directors shall from time to time, and at least annually, prepare a budget for the Condominium and the Association, determine the amount of Assessments payable by the Unit Owners to meet the Common Expenses of the Condominium and allocate and assess such expenses among the Unit Owners in accordance with the provisions of this Declaration and the Bylaws. The Board of Directors shall advise all Unit Owners promptly in writing of the amount of the Assessments payable by each of them as determined by the Board of Directors as aforesaid and shall furnish copies of the budget, on which such Assessments are based, to all Unit Owners and (if requested in writing) to their respective mortgagees. The Common Expenses shall include the expenses of and reserves for (if required by, and not waived in accordance with, applicable law) the operation, maintenance, repair and replacement of the Common Elements, costs of carrying out the powers and duties of the Association and any other expenses designated as Common Expenses by the Act, this Declaration, the Articles or Bylaws of the Association, applicable rules and regulations or by the Association. Incidental income to the Association, if any, may be used to pay regular or extraordinary Association expenses and liabilities, to fund reserve accounts, or otherwise as the Board of Directors shall determine from time to time, and need not be restricted or accumulated. Any Budget adopted shall be subject to change to cover actual expenses at any time. Any such change shall be adopted consistent with the provisions of this Declaration and the Bylaws.   XII. Collection of Assessments. (A) Liability for Assessments. A Unit Owner, regardless of how title is acquired, including by purchase at a foreclosure sale or by deed in lieu of foreclosure, shall be liable for all Assessments coming due while he/she is the Unit Owner. Additionally, a Unit Owner shall be jointly and severally liable with the previous Owner for all unpaid Assessments that came due up to the time of the conveyance, without prejudice to any right the Owner may have to recover from the previous Owner the amounts paid by the grantee Owner. The liability for Assessments may not be avoided by waiver of the use or enjoyment of any Common Elements or by the abandonment of the Unit for which the Assessments are made or otherwise. (B) Special and Capital Improvement Assessments. In addition to Assessments levied by the Association to meet the Common Expenses of the Condominium and the Association, the Board of Directors may levy “Special Assessments” and “Capital Improvement Assessments” upon the following terms and conditions: (1) “Special Assessments” shall mean and refer to an Assessment against each Owner and his Unit, representing a portion of the costs incurred by the Association for specific purposes of a nonrecurring nature which are not in the nature of capital improvements, including for the following purposes: (i) costs incurred by the Association for the acquisition, installation, construction or replacement of any capital improvements located or to be located within the Common Elements; or   17 -------------------------------------------------------------------------------- (ii) any expense necessary to repair or maintain the Common Elements in accordance with the Hotel Standards. (2) “Capital Improvement Assessments” shall mean and refer to an Assessment against each Owner and his or her Unit, representing a portion of the costs incurred by the Association for the acquisition, installation, construction or replacement (as distinguished from repairs and maintenance) of any capital improvements located or to be located within the Common Elements. Special Assessments and Capital Improvement Assessments may be levied by the Board of Directors and shall be payable in lump sums or installments, in the discretion of the Board of Directors; provided that, if such Special Assessments or Capital Improvement Assessments, in the aggregate in any year, exceed three percent (3%) of the then estimated operating budget of the Association, the Board of Directors must obtain approval of a majority of the voting interests represented at a meeting at which a quorum is attained. (C) Default in Payment of Assessments for Common Expenses. Assessments and installments thereof not paid within ten (10) days from the date when they are due shall bear interest at fifteen percent (15%) per annum from the date due until paid and shall be subject to an administrative late fee in an amount not to exceed the greater of $25.00 or five percent (5%) of each delinquent installment. The Association has a lien on each Condominium Parcel to secure the payment of Assessments. Except as set forth below, the lien is effective from, and shall relate back to, the date of the recording of this Declaration. However, as to a first mortgage of record, the lien is effective from and after the date of the recording of a claim of lien in the Public Records of the County, stating the description of the Condominium Parcel, the name of the record Owner and the name and address of the Association. The lien shall be evidenced by the recording of a claim of lien in the Public Records of the County. To be valid, the claim of lien must state the description of the Condominium Parcel, the name of the record Owner, the name and address of the Association, the amount due and the due dates, and the claim of lien must be executed and acknowledged by an officer or authorized officer of the Association. The claim of lien shall not be released until all sums secured by it (or such other amount as to which the Association shall agree by way of settlement) have been fully paid or until it is barred by law. No such lien shall be effective longer than one (1) year after the claim of lien has been recorded unless, within that one (1) year period, an action to enforce the lien is commenced. The one (1) year period shall automatically be extended for any length of time during which the Association is prevented from filing a foreclosure action by an automatic stay resulting from a bankruptcy petition filed by the Owner or any other person claiming an interest in the Unit. The claim of lien shall secure (whether or not stated therein) all unpaid Assessments, which are due and which may accrue subsequent to the recording of the claim of lien and prior to the entry of a certificate of title, as well as interest and all reasonable costs and attorneys’ fees incurred by the Association incident to the collection process. Upon payment in full, the person making the payment is entitled to a satisfaction of the lien in recordable form. The Association may bring an action in its name to foreclose a lien for unpaid Assessments in the manner a mortgage of real property is foreclosed and may also bring an action at law to recover a money judgment for the unpaid Assessments without waiving any claim of lien. The Association is entitled to. recover its reasonable attorneys’ fees incurred either in a lien foreclosure action or an action to recover a money judgment for unpaid Assessments. As an additional right and remedy of the Association, upon default in the payment of Assessments as aforesaid and after thirty (30) days’ prior written notice to the applicable Unit   18 -------------------------------------------------------------------------------- Owner and the recording of a claim of lien, the Association may accelerate and declare immediately due and payable all installments of Assessments for the remainder of the fiscal year. In the event that the amount of such installments changes during the remainder of the fiscal year, the Unit Owner or the Association, as appropriate, shall be obligated to pay or reimburse to the other the amount of increase or decrease within ten (10) days of same taking effect. (D) Notice of Intention to Foreclose Lien. No foreclosure judgment may be entered until at least thirty (30) days after the Association gives written notice to the Unit Owner of its intention to foreclose its lien to collect the unpaid Assessments. If this notice is not given at least thirty (30) days before the foreclosure action is filed, and if the unpaid Assessments, including those coming due after the claim of lien is recorded, are paid before the entry of a final judgment of foreclosure, the Association shall not recover attorney’s fees or costs. The notice must be given by delivery of a copy of it to the Unit Owner or by certified or registered mail, return receipt requested, addressed to the Unit Owner at the last known address, and upon such mailing, the notice shall be deemed to have been given. If after diligent search and inquiry the Association cannot find the Unit Owner or a mailing address at which the Unit Owner will receive the notice, the court may proceed with the foreclosure action and may award attorney’s fees and costs as permitted by law. The notice requirements of this Section are satisfied if the Unit Owner records a Notice of Contest of Lien as provided in the Act. (E) Appointment of Receiver to Collect Rental. If the Unit Owner remains in possession of the Unit after a foreclosure judgment has been entered, the court in its discretion may require the Unit Owner to pay a reasonable rental for the Unit. If the Unit is rented or leased during the pendency of the foreclosure action, the Association is entitled to the appointment of a receiver to collect the rent. The expenses of such receiver shall be paid by the party which does not prevail in the foreclosure action. (F) First Mortgagee. The liability of the holder of a first mortgage on a Unit (each, a “First Mortgagee”), or its successors or assigns, who acquires title to a Unit by foreclosure or by deed in lieu of foreclosure for the unpaid Assessments (or installments thereof) that became due prior to the First Mortgagee’s acquisition of title is limited to the lesser of: (1) The Unit’s unpaid Common Expenses and regular periodic Assessments which accrued or came due during the six (6) months immediately preceding the acquisition of title and for which payment in full has not been received by the Association; or (2) One percent (1%) of the original mortgage debt. As to a Unit acquired by foreclosure, the limitations set forth in clauses (a) and (b) above shall not apply unless the First Mortgagee joined the Association as a defendant in the foreclosure action. Joinder of the Association, however, is not required if, on the date the complaint is filed, the Association was dissolved or did not maintain an office or agent for service of process at a location which was known to or reasonably discoverable by the mortgagee. A First Mortgagee acquiring title to a Unit as a result of foreclosure or deed in lieu thereof may not, during the period of its ownership of such Unit, whether or not such Unit is unoccupied, be excused from the payment of any of the Common Expenses coming due during the period of such ownership. (G) Estoppel Statement. Within fifteen (15) days after receiving a written request therefore from a purchaser, Unit Owner or mortgagee of a Unit, the Association shall provide, a certificate, signed by an officer or agent of the Association, stating all Assessments and other moneys owed to the Association by the Unit Owner with respect to his or her Unit. Any person other than the   19 -------------------------------------------------------------------------------- Unit Owner who relies upon such certificate shall be protected thereby. The Association or its authorized agent may charge a reasonable fee for the preparation of such certificate. (H) Installments. Regular Assessments shall be collected in advance in monthly or quarterly installments, or in such other installment increments as the Board of Directors deems appropriate. Initially, assessments will be collected monthly, and be due on the first day of each month. (I) Application of Payments. Any payments received by the Association from a delinquent Unit Owner shall be applied as follows: (1) first to attorneys’ fees assessed against the Unit incurred by the Association in connection with any attempt to recover sums secured by an Assessment Lien on the Unit, if any; (2) then to fines assessed against the Unit by the Association, if any; (3) then to late fees assessed against the Unit by the Association, if any; and (4) then to any Assessment of the Unit in the order of the posting of such Assessment by the Association. The foregoing shall be applicable notwithstanding any restrictive endorsement, designation or instruction placed on or accompanying a payment. (J) Reserve Funds. Prior to turnover of control of the Condominium Association from the Developer to the Unit Owners, Developer will vote to waive reserves for the initial fiscal year of the Association. During the second fiscal year of the Association’s operation (and prior to turnover), it is intended that the Seller, as the developer the Condominium, will vote to waive or reduce funding of reserves for the second fiscal year of the Association. Thereafter, reserves may only be waived or reduced only upon the voting majority of the non-developer unit owners of the Condominium, at a duly called meeting of the Condominium Association; provided however that if a meeting of the unit owners is called to determine whether to waive or reduce the funding of reserves, and no such result is achieved or a quorum is not attained, the reserves will go into effect. XIII. Obligation for Expenses Relating to the Hotel Unit. (A) Maintenance. As provided in Sections VI(E) and VIII(C) above, the Hotel Operator has granted easements with respect to certain portions of the Hotel Unit and agreed to repair, replace, improve, maintain, manage, operate and insure the Hotel Unit, all to be done as determined and ordered by the Hotel Operator, or otherwise as provided in Section VIII(C). In consideration of the foregoing, each Residential Unit Owner by acceptance of a deed or other conveyance of the applicable Unit, and whether or not expressly stated, shall be deemed to agree that the costs incurred by the Hotel Operator in (or reasonably allocated to) the repair, replacement, improvement, maintenance, management, operation, ad valorem tax obligations and insurance of the Shared Components (including reasonable reserves if established by the Hotel Operator, any and all financial or other obligations of the Developer or the Hotel Operator under any parking lease, valet parking agreement and/or other parking arrangement (including any rent or fees, costs or other sums due thereunder); and any assessments payable by the Hotel Operator to the Association, the Shared Costs shall be paid for in part through charges (either general or special) imposed against the Residential Units in accordance with the terms hereof. No Owner may waive or otherwise escape liability for charges for the Shared Costs by non-use (whether voluntary or involuntary) of the   20 -------------------------------------------------------------------------------- Hotel Unit or abandonment of the right to use same. Notwithstanding anything herein contained to the contrary, the Hotel Operator shall be excused and relieved from any and all maintenance, repair and/or replacement obligations with respect to the Hotel Unit to the extent that the funds necessary to perform same are the obligation of the Residential Unit Owners and are not available through the charges imposed and actually collected. The Hotel Operator shall have no obligation to fund and/or advance any deficient or shortfall in funds which were the obligation of the Residential Unit Owners in order to properly perform the maintenance, repair and/or replacement obligations described herein. (B) Easement. An easement is hereby reserved and created in favor of the Hotel Operator, and its designees over the Condominium Property for the purpose of entering onto the Condominium Property for the performance of the maintenance, repair and replacement obligations herein described. Without limiting the generality of the foregoing, each Owner shall be deemed to understand and agree that inasmuch as the Condominium Property does not contain trash chutes, the Owner shall be obligated to follow such trash removal procedures as may be established from time to time by the Hotel Operator. To the extent that the Hotel Operator determines (without any obligation to do so) to remove trash directly from each Unit, then: (i) an easement is hereby reserved to allow the Hotel Operator (or its employees, agents or contractors) access to each Unit for such purpose, and (ii) all costs in connection with trash removal shall be deemed part of the Shared Costs. (C) Charges to Unit Owners; Lien. (1) Developer, for all Units now or hereafter located within the Condominium Property, hereby covenants and agrees, and each Owner of any Residential Unit, by acceptance of a deed therefore or other conveyance thereof, whether or not it shall be so expressed in such deed or other conveyance, shall be deemed to covenant and agree, to pay to the Hotel Operator annual charges for the operation and insurance of, and for payment of one hundred percent (100%) of the Shared Costs (the “Non-Hotel Units Allocated Share”), the establishment of reasonable reserves for the replacement of the Shared Components and the furnishings and finishings thereof, capital improvement charges, special charges and all other charges hereinafter referred to or lawfully imposed by the Hotel Operator in connection with the repair, replacement, improvement, maintenance, management, operation and insurance of the Shared Components, all such charges to be fixed, established and collected from time to time as herein provided. The annual charge, capital improvement charge and special charge, together with such interest thereon and costs of collection thereof as hereinafter provided, shall be a charge on the Residential Units and shall be a continuing lien upon the Residential Units against which each such charge is made and upon all improvements thereon, from time to time existing. Each such charge, together with such interest thereon and costs of collection thereof as hereinafter provided, shall also be the personal obligation of the person who is the Owner of such Residential Units at the time when the charge fell due and all subsequent Owners of that Unit until paid, except as provided in Section XIII(E) below. Reference herein to charges shall be understood to include reference to any and all of said charges whether or not specifically mentioned. Each Residential Unit shall be charged a “proportionate share” of the Hotel Shared Costs. The proportionate share for each Residential Unit of the Hotel Shared Costs is set forth on Exhibit “6” attached hereto. (2) In addition to the regular and capital improvement charges which are or may be levied hereunder, the Hotel Operator shall have the right to collect reasonable reserves for the replacement of the Shared Components and the furnishings and finishings thereof and to levy special charges against an Owner(s) to the exclusion of other Owners for the repair or replacement of damage to any portion of the Hotel Unit (including, without limitation, improvements, furnishings and finishings therein) caused by misuse, negligence or other action or inaction of an Owner or his guests, tenants or invitees. Any such special charge shall be subject to all of the applicable provisions of this Section including, without limitation, lien filing and foreclosure procedures and   21 -------------------------------------------------------------------------------- late charges and interest. Any special charge levied hereunder shall be due within the time specified by the Hotel Operator in the action imposing such charge. The annual regular charges provided for in this Section shall commence on the first day of the month next following the recordation of this Declaration and shall be applicable through December 31 of such year. Each subsequent annual charge shall be imposed for the year beginning January 1 and ending December 31. The annual charges shall be payable in advance in monthly installments, or in annual, semi- or quarter-annual installments if so determined by the Hotel Operator (absent which determination they shall be payable monthly). The charge amount (and applicable installments) may be changed at any time by the Hotel Operator from that originally stipulated or from any other charge that is in the future adopted by the Hotel Operator. The original charge for any year shall be levied for the calendar year (to be reconsidered and amended, if necessary, at an appropriate time during the year), but the amount of any revised charge to be levied during any period shorter than a full calendar year shall be in proportion to the number of months (or other appropriate installments) remaining in such calendar year. The Hotel Operator shall fix the date of commencement and the amount of the charge against the Residential Units for each charge period, to the extent practicable, at least thirty (30) days in advance of such date or period, and shall, at that time, prepare a roster of the Residential Units and charges applicable thereto, which shall be kept in the office of the Hotel Operator and shall be open to inspection by any Owner. Written notice of the charge shall thereupon be sent to every Unit Owner subject thereto twenty (20) days prior to payment of the first installment thereof, except as to special charges. In the event no such notice of the charges for a new charge period is given, the amount payable shall continue to be the same as the amount payable for the previous period, until changed in the manner provided for herein. (D) Effect of Non-Payment of Charge; the Personal Obligation; the Lien; Remedies of the Hotel Operator. If the charges (or installments) provided for herein are not paid on the date(s) when due (being the date(s) specified herein or pursuant hereto), then such charges (or installments) shall become delinquent and shall, together with late charges, interest and the cost of collection thereof as hereinafter provided, thereupon become a continuing lien on the Unit and all improvements thereon which shall bind such Unit in the hands of the then Owner, and such Owner’s heirs, personal representatives, successors and assigns. Except as provided in Section XIII(E) to the contrary, the personal obligation of an Owner to pay such charge shall pass to such Owner’s successors in title and recourse may be had against either or both. If any installment of a charge is not paid within fifteen (15) days after the due date, at the option of the Hotel Operator, a late charge not greater than the amount of such unpaid installment may be imposed (provided that only one (1) late charge may be imposed on any one (1) unpaid installment and if such installment is not paid thereafter, it and the late charge shall accrue interest at eighteen percent (18%) per annum or as provided herein but shall not be subject to additional late charges; provided further, however, that each other installment thereafter coming due shall be subject to one (1) late charge each as aforesaid) and the Hotel Operator may bring an action at law against the Owner(s) personally obligated to pay the same, may record a claim of lien (as evidence of its lien rights as hereinabove provided for) against the Unit on which the charges and late charges are unpaid and all improvements thereon, may foreclose the lien against the applicable Unit and all improvements thereon which the charges and late charges are unpaid, or may pursue one or more of such remedies at the same time or successively, and attorneys’ fees and costs actually incurred in preparing and filing the claim of lien and the complaint, if any, and prosecuting same, in such action shall be added to the amount of such charges, late charges and interest secured by the lien, and in the event a judgment is obtained, such judgment shall include all such sums as above provided and attorneys’ fees actually incurred together with the costs of the action, through all applicable appellate levels. Failure of the Hotel Operator (or any collecting entity) to send or deliver bills or notices of charges shall not relieve Owners from their obligations hereunder. The Hotel Operator shall have such other remedies for collection and enforcement of charges as may be permitted by applicable law. All remedies are intended to be, and shall be, cumulative.   22 -------------------------------------------------------------------------------- (E) Subordination of the Hotel Operator’s Lien. The lien of the charges provided for in this Article shall be subordinate to real property tax liens and the lien of any first mortgage; provided, however that any such mortgage lender when in possession, and in the event of a foreclosure, any purchaser at a foreclosure sale, and any such mortgage lender acquiring a deed in lieu of foreclosure, and all persons claiming by, through or under such purchaser or mortgage lender, shall hold title subject to the liability and lien of any charge coming due after such foreclosure (or conveyance in lieu of foreclosure). Any unpaid charge which cannot be collected as a lien against any Unit by reason of the provisions of this Section shall be deemed to be a charge divided equally among, payable by and a lien against all Units, including the Units as to which the foreclosure (or conveyance in lieu of foreclosure took place. (F) Curative Right. In the event (and only in the event) that the Hotel Operator fails to maintain the Shared Components as required under this Declaration for any reason other than failure to receive sufficient funds therefore from Unit Owners, the Association shall have the right to perform such duties; provided, however, that same may only occur after sixty (60) days’ prior written notice to the Hotel Operator and provided that the Hotel Operator has not effected curative action within said sixty (60) day period (or if the curative action cannot reasonably be completed within said sixty (60) day period, provided only that the Hotel Operator has not commenced curative actions within said sixty (60) day period and thereafter diligently pursued same to completion). To the extent that the Association must undertake maintenance responsibilities as a result of the Hotel Operators’ failure to perform same, then in such event, but only for such remedial actions as may be necessary, the Association shall be deemed vested with the charge rights of the Hotel Operator hereunder for the limited purpose of obtaining reimbursement from the Hotel Operator for the costs of performing such remedial work. (G) Financial Records. The Hotel Operator shall maintain financial books and records showing its actual receipts and expenditures with respect to the maintenance, operation, repair, replacement, alteration and insurance of the Shared Components, including the then current budget and any then proposed budget (the “Shared Components Records”). The Shared Components Records need not be audited or reviewed by a Certified Public Accountant. The Shared Components Records shall at all times, during reasonable business hours, be subject to the inspection of any Member of the Association. (H) Hotel Operators Consent; Conflict. The provisions of this Article XIII shall not be amended, modified or in any manner impaired and/or diminished, directly or indirectly, without the prior written consent of four-fifths (4/5th) of the Residential Unit Owners and the prior written consent of the Hotel Operator. In the event of any conflict between the provisions of this Article XIII, and the provision of any other Section of this Declaration, the provisions of this Article XIII shall prevail and govern. XIV. Insurance. (A) Insurance. Insurance obtained by the Hotel Operator pursuant to the requirements of this Article XIV shall be governed by the following provisions: (1) Purchase, Custody and Payment. (i) Purchase. All insurance policies required to be obtained by the Hotel Operator hereunder shall be issued by an insurance company authorized to do business in Florida or by surplus lines carriers offering policies for properties in Florida. (ii) Named Insured. The named insured shall be the Hotel Operator, individually, or such designee as may be designated by the Hotel Operator, and as agent for the   23 -------------------------------------------------------------------------------- Association and the Owners of Units covered by the policy, without naming them, and as agent for the holders of any mortgage on a Unit (or any leasehold interest therein), without naming them. The Association, Unit Owners and the holders of any mortgage on a Unit (or any leasehold interest therein) shall be deemed additional insureds. (iii) Custody of Policies and Payment of Proceeds. All policies shall provide that payments for losses made by the insurer shall be paid to the Hotel Operator and the holders of any mortgage on the Hotel Unit, as their interests may appear. (iv) Copies to Mortgagees. One copy of each insurance policy, or a certificate evidencing such policy, and all endorsements thereto, shall be furnished by the Hotel Operator upon request to the holders of any mortgage on a Unit. Copies or certificates shall be furnished not less than ten (10) days prior to the beginning of the term of the policy, or not less than ten (10) days prior to the expiration of each preceding policy that is being renewed or replaced, as appropriate. (v) Personal Property and Liability. Except as specifically provided herein, the Hotel Operator shall not be responsible to other Unit Owners to obtain insurance coverage upon the property lying within the boundaries of their Units, including, but not limited to, the Improvements, Owners’ personal property, nor insurance for the Owners’ personal liability and living expenses, nor for any other risks not otherwise insured in accordance herewith. (2) Coverage. The Hotel Operator shall maintain insurance covering the following: (i) Casualty. The Shared Components, together with all fixtures, building service equipment, personal property and supplies constituting the Shared Components (collectively the “Insured Property”), shall be insured in such commercially reasonable amounts as may be determined from time to time by the Hotel Operator. Notwithstanding the foregoing, the Insured Property shall not include, and shall specifically exclude, the Residential Units, the portions of the Hotel Unit which are not part of the Shared Components, and all furniture, furnishings, Unit floor coverings, wall coverings and ceiling coverings, other personal property owned, supplied or installed by Residential Unit Owners, and all electrical fixtures, appliances, air conditioner and/or heating equipment, water heaters, water filters, built-in cabinets and countertops, and window treatments, including curtains, drapes, blinds, hardware and similar window treatment components, or replacements or any of the foregoing which are located within the boundaries of a Unit and serve only one (1) Unit and all air conditioning compressors that service only an individual Unit, if any and to the extent not part of the Shared Components. Such policies may contain reasonable deductible provisions as determined by the Hotel Operator. Such coverage shall afford protection against loss or damage by fire and other hazards covered by a standard extended coverage endorsement, and such other risks as from time to time are customarily covered with respect to buildings and improvements similar to the Insured Property in construction, location and use, including, but not limited to, vandalism and malicious mischief. (ii) Liability. Comprehensive general public liability and automobile liability insurance covering loss or damage resulting from accidents or occurrences on or about or in connection with the Insured Property or adjoining driveways and walkways, or any work, matters or things related to the Insured Property, with such coverage as shall be required by the Hotel Operator, and with a cross liability endorsement to cover liabilities of the Unit Owners as a group to any Unit Owner, and vice versa.   24 -------------------------------------------------------------------------------- (iii) Worker’s Compensation. Worker’s Compensation and other mandatory insurance, when applicable, to the extent applicable to the maintenance, operation, repair or replacement of the Shared Components. (iv) Flood Insurance. Flood insurance covering the Insured Property, if so determined by the Hotel Operator. (v) Other Insurance. Such Other Insurance as the Hotel Operator shall determine from time to time to be desirable in connection with the Shared Components. When appropriate and obtainable, each of the foregoing policies shall waive the insurer’s right to: (i) as to property insurance policies, subrogation against the Association and against the Unit Owners individually and as a group; (ii) to pay only a fraction of any loss in the event of coinsurance or if other insurance carriers have issued coverage upon the same risk; and (iii) avoid liability for a loss that is caused by an act of the Hotel Operator (or any of its employees, contractors and/or agents), one (1) or more Unit Owners or as a result of contractual undertakings. Additionally, and each policy shall provide that the insurance provided shall not be prejudiced by any act or omissions of individual Unit Owners that are not under the control of the Hotel Operator. (3) Additional Provisions. All policies of insurance shall provide that such policies may not be canceled or substantially modified without at least thirty (30) days’ prior written notice to all of the named insureds, including all mortgagees. Prior to obtaining any policy of casualty insurance or any renewal thereof, the Hotel Operator may obtain an appraisal from a fire insurance company, or other competent appraiser, of the full insurable replacement value of the Insured Property (exclusive of foundations), without deduction for depreciation, for the purpose of determining the amount of insurance to be effected pursuant to this Section. (4) Premiums. Premiums upon insurance policies purchased by the Hotel Operator pursuant to this Article XIV shall be among the costs assessed against the Unit Owners in accordance with the provisions of Section XIII(C). Premiums may be financed in such manner as the Hotel Operator deems appropriate. (5) Share of Proceeds. All insurance policies obtained by or on behalf of the Hotel Operator pursuant to this Article XIV shall be for the benefit of the Hotel Operator, the Association, the Unit Owners and the holders of any mortgage on a Unit (or any leasehold interest therein), as their respective interests may appear. The duty of the Hotel Operator shall be to receive such proceeds as are paid and to hold the same in trust for the purposes elsewhere stated herein, and for the benefit of the Unit Owners and the holders of any mortgage on the subject Unit(s) (or any leasehold interest therein) in accordance with the allocated interest attributable thereto. (6) Distribution of Proceeds. Proceeds of insurance policies required to be maintained by the Hotel Operator pursuant to this Article XIV shall be distributed to or for the benefit of the beneficial owners thereof in the following manner: Reconstruction or Repair. If the damaged property for which the proceeds are paid is to be repaired or reconstructed, the proceeds shall be paid to defray the cost thereof as elsewhere provided herein. Any proceeds remaining after defraying such costs shall be distributed to the Owners, remittances to Unit Owners and their mortgagees being payable jointly to them. (7) Hotel Operator as Agent. The Hotel Operator is hereby irrevocably appointed as agent and attorney-in-fact for the Association and each Unit Owner and for each owner of a mortgage or other lien upon a Unit and for each owner of any other interest in the Condominium Property to adjust all claims arising under insurance policies purchased by the Hotel Operator and to execute and deliver releases upon the payment of claims.   25 -------------------------------------------------------------------------------- (8) Unit Owners’ Personal Coverage. The insurance required to be purchased by the Hotel Operator pursuant to this Article XIV shall not cover claims against an Owner due to accidents occurring within his Unit, nor casualty or theft loss to the contents of an Owner’s Unit. It shall be the obligation of the individual Unit Owner, if such Owner so desires, to purchase and pay for insurance as to all such and other risks not covered by insurance required to be carried by the Hotel Operator hereunder. (9) Effect on Association. The Association shall only maintain such insurance as is expressly required to be maintained by the Association pursuant to the Act, it being the express intent of the Developer, as the Owner of each and every of the Units upon the recordation hereof, for itself and its successors and assigns, that the Association not be required to maintain insurance hereunder. To the extent that the Association is required to maintain insurance pursuant to the express requirements of the Act, then (a) as to any insurance required to be maintained by the Association, the Hotel Operator shall be relieved and released of its obligation hereunder to maintain same, and (b) all of the provisions hereof regarding said insurance, any claims thereunder and the distribution and application of proceeds thereunder shall be governed in accordance with the terms of this Declaration governing the insurance required to be maintained by the Hotel Operator as if the references herein to the Hotel Operator were references to the Association. (10) Benefit of Mortgagees. Certain provisions in this Article XIV entitled “Insurance” are for the benefit of mortgagees of Units and may be enforced by such mortgagees. No mortgagee shall have any right to determine or participate in the determination as to whether or not any damaged property shall be reconstructed or repaired, and no mortgagee shall have any right to apply or have applied to the reduction of a mortgage debt any insurance proceeds, except for actual distributions thereof made to the Unit Owner and mortgagee pursuant to the provisions of this Declaration. (B) Fidelity Insurance or Fidelity Bonds. The Association shall obtain and maintain adequate insurance or fidelity bonding of all persons who control or disburse Association funds, which shall include, without limitation, those individuals authorized to sign Association checks and the president, secretary and treasurer of the Association. The insurance policy or fidelity bond shall be in such amount as shall be determined by a majority of the Board of Directors, but must be sufficient to cover the maximum funds that will be in the custody of the Association or its management agent at any one time. The premiums on such bonds and/or insurance shall be paid by the Association as a Common Expense.   XV. Reconstruction or Repair After Fire or Other Casualty. (A) Determination to Reconstruct or Repair. Subject to the immediately following paragraph, in the event of damage to or destruction of the Insured Property as a result of fire or other casualty, the Hotel Operator shall determine whether or not to repair and/or restore the Insured Property, and if a determination is made to effect restoration, the Hotel Operator shall disburse the proceeds of all insurance policies required to maintained by it under Article XIV to the contractors engaged in such repair and restoration in appropriate progress payments. In the event the Hotel Operator determines not to effect restoration to the Shared Components, the net proceeds of insurance resulting from such damage or destruction shall be divided among all the Unit Owners in proportion to their Allocated Interests; provided, however, that no payment shall be made to a Unit Owner until there has first been paid off out of his share of such fund all mortgages and liens on his Unit in the order of priority of such mortgages and liens. (B) Plans and Specifications. Any reconstruction or repair must be made substantially in accordance with the plans and specifications for the original Improvements and then applicable   26 -------------------------------------------------------------------------------- building and other codes; or if not, then in accordance with the plans and specifications approved by the Hotel Operator, provided, however, that if any reconstruction is undertaken, same shall be undertaken in such a manner to restore the Units to substantially the same condition they were in prior to the occurrence of the casualty. (C) Assessments. If the proceeds of the insurance are not sufficient to defray the estimated costs of reconstruction and repair to be effected by the Hotel Operator, or if at any time during reconstruction and repair, or upon completion of reconstruction and repair, the funds for the payment of the costs of reconstruction and repair are insufficient, Assessments shall be made against the Unit Owners by the Hotel Operator (which shall be deemed to be assessments made in accordance with, and secured by the lien rights contained in, Article XIII above) in sufficient amounts to provide funds for the payment of such costs. Such Assessments on account of damage to the Insured Property shall be in proportion to all of the Owners’ respective Allocated Interests. (D) Benefit of Mortgagees. Certain provisions in this Article XV are for the benefit of mortgagees of Units and may be enforced by any of them. XVI. Condemnation. (A) Condemnation. (1) Deposit of Awards. The taking of portions of the Shared Components by the exercise of the power of eminent domain shall be deemed to be a casualty, and the awards for that taking shall be deemed to be proceeds from insurance on account of the casualty and shall be deposited with the Hotel Operator. Even though the awards may be payable to Unit Owners, the Unit Owners shall deposit the awards with the Hotel Operator; and in the event of failure to do so, in the discretion of the Hotel Operator, a charge shall be made against a defaulting Unit Owner in the amount of his award, or the amount of that award shall be set off against the sums hereafter made payable to that Owner. (2) Determination Whether to Continue Condominium. Whether the Condominium will be continued after condemnation will be determined in the manner provided for determining whether damaged property will be reconstructed and repaired after casualty. For this purpose, the taking by eminent domain also shall be deemed to be a casualty. (3) Disbursement of Funds. If the Condominium is terminated after condemnation, the proceeds of the awards and Special Assessments will be deemed to be insurance proceeds and shall be owned and distributed in the manner provided with respect to the ownership and distribution of insurance proceeds if the Condominium is terminated after a casualty. (4) Taking of Shared Components. Awards for the taking of Shared Components shall be used to render the remaining portion of the Shared Components usable in the manner approved by the Hotel Operator; provided, that if the cost of such work shall exceed the balance of the funds from the awards for the taking, the work shall be approved in the manner elsewhere required for capital improvements to the Shared Components. The balance of the awards for the taking of Shared Components, if any, shall be distributed to the Unit Owners in accordance with their Allocated Interests. Notwithstanding the foregoing, in the event that the costs of restoration resulting from any taking exceed $1,000,000.00, then the Hotel Operator shall have the sole right to determine whether or not to repair and/or restore in the same manner as is provided in Article XV above with respect to a casualty loss. If there is a mortgage on a Unit, the distribution shall be paid jointly to the Owner and the said mortgagees.   27 -------------------------------------------------------------------------------- (B) Unit Reduced but Habitable. If the taking reduces the size of a Unit and the remaining portion of the Unit can be made habitable (in the sole opinion of the Association), the award for the taking of a portion of the Unit shall be used for the following purposes in the order stated and the following changes shall be made to the Condominium: (1) Restoration of Unit. The Unit shall be made habitable. If the cost of the restoration exceeds the amount of the award, the additional funds required shall be charged to and paid by the Owner of the Unit. (2) Distribution of Surplus. The balance of the award in respect of the Unit, if any, shall be distributed to the Owner of the Unit and to each mortgagee of the Unit, the remittance being made payable jointly to the Owner and such mortgagees. (3) Adjustment of Shares in Common Elements. If the floor area of the Unit is reduced by the taking, the percentage representing the share in the Common Elements and of the Common Expenses and Common Surplus appurtenant to the Unit shall be reduced by multiplying the percentage of the applicable Unit prior to reduction by a fraction, the numerator of which shall be the area in square feet of the Unit after the taking and the denominator of which shall be the area in square feet of the Unit before the taking. The shares of all Unit Owners in the Common Elements, Common Expenses and Common Surplus shall then be restated as follows: (i) add the total of all percentages of all Units after reduction as aforesaid (the “Remaining Percentage Balance”); and (ii) divide each percentage for each Unit after reduction as aforesaid by the Remaining Percentage Balance. The result of such division for each Unit shall be the adjusted percentage for such Unit. (C) Unit Made Uninhabitable. If the taking is of the entire Unit or so reduces the size of a Unit that it cannot be made habitable (in the sole opinion of the Association), the award for the taking of the Unit shall be used for the following purposes in the order stated and the following changes shall be made to the Condominium: (1) Payment of Award. The awards shall be paid first to the applicable Institutional First Mortgagees in amounts sufficient to pay off their mortgages in connection with each Unit which is not so habitable; second, to the Association for any due and unpaid Assessments; third, jointly to the affected Unit Owners and other mortgagees of their Units. In no event shall the total of such distributions in respect of a specific Unit exceed the market value of such Unit immediately prior to the taking. The balance, if any, shall be applied to repairing and replacing the Common Elements. (2) Addition to Common Elements. The remaining portion of the Unit, if any, shall become part of the Common Elements and shall be placed in a condition allowing, to the extent possible, for use by all of the Unit Owners in the manner approved by the Board of Directors and the Hotel Operator; provided that if the cost of the work therefore shall exceed the balance of the fund from the award for the taking, such work shall be approved in the manner elsewhere required for capital improvements to the Common Elements. (3) Adjustment of Shares. The shares in the Common Elements, Common Expenses and Common Surplus appurtenant to the Units that continue as part of the Condominium shall be adjusted to distribute the shares in the Common Elements, Common Expenses and Common   28 -------------------------------------------------------------------------------- Surplus among the reduced number of Unit Owners (and among reduced Units). This shall be effected by restating the shares of continuing Unit Owners as follows: (i) add the total of all percentages of all Units of continuing Owners prior to this adjustment, but after any adjustments made necessary by Section XVI(B)(3) hereof (the “Percentage Balance”); and (ii) divide the percentage of each Unit of a continuing Owner prior to this adjustment, but after any adjustments made necessary by Section XVI(B)(3) hereof, by the Percentage Balance. The result of such division for each Unit shall be the adjusted percentage for such Unit. (4) Assessments. If the balance of the award (after payments to the Unit Owner and such Owner’s mortgagees as above provided) for the taking is not sufficient to alter the remaining portion of the Unit for use as a part of the Common Elements, the additional funds required for such purposes shall be raised by Assessments against all of the Unit Owners who will continue as Owners of Units after the changes in the Condominium effected by the taking. The Assessments shall be made in proportion to the applicable percentage shares of those Owners after all adjustments to such shares effected pursuant hereto by reason of the taking. (5) Arbitration. If the market value of a Unit prior to the taking cannot be determined by agreement between the Unit Owner and mortgagees of the Unit and the Association within thirty (30) days after notice of a dispute by any affected party, such value shall be determined by arbitration in accordance with the then existing rules of the American Arbitration Association, except that the arbitrators shall be two appraisers appointed by the American Arbitration Association who shall base their determination upon an average of their appraisals of the Unit. A judgment upon the decision rendered by the arbitrators may be entered in any court of competent jurisdiction in accordance with the Florida Arbitration Code. The cost of arbitration proceedings shall be assessed against all Unit Owners, including Owners who will not continue after the taking, in proportion to the applicable percentage shares of such Owners as they exist prior to the adjustments to such shares effected pursuant hereto by reason of the taking. Notwithstanding the foregoing, nothing contained herein shall limit or abridge the remedies of Unit Owners provided in Sections 718.303 and 718.506, Florida Statutes. (D) Amendment of Declaration. The changes in Units, in the Common Elements and in the ownership of the Common Elements and share in the Common Expenses and Common Surplus that are effected by the taking shall be evidenced by an amendment to this Declaration of Condominium that is only required to be approved by, and executed upon the direction of, a majority of all Directors of the Association. XVII. Use and Occupancy Restrictions and Hotel Disclosures. In order to provide for congenial occupancy of the Condominium and for the protection of the values of the Units, the use of the Condominium Property shall be restricted to and shall be in accordance with the following provisions: (See also the Rules and Regulations attached to the Bylaws as Schedule “A” thereto). (A) Children. Children shall be permitted to be occupants of Units, but are restricted in certain activities. (B) Pets. All pets are prohibited.   29 -------------------------------------------------------------------------------- (C) Flags. Notwithstanding the provisions of Section IX(A) above, any Unit Owner may display one (1) portable, removable United States flag in a respectful way, and, on Armed Forces Day, Memorial Day, Flag Day, Independence Day, September 11 and Veterans Day, may display in a respectful way portable, removable official flags, not larger than 4 1/2 feet by 6 feet, that represent the United States Army, Navy, Air Force, Marine Corps or Coast Guard. (D) Window Coverings. Curtains, blinds, shutters, levelors, or draperies (or linings thereof) which face the exterior windows or glass doors of Units shall be white or off-white in color and shall be subject to disapproval by the Association, Master Association and Hotel Operator, in which case they shall be removed and replaced with acceptable items. (E) Parking. Each Owner, by acceptance of a deed or other conveyance of a Unit, shall be deemed to understand and agree that there is no parking contained within the Condominium Property and that all parking shall be located within the common property of the Master Association and shall be subject to such rules and regulations as are adopted by the Master Association from time to time. It is anticipated that all parking will be mandatory valet parking. (F) Patios and/or Balconies Appurtenant to Units. Nothing shall overhang or be mounted to the balcony rail including flower boxes and decorative adornment. No Unit Owner shall be permitted to store any items or decorative adornments whatsoever on balconies, patios, or terraces, including, without limitation, bicycles, motor bikes, grills or any other open flame cooking device, or any other item that extends above the height of the balcony railing. The foregoing shall not prevent, however, placing and using patio-type furniture, planters and other items in such areas if same are normally and customarily used for a residential balcony or terrace area, but all such patio furniture planters and other items must be acceptable to the Hotel Operator. In the event of any doubt or dispute as to whether a particular item is permitted hereunder, the decision of the Hotel Operator shall be final dispositive. No gas or barbecue grills of any type are permitted on the balcony or in any other area of the Condominium Property. No Unit Owner shall display, hang, or use any signs, clothing, sheets, blankets, laundry or other articles outside his or her Unit, or which may be visible from the outside of the Unit (other than draperies, curtains or shades of a customary nature and appearance in the light, neutral colors). Items which are not permitted to overhang windows, doors or balcony include, but are not limited to window sized air-conditioning units, linens, cloths, clothing, shoes, bathing suits or swimwear, curtains, rugs, mops or laundry of any kind, or any articles. To the extent permitted by applicable law, no Owner may install any antenna, satellite dish or other transmitting or receiving apparatus in or upon his or her Unit (and/or areas appurtenant thereto), without the prior written consent of the Hotel Operator. (G) Nuisances. No nuisances (as defined by the Association) shall be allowed on the Condominium, nor shall any use or practice be allowed which is a source of annoyance to occupants’ of Units or which interferes with the peaceful possession or proper use of the Condominium by its residents, occupants or members. No activity specifically permitted by this Declaration shall be deemed a nuisance, regardless of any noises and/or odors emanating therefrom (except, however, to the extent that such odors and/or noises exceed limits permitted by applicable law). No improper, offensive, hazardous or unlawful use shall be made of the Condominium or any part thereof, and all valid laws, zoning ordinances and regulations of all governmental bodies having jurisdiction thereover shall be observed. Violations of laws, orders, rules, regulations or requirements of any governmental agency having jurisdiction thereover, relating to any portion of the Condominium, shall be corrected by, and at the sole expense of, the party obligated to maintain or repair such portion of the Condominium Property, as elsewhere herein set forth. All portions of the Condominium shall be managed and maintained in accordance with the Hotel Standards.   30 -------------------------------------------------------------------------------- Notwithstanding the foregoing, rental and property management activities for the operation of the Hotel may be conducted at all times, twenty-four (24) hours a day, and such activity shall not be considered a nuisance. (H) Leases. It is intended that the Residential Units may be used for rentals. As such, leasing of Residential Units shall not be subject to the approval of the Association and/or any other limitations, other than as expressly provided herein. No portion of a Residential Unit (other than an entire Residential Unit) may be rented. There shall be no minimum lease term for the rental of Residential Units, nor shall there a maximum number of times that a Residential Unit may be leased. All leases are subject to local rules, regulations and ordinances. Every lease of a Residential Unit shall specifically provide (or, if it does not, shall be automatically deemed to provide) that a material condition of the lease shall be the tenant’s full compliance with the covenants, terms, conditions and restrictions of the Declaration (and all Exhibits hereto), the Master Association Declaration (and all Exhibits thereto) and with any and all rules and regulations adopted by the Hotel Operator and/or the Association from time to time (before or after the execution of the lease), including, without limitation, any and all regulations and/or procedures established by applicable Florida law and/or adopted by the Hotel Operator regarding mandatory check-in for Owners and residents, coordination of charging privileges and other matters reasonable necessary to allow Owners and hotel guests to be well integrated into a unified structure and operation. The Unit Owner will be jointly and severally liable with the tenant to the Association and/or the Hotel Operator for any amount which is required by the Association and/or the Hotel Operator to repair any damage to the Common Elements, the Hotel Unit and/or the Shared Components resulting from acts or omissions of tenants (as determined in the sole discretion of the Association and/or the Hotel Operator) and to pay any claim for injury or damage to property caused by the negligence of the tenant and Special Assessments may be levied against the Residential Unit therefore. All leases are hereby made subordinate to any lien filed by the Association, the Master Association or the Hotel Operator, whether prior or subsequent to such lease. When a Unit is leased, a tenant shall have all use rights in those Common Elements otherwise readily available for use generally by Unit Owners, and the Owner of the leased Unit shall not have such rights, except as a guest, unless such rights are waived in writing by the tenant. The lease of a Residential Unit for a term of six (6) months or less is subject to a tourist development tax assessed pursuant to Section 125.0104, Florida Statutes. A Unit Owner leasing his or her Unit for a term of six (6) months or less agrees, and shall be deemed to have agreed, for such Owner, and his or her heirs, personal representatives, successors and assigns, as appropriate, to hold the Association, the Master Association, the Hotel Operator, the Developer and all other Unit Owners harmless from and to indemnify them for any and all costs, claims, damages, expenses or liabilities whatsoever, arising out of the failure of such Unit Owner to pay the tourist development tax and/or any other tax or surcharge imposed by the State of Florida with respect to rental payments or other charges under the lease, and such Unit Owner shall be solely responsible for and shall pay to the applicable taxing authority, prior to delinquency, the tourist development tax and/or any other tax or surcharge due with respect to rental payments or other charges under the lease. The authorization of a Unit Owner to lease its Unit shall refer solely to rentals to the public conducted by the Unit Owner directly or through rental agents and shall exclude the use or occupancy of Units under timeshare, fractional ownership or interval exchange programs (whether the exchange is based on direct exchange of occupancy rights, cash payments, reward programs or other point or accrual systems) or other membership plans or arrangements (collectively, “Occupancy Plans”) through which a participant in the plan or arrangement acquires an ownership interest in the Unit with attendant rights of periodic use and occupancy or acquires contract rights to such periodic use and occupancy of the Unit or a portfolio of accommodations including the Unit, and use   31 -------------------------------------------------------------------------------- of a Unit for or under any such Occupancy Plans is prohibited; provided, however, that the foregoing prohibition shall not apply, and use in connection with Occupancy Plans shall be permitted (i) for any Unit owned by Developer, Hotel Operator or their respective affiliates, so long as the Occupancy Plan is managed by Hotel Operator or its affiliates, or (ii) if the Occupancy Plan consists of an interval exchange program based on direct exchange of occupancy rights (that is, excluding interval exchange programs in which the Unit Owner receives any cash payments or consideration other than a right to periodic exchange of occupancy rights and related privileges) and such permitted interval exchange program is operated by the Hotel Operator or its affiliates or by the then-current management agent. (I) Hotel Disclosures. (1) It is intended that the Hotel Unit will be used and operated for purposes specifically required by the terms and conditions of a hotel franchise agreement wherein the Hotel Operator will own, occupy and/or operate all of the Hotel Unit to conduct Hotel operations within the Condominium project. There are no assurances that the Hotel will be operated under any other brand hotel “flag.” Any hotel license company, may change the Hotel Standards from time to time, and such changes may impact the financial obligations of the Association. (2) Common Elements and Participating Residential Units will be operated, maintained and repaired in accordance with the Hotel Standards and the budget of the Association will include costs and expenses necessary to maintain the Condominium project in accordance with the Hotel Standards. If the Association fails to maintain the Condominium project in accordance with the Hotel Standards, pursuant to the terms of Section VIII(B) set forth herein, the Hotel Operator has the right to perform such maintenance obligations and to charge the Association for the expenses incurred in connection therewith. (3) No Unit Owner shall have any right, title or interest in the brand name of the Hotel or the Hotel Operator in any manner except as may be specifically set forth by separate agreement between the Hotel Operator and Owner. (4) No Unit may be identified or affiliated in any way with any hotel “flag” (that is, the brand name of any hotel management or franchise company, such as Crowne Plaza, Westin, Marriott, Hyatt or Hilton), other than the brand name (if any) by which the Hotel is identified; provided that the foregoing restriction shall not be construed to prevent the identification or affiliation of a Unit with a local, regional or national rental management company that is not a hotel “flag”. (J) Weight, Sound and other Restrictions. No hard and/or heavy surface floor coverings, such as tile, marble, wood, terrazo and the like will be permitted unless (i) installed by, or at the direction of, the Developer, or (ii) first approved in writing by the Hotel Operator. Even once approved by the Hotel Operator, the installation of insulation materials shall be performed in a manner that provides proper mechanical isolation of the flooring materials from any rigid part of the building structure, whether of the concrete subfloor (vertical transmission) or adjacent walls and fittings (horizontal transmission). Additionally, the floor coverings (and insulation and adhesive material therefore) installed on any patio and/or balcony shall not exceed a thickness that will result in the finish level of the patios and/or balcony being above the bottom of the scuppers or diminish the required height of the rails (as established by the applicable building code). Also, the installation of any improvement or heavy object must be submitted to and approved by the Board of Directors and the Hotel Operator, and be compatible with the overall structural design of the building. All areas within a Unit other than foyers, kitchens and bathrooms, unless to receive floor covering approved by the Board of Directors and the Hotel Operator, are to receive sound absorbent, less dense floor coverings, such as carpeting or hard surface floor coverings meeting the specifications described   32 -------------------------------------------------------------------------------- above. The Board of Directors and the Hotel Operator will have the right to specify the exact material to be used on patios and/or balcony. Any use guidelines set forth by the Association shall be consistent with good design practices for the waterproofing and overall structural design of the Building. Owners will be held strictly liable for violations of these restrictions and for all damages resulting therefrom and the Association has the right to require immediate removal of violations. Applicable warranties of the Developer, if any, shall be voided by violations of these restrictions and requirements. Each Owner agrees that sound transmission in a multi-story building such as the Condominium is very difficult to control, and that noises from adjoining or nearby Units, the plumbing systems and/or mechanical equipment can often be heard in another Unit. The Developer does not make any representation or warranty as to the level of sound transmission which may be detectable in a particular Unit and in other portions of the Condominium Property, and each Owner shall be deemed to waive and expressly release any such warranty and claim for loss or damages resulting from sound transmission. (K) Mitigation of Dampness and Humidity. No Unit Owner shall install, within his or her Unit, or upon the Common Elements, non-breathable wall-coverings or low-permeance paints. Additionally, any and all built-in casework, furniture, and or shelving in a Unit must be installed over floor coverings to allow air space and air movement and shall not be installed with backboards flush against any gypsum board, masonry block or concrete wall. Additionally, all Unit Owners, whether or not occupying the Unit, shall periodically run the air conditioning system to maintain the Unit temperature, whether or not occupied, at 78°F, and to keep the humidity in the Unit below sixty percent (60%). Leaks, leaving exterior doors or windows open, wet flooring and moisture will contribute to the growth of mold, mildew, fungus or spores. Each Unit Owner, by acceptance of a deed, or otherwise acquiring title to a Unit, shall be deemed to have agreed that neither the Developer nor the Hotel Operator is responsible, and each hereby disclaims any responsibility for any illness, personal injury, death or allergic reactions which may be experienced by the Unit Owner, its family members and/or its or their guests, tenants and invitees and/or the pets of all of the aforementioned persons, as a result of mold, mildew, fungus or spores. It is the Unit Owner’s responsibility to keep the Unit clean, dry, well-ventilated and free of contamination. While the foregoing are intended to minimize the potential development of molds, fungi, mildew and other mycotoxins, each Unit Owner understands and agrees that there is no method for completely eliminating the development of molds or mycotoxins. The Developer does not make any representations or warranties regarding the existence or development of molds or mycotoxins and each Unit Owner shall be deemed to waive and expressly release any such warranty and claim for loss or damages resulting from the existence and/or development of same. In furtherance of the rights of the Association as set forth in Section X(l) above, in the event that the Association and/or Hotel Operator reasonably believes that the provisions of this Section XVII(K) are not being complied with, then, the Association and/or the Hotel Operator shall have the right (but not the obligation) to enter the Unit (without requiring the consent of the Unit Owner or any other party) to turn on the air conditioning in an effort to cause the temperature of the Unit to be maintained as required hereby (with all utility consumption, costs to be paid and assumed by the Unit Owner). To the extent that electric service is not then available to the Unit, the Association shall have the further right, but not the obligation (without requiring the consent of the Unit Owner or any other party) to connect electric service to the Unit (with the costs thereof to be borne by the Unit Owner, or if advanced by the Association, to be promptly reimbursed by the Unit Owner to the Association, with all such costs to be deemed charges hereunder). Each Unit Owner, by acceptance of a deed or other conveyance of a Unit, holds the Developer harmless and agrees to indemnify the Developer from and against any and all claims made by the Unit Owner and the Unit Owner’s guests, tenants and invitees on account of any illness, allergic reactions, personal injury and death to such persons and to any pets of such persons, including all expenses and costs associated with such claims including, without limitation, inconvenience, relocation and moving expenses, lost time, lost earning power, hotel and other accommodation expenses for room and board, all attorneys fees and other   33 -------------------------------------------------------------------------------- legal and associated expenses through and including all appellate proceedings with respect to all matters mentioned in this Section XVII(K). (L) Association Access to Units. No Unit Owner shall change the locks to his or her Unit (or otherwise preclude access to the Hotel Operator). The Hotel Operator shall have the right to adopt reasonable regulations from time to time regarding access control and check-in, check-out procedures which shall be applicable to both hotel guests and Unit Owners, which may include, without limitation, an obligation for each Owner, and each Owner’s guests, to register and/or pick up keys to the Owner’s Unit at the front desk each time the Owner or the Owner’s guests begin new occupancy of the Unit. Each Participating Residential Unit Owner understands and agrees that the Hotel Operator may, on a regular or periodic basis, deactivate keys to the Units to enforce the registration obligation set forth herein. (M) Rules and Regulations. Rules and regulations concerning the use of the Condominium Property may be promulgated, modified, amended or terminated from time to time by the Board of Directors and/or the Hotel Operator, provided such rules and regulations do not conflict with the Hotel Standards. Copies of such rules and regulations and amendments thereto shall be furnished by the Association or Hotel Operator to all Unit Owners and residents of the Condominium upon request. The Association and/or Hotel Operator (as applicable) shall have the right to enforce all restrictions set forth in this Article XVII and any rules and regulations, as established by the Board of Directors and/or the Hotel Operator, in any manner it deems necessary, including, without limitation, injunctions, suits for damages or fines. (N) Exterior Storm Shutters. The Hotel Operator shall, from time to time, establish exterior storm shutter specifications which comply with the applicable building code, and establish permitted colors, styles and materials for exterior storm shutters. The Hotel Operator may install exterior storm shutters, and may maintain, repair or replace such approved shutters, whether on or within Shared Components or Units; provided, however, that if laminated glass or window film, in accordance with all applicable building codes and standards, architecturally designed to serve as hurricane protection, is installed with Hotel Operator consent, the Hotel Operator may not install exterior storm shutters in accordance with this provision. All shutters shall remain open unless and until a storm watch or storm warning is announced by the National Weather Center or other recognized weather forecaster. All shutters must be opened or removed within two (2) days after the storm has passed. Developer shall have no obligations with respect to the installation of the shutters, and/or for the repair, replacement and/or upgrade of the shutters. (O) Relief by the Hotel Operator. The Hotel Operator shall have the power (but not the obligation) to grant relief in particular circumstances from the provisions of specific restrictions contained in this Article XVII for good cause shown. (P) Effect on Developer and Hotel Operator. Subject to the following exceptions, the restrictions and limitations set forth in this Article XVII shall not apply to the Developer, the Hotel Operator nor to Units owned by the Developer. XVIII. Compliance. Enforcement and Default. The Association, each Unit Owner, occupant of a Unit, tenant and other invitee of a Unit Owner shall be governed by and shall comply with the terms of this Declaration and all Exhibits annexed hereto, and the rules and regulations adopted pursuant to those documents, as the same may be amended from time to time and the provisions of all of such documents shall be deemed incorporated into any lease of a Unit whether or not expressly stated in such lease. The Association (and Unit Owners, if appropriate) shall be entitled to the following relief in addition to the remedies provided by the Act:   34 -------------------------------------------------------------------------------- (A) Mandatory Nonbinding Arbitration of Disputes. Prior to the institution of court litigation, the parties to a Dispute shall petition the Division for nonbinding arbitration. The arbitration shall be conducted according to rules promulgated by the Division and before arbitrators employed by the Division. The filing of a petition for arbitration shall toll the applicable statute of limitation for the applicable Dispute, until the arbitration proceedings are completed. Any arbitration decision shall be presented to the parties in writing, and shall be deemed final if a complaint for trial de novo is not filed in a court of competent jurisdiction in which the Condominium is located within thirty (30) days following the issuance of the arbitration decision. The prevailing party in the arbitration proceeding shall be awarded the costs of the arbitration, and attorneys’ fees and costs incurred in connection with the proceedings. The party who files a complaint for a trial de novo shall be charged the other party’s arbitration costs, courts costs and other reasonable costs, including, without limitation, attorneys’ fees, investigation expenses and expenses for expert or other testimony or evidence incurred, after the arbitration decision, if the judgment upon the trial de novo is not more favorable than the arbitration decision. If the judgment is more favorable, the party who filed a complaint for trial de novo shall be awarded reasonable court costs and attorneys’ fees. Any party to an arbitration proceeding may enforce an arbitration award by filing a petition in a court of competent jurisdiction in which the Condominium is located. A petition may not be granted unless the time for appeal by the filing of a complaint for a trial de novo has expired. If a complaint for a trial de novo has been filed, a petition may not be granted with respect to an arbitration award that has been stayed. If the petition is granted, the petitioner may recover reasonable attorneys’ fees and costs incurred in enforcing the arbitration award. (B) Negligence and Compliance. A Unit Owner and/or tenant of a Unit shall be liable for the expense of any maintenance, repair or replacement made necessary by his negligence or by that of any member of his family or his or their guests, employees, agents or lessees, but only to the extent such expense is not met by the proceeds of insurance actually collected in respect of such negligence by the Association. In the event a Unit Owner, tenant or occupant fails to maintain a Unit or fails to cause such Unit to be maintained, or fails to observe and perform all of the provisions of the Declaration, the Bylaws, the Articles of Incorporation of the Association, applicable rules and regulations, or any other agreement, document or instrument affecting the Condominium Property or administered by the Association, in the manner required, the Association shall have the right to proceed in equity to require performance and/or compliance, to impose any applicable fines (in accordance with the provisions of Section XVIII(C) below), to sue at law for damages, and to charge the Unit Owner for the sums necessary to do whatever work is required to put the Unit Owner or Unit in compliance, provided, however, that nothing contained in this Section XVIII(B) shall authorize the Association to enter a Unit to enforce compliance. In any proceeding arising because of an alleged failure of a Unit Owner, a tenant or the Association to comply with the requirements of the Act, this Declaration, the Exhibits annexed hereto, or the rules and regulations adopted pursuant to said documents, as the same may be amended from time to time, the prevailing party shall be entitled to recover the costs of the proceeding and such reasonable attorneys’ fees (including appellate attorneys’ fees). A Unit Owner prevailing in an action with the Association, in addition to recovering his reasonable attorneys’ fees, may recover additional amounts as determined by the court to be necessary to reimburse the Unit Owner for his share of Assessments levied by the Association to fund its expenses of the litigation. (C) Fines. In addition to any and all other remedies available to the Association, a fine or fines may be imposed upon an Owner for failure of an Owner, his family, guests, invitees, lessees or employees, to comply with any covenant, restriction, rule or regulation herein or Articles of Incorporation, Bylaws or Rules and Regulations of the Association, provided the following procedures are adhered to: (1) Notice: The party against whom the fine is sought to be levied shall be afforded an opportunity for hearing after reasonable notice of not less than fourteen (14) days and   35 -------------------------------------------------------------------------------- said notice shall include: (i) a statement of the date, time and place of the hearing; (ii) a statement of the provisions of the Declaration, Bylaws, Articles or rules which have allegedly been violated; and (iii) a short and plain statement of the matters asserted by the Association. (2) Hearing: The non-compliance shall be presented to a committee of other Unit Owners, who shall hear reasons why penalties should not be imposed. The party against whom the fine may be levied shall have an opportunity to respond, to present evidence, and to provide written and oral argument on all issues involved and shall have an opportunity at the hearing to review, challenge, and respond to any material considered by the committee. A written decision of the committee shall be submitted to the Owner or occupant by not later than twenty-one (21) days after the meeting. If the committee does not agree with the fine, the fine may not be levied. (3) Fines: The Board of Directors may impose fines against the applicable Unit up to the maximum amount permitted by law from time to time. At the time of the recordation of this Declaration, the Act provides that no fine may exceed $100.00 per violation, or $1,000.00 in the aggregate. (4) Violations: Each separate incident which is grounds for a fine shall be the basis of one separate fine. In the case of continuing violations, each continuation of same after a notice thereof is given shall be deemed a separate incident. (5) Payment of Fines: Fines shall be paid not later than thirty (30) days after notice of the imposition thereof, (6) Application of Fines: All monies received from fines shall be allocated as directed by the Board of Directors. (7) Non-exclusive Remedy: These fines shall not be construed to be exclusive and shall exist in addition to all, other rights and remedies to which the Association may be otherwise legally entitled; however, any penalty paid by the offending Owner or occupant shall be deducted from or offset against any damages which the Association may otherwise be entitled to recover by law from such Owner or occupant. (D) The Hotel Operator (i) shall have the right to enforce provisions in this Declaration relating to the Hotel Operator and the Hotel Standards; (ii) shall have all other rights and remedies available to it under this Declaration, at law or in equity; and (iii) as has been provided in this Declaration, shall have rights to maintain the Condominium Project in accordance with the Hotel Standards in the event the Hotel Standards are not adequately maintained by the Association. XIX. Termination of Condominium. The Condominium shall continue until (a) terminated by casualty loss, condemnation or eminent domain, as more particularly provided in this Declaration, or (b) such time as withdrawal of the Condominium Property from the provisions of the Act is authorized by a vote of Owners owning at least eighty percent (80%) of the voting interests and by the Institutional First Mortgagees of Units to which at least sixty seven percent (67%) of the voting interests subject to mortgages held by Institutional First Mortgagees are appurtenant. In the event such withdrawal is authorized as aforesaid, and provided that the Board of Directors first notifies the Division of an intended withdrawal, the Condominium Property shall be subject to an action for partition by any Unit Owner, mortgagee or lienor as if owned in common in which event the net proceeds of the partition sale shall be divided among all Unit Owners in proportion to their respective interests in the Common Elements, provided, however, that no payment shall be made to a Unit Owner until there has first been paid off out of his share of such net proceeds all mortgages and liens on his Unit in the   36 -------------------------------------------------------------------------------- order of their priority. The termination of the Condominium, as aforesaid, shall be evidenced by a certificate of the Association executed by its President and Secretary, certifying as to the basis of the termination and said certificate shall be recorded among the public records of the County. The Association shall, within thirty (30) business days following such recordation, provide the Division with a copy of such recorded certificate. This Section may not be amended without the consent of the Developer as long as it owns any Unit.   XX. Additional Rights of Mortgagees and Others. (A) Availability of Association Documents. The Association shall have current and updated copies of the following available for inspection by Institutional First Mortgagees during normal business hours or under other reasonable circumstances as determined by the Board of Directors: (a) this Declaration; (b) the Articles; (c) the Bylaws; (d) the rules and regulations of the Association; and (e) the books, records and financial statements of the Association. (B) Amendments. Subject to the other provisions of this Declaration and except as provided elsewhere to the contrary, an amendment directly affecting any of the following shall require the approval of a Majority of Institutional First Mortgagees; (a) voting rights; (b) increases in assessments by more than twenty-five percent (25%) over the previous assessment amount, assessment liens or the priority of assessment liens; (c) reductions in reserves for maintenance, repair and replacement of Common Elements; (d) responsibility for maintenance and repairs; (e) reallocation of interests in the Common Elements or rights to their use; (f) redefinition of Unit boundaries; (g) conversion of Units into Common Elements or Common Elements into Units; (h) expansion or contraction of the Condominium; (i) hazard or fidelity insurance requirements; (j) imposition of restrictions on leasing of units; (k) imposition of restrictions on the selling or transferring of title to Units; (I) restoration or repair of the Condominium after a casualty or partial condemnation; (m) any action to terminate the Condominium after casualty or condemnation; and (n) any provision that expressly, benefits mortgage holders, insurers or guarantors as a class. In accordance with Section 718.110(11), Florida Statutes, any consent required of a mortgagee may not be unreasonably withheld. (C) Notices. Any holder, insurer or guarantor of a mortgage on a Unit shall have, if first requested in writing from the Association, the right to timely written notice of: (1) any condemnation or casualty loss affecting a material portion of the Condominium Property or the affected mortgaged Unit; (2) a sixty (60) day delinquency in the payment of the Assessments on a mortgaged Unit; (3) the occurrence of a lapse, cancellation or material modification of any insurance policy or fidelity bond maintained by the Association; and (4) any proposed action which requires the consent of a specified number of mortgage holders. (D) Additional Rights. Institutional First Mortgagees shall have the right, upon written request to the Association, to: (a) receive a copy of an audited financial statement of the Association for the immediately preceding fiscal year if such statements were prepared; and (b) receive notices of and attend Association meetings.   37 -------------------------------------------------------------------------------- XXI. Covenant Running With the Land. All provisions of this Declaration, the Articles, Bylaws and applicable rules and regulations of the Association, shall, to the extent applicable and unless otherwise expressly herein or therein provided to the contrary, be perpetual and be construed to be covenants running with the Land and with every part thereof and interest therein, and all of the provisions hereof and thereof shall be binding upon and inure to the benefit of the Developer and subsequent owner(s) of the Land or any part thereof, or interest therein, and their respective heirs, personal representatives; successors and assigns, but the same are not intended to create nor shall they be construed as creating any rights in or for the benefit of the general public. All present and future Unit Owners, tenants and occupants of Units shall be subject to and shall comply with the provisions of this Declaration and the Articles, Bylaws and applicable rules and regulations, all as they may be amended from time to time. The acceptance of a deed or conveyance, or the entering into of a lease, or the entering into occupancy of any Unit, shall constitute an adoption and ratification of the provisions of this Declaration, and the Articles, Bylaws and applicable rules and regulations of the Association, all as they may be amended from time to time, including, but not limited to, a ratification of any appointments of attorneys-in-fact contained herein. XXII. Disclosures. (A) The Condominium has been created by converting a previously existing apartment complex, and, accordingly, the Improvements have been previously occupied. Developer has elected not to fund converter reserves, but instead to warrant the Improvements in accordance with the provisions of Section 718.618, Florida Statutes, to the extent applicable. (B) Notwithstanding that this Condominium is a conversion of previously occupied premises, Developer has elected to warrant the improvements solely to the extent provided in Section 718.618 Florida Statutes. Except only for those warranties provided in Section 718.618, Florida Statutes (and only to the extent applicable and not yet expired), to the maximum extent lawful Developer hereby disclaims any and all and each and every express or implied warranties, whether established by statutory, common, case law or otherwise, as to the design, construction, sound and/or odor transmission, existence and/or development of molds, mildew, toxins or fungi, furnishing and equipping of the Condominium Property, including, without limitation, any implied warranties of habitability, fitness for a particular purpose or merchantability, compliance with plans, all warranties imposed by statute (other than those imposed by Sections 718.618, Florida Statutes, and then only to the extent applicable and not yet expired) and all other express and implied warranties of any kind or character. Developer has not given and the Unit Owner has not relied on or bargained for any such warranties. Each Unit Owner recognizes and agrees that the Unit and Condominium are not new construction and were not constructed by Developer. Each Unit Owner, by accepting a deed to a Unit, or other conveyance thereof, shall be deemed to represent and warrant to Developer that in deciding to acquire the Unit, the Unit Owner relied solely on such Unit Owner’s independent inspection of the Unit and the Condominium as well as the conversion inspection reports included in the Prospectus. The Unit Owner has not received nor relied on any warranties and/or representations from Developer of any kind, other than as expressly provided herein. (C) All Unit Owners, by virtue of their acceptance of title to their respective Units (whether from the Developer or another party) shall be deemed to have automatically waived all of the aforesaid disclaimed warranties and incidental and consequential damages. The foregoing shall also apply to any party claiming by, through or under a Unit Owner, including a tenant thereof. (D) Given the climate and humid conditions in South Florida, molds, mildew, spores, fungi and/or other toxins may exist and/or develop within the Unit, Building and/or the   38 -------------------------------------------------------------------------------- Condominium Property. In April, 2004, a mold investigation was performed on the property by AirQuest Environmental Inc., which found widespread mold growth throughout the building caused by several sources of moisture intrusion into the building including water from asbestos abatement activities, inadequate or malfunctioning climate control and roof leaks. It is expected that the extensive renovations performed to convert the property to a condominium will resolve or repair the sources of moisture intrusion and that the Condominium Property will no longer have widespread mold growth throughout the building. Buyer is hereby advised that certain molds, mildew, spores, fungi and/or other toxins may be, or if allowed to remain for a sufficient period may become, toxic and potentially pose a health risk. By executing and delivering this Agreement and closing, Buyer shall be deemed to have assumed the risks associated with molds, mildew, spores, fungi and/or other toxins and to have released and indemnified Seller and Seller’s affiliates from and against any and all liability or claims resulting from same, including, without limitation, any liability for incidental or consequential damages (which may result from, without limitation, the inability to possess the Unit, inconvenience, moving costs, hotel costs, storage costs, loss of time, lost wages, lost opportunities and/or personal injury and death to or suffered by the Unit Owner, pets, its family members and/or its or their guests, tenants, invitees or any other person). Without limiting the generality of the foregoing, leaks, leaving exterior doors or windows open, wet flooring and moisture will contribute to the growth of mold, mildew, spores, fungi or other toxins. Buyer understands and agrees that Seller is not responsible for, and Seller hereby disclaims any responsibility for, any illness or allergic reactions, personal injury or death which may be experienced by Buyer, pets, its family members and/or its or their guests, tenants and invitees as a result of mold, mildew, spores, fungi or other toxins. It is solely the Buyer’s responsibility to keep the Unit clean, dry, well-ventilated and free of contamination. The thermostats in each Unit are an integral part of the Life Safety Systems and are intended to assist in monitoring the accumulation of moisture in the Units to prevent same from reaching levels which may accelerate the development of molds, spores or other natural growths which if allowed to accumulate may become toxic or otherwise create health risks. Each buyer understands and agrees that the thermostats may have recording and/or monitoring features which can report back to the Association the temperature settings and readings in the Units. The thermostats shall be operated and kept operable at all times and there shall be no alteration of or to the thermostats without the prior written approval of the Association. The Unit Owner’s failure to operate at all times any thermostats installed in the Unit will contribute to the development of molds, spores or other natural growths. It is solely the Unit Owner’s responsibility to keep any thermostats installed in the Unit operable at all times. (E) Each Unit Owner understands and agrees that for some time in the future, it, and its guests, tenants and invitees may be disturbed by the noise, commotion and other unpleasant effects of nearby construction activity and as a result Owner and its guests, tenants and invitees may be impeded in using portions of the Condominium Property by that activity. Because the Condominium is located in an urban area, demolition or construction of buildings and other structures within the immediate area or within the view lines of any particular Unit or of any part of the Condominium (the “Views”) may block, obstruct, shadow or otherwise affect Views, which may currently be visible from the Unit or from the Condominium. Therefore, each Owner, for itself, its successors and assigns, agrees to release Developer, its partners and its and their officers, members, directors and employees and every affiliate and person related or affiliated in any way with any of them (“Developer’s Affiliates”) from and against any and all losses, claims, demands, damages, costs and expenses of whatever nature or kind, including attorney’s fees and costs, including those incurred through all arbitration and appellate proceedings, related to or arising out of any claim against the Developer or Developer’s Affiliates related to Views or the disruption, noise, commotion, and other unpleasant effects of nearby development or construction. As a result of the foregoing, there is no guarantee of view, natural light, security, privacy, location, design, density or any other matter. (F) Each Unit Owner, by acceptance of a deed or other conveyance of a Unit, understands and agrees that there are various methods for calculating the square footage of a Unit,   39 -------------------------------------------------------------------------------- and that depending on the method of calculation, the quoted square footage of a Unit may vary by more than a nominal amount. Additionally, as a result of in the field construction, other permitted changes to the Unit, and settling and shifting of improvements, actual square footage of a Unit may also be affected. Accordingly, during the pre-closing inspection, each buyer should, among other things, review the size and dimensions of the Unit. By closing, each buyer shall be deemed to have conclusively agreed to accept the size and dimensions of the Unit, regardless of any variances in the square footage from that which may have been disclosed at any time prior to closing, whether included as part of Developer’s promotional materials or otherwise. Developer does not make any representation or warranty as to the actual size, dimensions or square footage of any Unit, and each Unit Owner shall be deemed to have fully waived and expressly released any such warranty and claim for losses or damages resulting from any variances between any represented or otherwise disclosed square footage and the actual square footage of the Unit. (G) Each Unit Owner understands and agrees that the Building and the Improvements constitute existing non-conforming uses, which could not necessarily be replicated in the event of a casualty or other circumstances requiring rebuilding. Accordingly, each Unit Owner agrees that there will be limitations on what may be reconstructed under such circumstances and on the number of units that may be reconstructed, and there is no assurance that the Building or Improvements may be restored. In the event the existing Improvements cannot be restored, the property insurance carried by the Association insures, subject to policy limitations and qualifications, the replacement cost of any new structure, or if a new structure is not built, the replacement cost less depreciation of the original Building. By executing and delivering a Purchase Agreement and closing, each Unit Owner, for itself, its successors and assigns shall be deemed to have assumed the risks that the Building and Improvements may not be fully restored and to have fully waived and released any claim against the Developer as a result of the limitation on reconstruction resulting from current regulations. (H) Each Unit Owner shall be deemed to understand and agree that the parking facilities within the Master Association common property may be located below the federal flood plain, and, accordingly, in the event of flooding, any automobiles and/or personal property stored therein is susceptible to water damage. Additionally, insurance premiums, both for the Master Association in insuring the parking, and for owners, may be higher than if the parking structure was above the federal flood plain. By acquiring title to, or taking possession of, a Unit, each Unit Owner shall be deemed to have agreed to assume any responsibility for loss, damage or liability resulting therefrom and waives any and all liability of Developer or Master Association. (I) Each Unit Owner acknowledges and agrees that the Units, the Building and other portions of the Condominium Property may be located in coastal areas partially or totally seaward of the coastal construction control line as defined in Section 161.053, Florida Statutes. Unit Owner is fully apprised of the character of the regulation of property in such coastal areas and thereby expressly waives and releases any claim against the Developer as a result of the limitation on improvements or reconstruction resulting from the regulation of property in such coastal areas. (J) An environmental investigation was performed on the Condominium Property prior to Developer’s purchase. The investigation discovered petroleum products in the groundwater above state cleanup target levels. The source of the petroleum products in the groundwater is believed to be either the former Hallandale Citgo gas station that was located partially on the Condominium Property years ago or the 7-Eleven adjacent to the Condominium Property. The investigation also identified soils which may have been impacted by the former Hallandale Citgo gas station. Cleanup of soil and groundwater has not been required by a government agency but may be required in the future. If conducted on the Condominium Property by the Maseter Association, the soil cleanup is estimated to cost approximately $250,000 and groundwater cleanup is estimated to cost approximately $500,000.   40 -------------------------------------------------------------------------------- (K) Purchaser understands and agrees that prior to conversion to a condominium, certain portions of the Condominium Property, including some, but not all, of the Units, contained fully encapsulated asbestos containing material (“ACM”). Prior to or during conversion of the condominium from an apartment complex, extensive renovations were undertaken. During those renovations, most, if not all, of the ACM was removed. To the extent that the completed renovations have not removed all of the ACM, and in order to minimize the impact of the ACM and the potential harm that may result therefrom, the Association shall adopt an operations and maintenance plan in accordance with the specifications set forth in an operation and maintenance plan (the “O&M Plan”) established by the Board, together with a licensed asbestos consulting firm, from time to time. The O&M Plan shall be held in the office of the Association and made available to Unit Owners in accordance with Section 17 of the Bylaws. Buyer further understands and agrees that, in accordance with the O&M Plan, absolutely no penetration or other invasive disturbance shall be made to any portions of the Condominium Property that may contain ACM, without the prior written consent of the Board of Directors and that any and all such penetration and/or other invasive disturbance, if first approved by the Board as set forth herein, shall be made in strict compliance with the O&M Plan requirements. Buyer shall be deemed to: (i) have assumed the risks associated with the ACM, and (ii) agrees that any use of the Unit in violation of the O&M Plan may increase the potential harm that may result from the ACM. Buyer releases the Developer, its partners, contractors, architects, engineers, and its and their officers, directors, shareholders, employees and agents, from and against any and all liability resulting from the (i) existence of the ACM, (ii) the failure to maintain the Unit and/or Common Elements in accordance with the O&M Plan, and/or (iii) any unauthorized or improper penetrations and/or other disturbances to the Unit. (L) All of the disclaimers set forth in this Article, as well as in other locations throughout the Declaration, shall be applicable and binding upon each Unit Owner. (M) NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, HAVE BEEN GIVEN OR MADE BY DEVELOPER, HOTEL OPERATOR OR ITS OR THEIR AGENTS OR EMPLOYEES IN CONNECTION WITH ANY PORTION OF THE CONDOMINIUM PROPERTY, THE SHARED COMPONENTS, THEIR PHYSICAL CONDITION, ZONING, COMPLIANCE WITH APPLICABLE LAWS, MERCHANTABILITY, HABITABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR IN CONNECTION WITH THE SUBDIVISION, SALE, OPERATION, MAINTENANCE, COST OF MAINTENANCE, TAXES OR REGULATION THEREOF, EXPECT (A) AS SPECIFICALLY AND EXPRESSLY SET FORTH IN THIS DECLARATION OR IN DOCUMENTS WHICH MAY BE FILED BY DEVELOPER OR HOTEL OPERATOR FROM TIME TO TIME WITH APPLICABLE REGULATORY AGENCIES, AND (B) AS OTHERWISE REQUIRED BY LAW. AS TO SUCH WARRANTIES WHICH CANNOT BE DISCLAIMED, AND TO OTHER CLAIMS, IF ANY, WHICH CAN BE MADE AS TO THE AFORESAID MATTERS, ALL INCIDENTAL AND CONSEQUENTIAL DAMAGES ARISING THEREFROM ARE HEREBY DISCLAIMED. ALL OWNERS, BY VIRTUE OF ACCEPTANCE OF TITLE TO THEIR RESPECTIVE UNITS (WHETHER FROM DEVELOPER OR ANOTHER PARTY) SHALL BE DEEMED TO HAVE AUTOMATICALLY WAIVED ALL OF THE AFORESAID DISCLAIMED WARRANTIES AND INCIDENTAL AND CONSEQUENTIAL DAMAGES. XXIII. Sian Ocean Residences &Resort Master Association. The Condominium Property is subject to the terms and conditions of the Declaration of Covenants, Conditions and Easements for Sian Ocean Residences & Resort Master Association, to be recorded in the public records of Broward County, Florida (the “Master Association Declaration”). The Master Association Declaration provides that the Master Association is responsible for the operation, management, maintenance, repair, replacement of and taking title to the common property of the Master Association, including without limitation certain open areas, surface parking areas, parking garages, paved areas and pools and pool areas. The Master Association Declaration contains certain   41 -------------------------------------------------------------------------------- use restrictions, architectural review criteria and certain easements affecting all property subject to the Master Association Declaration. It is contemplated that all parking is within the Master Association common property, and is intended to be subject to mandatory valet parking. Each owner of a condominium unit is a member of the Master Association, and each member of the Master Association is obligated to pay an assessment fee to the Master Association. As an automatic member of the Master Association, each Unit Owner will have the right to use the common property of the Master Association. All Unit Owners will have rights of use and obligations to share in the cost of maintenance of these facilities in accordance with the Master Association Declaration. XXIV. Additional Provisions. (A) Notices. All notices to the Association required or desired hereunder or under the Bylaws of the Association shall be sent by certified mail (return receipt requested) to the Association in care of its office at the Condominium, or to such other address as the Association may hereafter designate from time to time by notice in writing to all Unit Owners. All notices to the Hotel Operator required or desired hereunder or under the Bylaws of the Association shall be sent by certified mail (return receipt requested) to the Hotel Operator in care of its office at the Condominium, or to such other address as the Hotel Operator may hereafter designate from time to time by notice in writing to all Unit Owners. Except as provided specifically in the Act, all notices to any Unit Owner shall be sent by first class mail to the Condominium address of such Unit Owner, or such other address as may have been designated by him or her from time to time, in writing, to the Association. All notices to mortgagees of Units shall be sent by first class mail to their respective addresses, or such other address as may be designated by them from time to time, in writing to the Association. All notices shall be deemed to have been given when mailed in a postage prepaid sealed wrapper, except notices of a change of address, which shall be deemed to have been given when received, or five (5) business days after proper mailing, whichever shall first occur. (B) Interpretation. Except where otherwise provided herein, the Board of Directors of the Association shall be responsible for interpreting the provisions hereof and of any of the Exhibits attached hereto. Such interpretation shall be binding upon all parties unless wholly unreasonable. An opinion of legal counsel that any interpretation adopted by the Association is not unreasonable shall conclusively establish the validity of such interpretation. (C) Mortgagees. Anything herein to the contrary notwithstanding, the Association shall not be responsible to any mortgagee or lienor of any Unit hereunder, and may assume the Unit is free of any such mortgages or liens, unless written notice of the existence of such mortgage or lien is received by the Association. (D) Exhibits. There is hereby incorporated in this Declaration all materials contained in the Exhibits annexed hereto, except that as to such Exhibits, any conflicting provisions set forth therein as to their amendment, modification, enforcement and other matters shall control over those hereof. (E) Signature of President and Secretary. Wherever the signature of the President of the Association is required hereunder, the signature of a vice-president may be substituted therefore, and wherever the signature of the Secretary of the Association is required hereunder, the signature of an assistant, secretary may be substituted therefore, provided that the same person may not execute any single instrument on behalf of the Association in two separate capacities. (F) Governing Law. Should any dispute or litigation arise between any of the parties whose rights or duties are affected or determined by this Declaration, the Exhibits annexed hereto or applicable rules and regulations adopted pursuant to such documents, as the same may be amended from time to time, said dispute or litigation shall be governed by the laws of the State of Florida.   42 -------------------------------------------------------------------------------- (G) Severability . The invalidity in whole or in part of any covenant or restriction, or any section, sentence, paragraph, clause, phrase or word, or other provision of this Declaration, the Exhibits annexed hereto, or applicable rules and regulations adopted pursuant to such documents, as the same may be amended from time to time, shall not affect the validity of the remaining portions thereof which shall remain in full force and effect. (H) Waiver. The failure of the Association or any Unit Owner to enforce any covenant, restriction or other provision of the Act, this Declaration, the Exhibits annexed hereto, or the rules and regulations adopted pursuant to said documents, as the same may be amended from time to time, shall not constitute a waiver of their right to do so thereafter. (I) Ratification. Each Unit Owner, by reason of having acquired ownership (whether by purchase, gift, operation of law or otherwise), and each occupant of a Unit, by reason of his occupancy, shall be deemed to have acknowledged and agreed that all of the provisions of this Declaration, and the Articles and Bylaws of the Association, and applicable rules and regulations, are fair and reasonable in all material respects. (J) Execution of Documents: Attorney in-Fact. Without limiting the generality of other sections of this Declaration and without such other sections limiting the generality hereof, each Owner, by reason of the acceptance of a deed to such Owner’s Unit, hereby agrees to execute, at the request of the Developer, all documents or consents which may be required by all governmental agencies to allow the Developer and its affiliates to complete the plan of development of the Condominium as such plan may be hereafter amended, and each such Owner further appoints hereby and thereby the Developer as such Owner’s agent and attorney in-fact to execute, on behalf and in the name of such Owners, any and all of such documents or consents. This power of attorney is irrevocable and coupled with an interest. The provisions of this Section may not be amended without the consent of the Developer. (K) Gender; Plurality. Wherever the context so permits, the singular shall include the plural, the plural shall include the singular, and the use of any gender shall be deemed to include all or no genders. (L) Captions. The captions herein and in the Exhibits annexed hereto are inserted only as a matter of convenience and for ease of reference and in no way define or limit the. scope of the particular document or any provision thereof. (M) Liability. Notwithstanding anything contained herein or in the Articles of Incorporation, Bylaws, any rules or regulations of the Association or any other document governing or binding the Association (collectively, the “Association Documents”), neither the Hotel Operator nor the Association, except to the extent specifically provided to the contrary herein, shall not be liable or responsible for, or in any manner be a guarantor or insurer of, the health, safety or welfare of any Owner, occupant or user of any portion of the Condominium Property including, without limitation, Owners and their guests, invitees, agents, servants, contractors or subcontractors or for any property of any such persons. Without limiting the generality of the foregoing: (1) it is the express intent of the Association Documents that the various provisions thereof which are enforceable by the Association and/or the Hotel Operator and which govern or regulate the uses of the properties have been written, and are to be interpreted and enforced, for the sole purpose of enhancing and maintaining the enjoyment of the properties and the value thereof; (2) neither the Hotel Operator nor the Association is not empowered, and has not been created, to act as an entity which enforces or ensures the compliance with the laws of the   43 -------------------------------------------------------------------------------- United States, State of Florida, County and/or any other jurisdiction or the prevention of tortious activities; and (3) the provisions of the Association Documents setting forth the uses of assessments which relate to health, safety and/or welfare shall be interpreted and applied only as limitations on the uses of assessment funds and not as creating a duty of the Hotel Operator and/or the Association to protect or further the health, safety or welfare of any person(s), even if assessment funds are chosen to be used for any such reason. Each Owner (by virtue of his acceptance of title to his Unit) and each other person having an interest in or lien upon, or making use of, any portion of the properties (by virtue of accepting such interest or lien or making such use) shall be bound by this provision and shall be deemed to have automatically waived any and all rights, claims, demands and causes of action against the Hotel Operator and/or the Association arising from or connected with any matter for which the liability of the Hotel Operator and/or the Association has been disclaimed hereby. As used herein, (i) “Association” shall include within its meaning all of Association’s directors, officers, committee and Board of Directors members, employees, agents, contractors (including management companies), subcontractors, successors, nominees and assigns, and (ii) “Hotel Operator” shall include within its meaning all of its members, and its and their directors, officers, shareholder, employees, agents, contractors (including management companies), subcontractors, successors and assigns. The provisions hereof shall also inure to the benefit of Developer, which shall be fully protected hereby. [The remainder of this page is intentionally blank]   44 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Developer has caused this Declaration to be duly executed and its corporate seal to be hereunto affixed as of the          day of                 , 200    .   Witnesses:     MCZ/Centrum Florida XIX,LLC, a Delaware limited liability company By:            Print Name:          By:            Name:      By:          Title:      Print Name:                       [Corporate Seal]   STATE OF      COUNTY OF   The foregoing Declaration was acknowledged before me, this ________ day of ________, 200_, by _______________ , as _________________ of _________________, as _______________________ of MCZ/Centrum Florida XIX, LLC,, a Delaware limited liability company, on behalf of said entity(ies). He/she is _____ personally known to me or _____ has produced ___________________________________________________________ as identification.      Print Name:      Notary Public, State of      My Commission Expires:   Commission No.:      (Notarial Seal)     45 -------------------------------------------------------------------------------- JOINDER SIAN RESORT RESIDENCES I CONDOMINIUM ASSOCIATION, INC., a Florida corporation not for profit, hereby agrees to accept all the benefits and all of the duties, responsibilities, obligations and burdens imposed upon it by the provisions of this Declaration and Exhibits attached hereto. SIAN RESORT RESIDENCES I CONDOMINIUM ASSOCIATION, INC. has caused these presents to be signed in its name by its proper officer and its corporate seal to be affixed this _____ day of _______________, 200__.   SIAN RESORT RESIDENCES I CONDOMINIUM ASSOCIATION, INC., a Florida corporation not-for-profit By:      Print Name:      Its:      [CORPORATE SEAL]   STATE OF      COUNTY OF      The foregoing Declaration was acknowledged before me, this ___________ day of ____________ 200_, by _____________________, as __________________ of Sian Resort Residences I Condominium Association, Inc., a Florida not-for-profit corporation, on behalf of said entity(ies). He/she is ____ personally known to me or _____ has produced ____________ __________ as identification.      Name:      Notary Public, State of      My Commission Expires:   Commission No.:      (Notarial Seal)     46 -------------------------------------------------------------------------------- EXHIBIT “1” LEGAL DESCRIPTION The legal description of the Sian Resort Residences I Condominium is as follows: Commencing at the Northeast corner of Section 26, Township 51 South, Range 42 East; thence running Westerly along the North line of said Section 26, a distance of 297.4 feet to a point on the West line of the right of way of U.S. Road A-l-A (State Road #140, known as Ocean beach Road) as described in Easement Deed from Hallandale Beach Improvements Co., a Florida corporation to the State of Florida, dated April 13, 1932, and recorded in Deed Book 232, Page 265, of the Public Records of Broward County, Florida; thence Southerly along the West right of way line of the aforesaid U.S. Road A-l-A South 04°45’23” West, a distance of 796.3 feet to a point, said point being the Southeast corner of Lot 18, SEACREST PARK, according to the plat thereof, as recorded in Plat Book 23, Page 16 of the Public Records of Broward County, Florida; thence continue South 04°45’23” West along said West Right of Way of the aforementioned State Road A-l-A for a distance of 179.29 feet to a point; thence South 86°42’51” West 49.82 feet to the Point of Beginning of the following described parcel; thence South 02°51’49” East for a distance of 38.15 feet to a point; thence south 87°04’41” West for a distance of 12.53 feet to a point; thence South 02°51’49” East for a distance of 18.55 feet to a point; thence South 87°04’41” West for a distance of 27.98 feet to a point; thence south 02°51’49” East for a distance of 13.41 feet to a point; thence South 87°04’41” West for a distance of 253.92 feet to a point; thence North 02°51’49” West for a distance of 13.41 feet to a point; thence South 87°04’41” West for a distance of 17.61 feet to a point; thence North 02°51’49” West for a distance of 18.51 feet to a point; thence South 87°04’41” West for a distance of 22.19 feet to a point; thence North 02°51’49” West for a distance of 38.34 feet to a point; thence North 87°04’41” East for a distance of 22.26 feet to a point; thence North 02°51’49” West for a distance of 32.51 feet to a point; thence North 87°04’41” East for a distance of 299.44 feet to a point; thence South 02°51’49” East for a distance of 32.68 feet to a point; thence North 87°04’41” East for a distance of 12.53 feet to a point; to the Point of Beginning. The foregoing property is presently subject to the following title exceptions:   1) Real estate taxes for the year 2005 and subsequent years.   2) Ten foot utility easement in favor of the City of Hollywood recorded in Official Records Book 5048 at page 280, and in Official Records Book 5048 at page 283 and in Official Records Book 5048 at page 286, all of the public records of Broward County, Florida.   3) Easement granted to Southern Bell Telephone and Telegraph Company recorded in Official Records book 6542 at page 985 of the public records of Broward County, Florida.   4) Notice regarding Intercoastal Waterway right-of-way recorded in official records book 28071 at page 945 of the public records of Broward County, Florida.   5) Easement in favor of FPL recorded in official records book 5207, age page 717 of the public records of Broward County, Florida.   6) Declaration of Covenants, Conditions and Easements for Sian Ocean Residences & Resort Master Association, recorded simultaneously herewith.   7) All other covenants, conditions, restrictions and easements of record. -------------------------------------------------------------------------------- EXHIBIT “2” BOUNDARY SURVEY AND PLOT PLAN   2 -------------------------------------------------------------------------------- EXHIBIT “3” SCHEDULE OF PERCENTAGE SHARES OF OWNERSHIP OF COMMENT ELEMENTS AND COMMON SURPLUS AND OF SHARING OF COMMON EXPENSES   3 -------------------------------------------------------------------------------- EXHIBIT “5” ARTICLES OF INCORPORATION OF SIAN RESORT RESIDENCES I CONDOMINIUM ASSOCIATION, INC.   4 -------------------------------------------------------------------------------- ARTICLES OF INCORPORATION OF SIAN RESORT RESIDENCES I CONDOMINIUM ASSOCIATION, INC. The undersigned incorporator, for the purpose of forming a corporation not for profit pursuant to the laws of the State of Florida, hereby adopts the following Articles of Incorporation: ARTICLE 1 NAME The name of the corporation shall be SIAN RESORT RESIDENCES I CONDOMINIUM ASSOCIATION, INC., which is hereinafter referred to as the “Association”. ARTICLE 2 OFFICE The principal office and mailing address of the Association shall be at 4000 South Ocean Drive, Hollywood, Florida 33019 or at such other place as may be subsequently designated by the Board of Directors. All books and records of the Association shall be kept at its principal office or at such other place as may be permitted by the Act. ARTICLE 3 PURPOSE The purpose for which the Association is organized is to provide an entity pursuant to the Florida Condominium Act as it exists on the date hereof (the “Act”) for the operation of that certain condominium located in Broward County, Florida, and known as SIAN RESORT RESIDENCES I CONDOMINIUM (the “Condominium”). ARTICLE 4 DEFINITIONS The terms used in these Articles shall have the same definitions and meanings as those set forth in the Declaration of the Condominium to be recorded in the Public Records of Broward County, Florida, unless herein provided to the contrary, or unless the context otherwise requires. ARTICLE 5 POWERS The powers of the Association shall include and be governed by the following: 5.1 General. The Association shall have all of the common-law and statutory powers of a corporation not for profit under the Laws of Florida, except as expressly limited or restricted by the terms of these Articles, the Declaration, the Bylaws or the Act. 5.2 Enumeration. The Association shall have all of the powers and duties set forth in the Act, except as limited by these Articles, the Bylaws and the Declaration (to the extent that they are not in conflict with the Act), and all of the powers and duties reasonably necessary to operate the Condominium pursuant to the Declaration and as more particularly described in the Bylaws, as they may be amended from time to time, including, but not limited to, the following: (a) To make and collect Assessments and other charges against members as Unit Owners (whether or not such sums are due and payable to the Association), and to use the proceeds thereof in the exercise of its powers and duties. -------------------------------------------------------------------------------- (b) To assume all of Developer’s and/or its affiliates’ responsibilities to the County, and its governmental and quasi-governmental subdivisions and similar entities of any kind with respect to the Common Elements (including, without limitation, any and all obligations imposed by any permits or approvals issued by the County, as same may be amended, modified or interpreted from time to time) and, in either such instance, the Association shall indemnify and hold Developer and its affiliates harmless with respect thereto in the event of the Association’s failure to fulfill those responsibilities. (c) To buy, accept, own, operate, lease, sell, trade and mortgage both real and personal property in accordance with the provisions of the Declaration. (d) To maintain, repair, replace, reconstruct, add to and operate the Common Elements, and other property acquired or leased by the Association. (e) To purchase insurance upon the Common Elements and insurance for the protection of the Association, its officers, directors and Unit Owners. (f) To make and amend reasonable rules and regulations for the maintenance, conservation and use of the Common Elements and for the health, comfort, safety and welfare of the Unit Owners. (g) To enforce by legal means the provisions of the Act, the Declaration, these Articles, the Bylaws, and the rules and regulations for the use of the Common Elements. (h) To contract for the management and maintenance of the Common Elements and to authorize a management agent (which may be an affiliate of the Developer) to assist the Association in carrying out its powers and duties by performing such functions as the submission of proposals, collection of Assessments, preparation of records, enforcement of rules and maintenance, repair and replacement of the Common Elements with such funds as shall be made available by the Association for such purposes. (i) To employ personnel to perform the services required for the proper operation of the Common Elements. (j) To execute all documents or consents, on behalf of all Unit Owners (and their mortgagees), required by all governmental and/or quasi-governmental agencies in connection with land use and development matters (including, without limitation, plats, waivers of plat, unities of title, covenants in lieu thereof, etc.) relating to the Condominium Property, and in that regard, each Unit Owner, by acceptance of the deed to such Owner’s Unit, and each mortgagee of a Unit, by acceptance of a lien on said Unit, appoints and designates the President of the Association as such Unit Owner’s and mortgagee’s agent and attorney-in-fact to execute, any and all such documents or consents. 5.4 Distribution of Income: Dissolution. The Association shall not pay a dividend to its members and shall make no distribution of income to its members, directors or officers, and upon dissolution, all assets of the Association shall be transferred only to another non-profit corporation or a public agency or as otherwise authorized by the Florida Not For Profit Corporation Act (Chapter 617, Florida Statutes).   2 -------------------------------------------------------------------------------- 5.5 Limitation. The powers of the Association shall be subject to and shall be exercised in accordance with the provisions hereof and of the Declaration, the Bylaws and the Act, provided that in the event of conflict, the provisions of the Act shall control over those of the Declaration and Bylaws. ARTICLE 6 MEMBERS 6.1 Membership. The members of the Association shall consist of all of the record title owners of Units in the Condominium from time to time, and after termination of the Condominium, shall also consist of those who were members at the time of such termination, and their successors and assigns. 6.2 Assignment. The share of a member in the funds and assets of the Association cannot be assigned, hypothecated or transferred in any manner except as an appurtenance to the Unit for which that share is held. 6.3 Voting. On all matters upon which the membership shall be entitled to vote, the memberships appurtenant to the Residential Units shall be entitled to one (1) vote per Unit and the memberships appurtenant to the Hotel Unit shall be entitled to one hundred and ten (110) votes. Only the Hotel Operator may vote as to those matters concerning only the Hotel Unit (including without limitation, the election of the one (1) Hotel Director as set forth in Article 10 of these Articles), and only the Owners of the Residential Units may vote as to those matters concerning only Residential Units (including without limitation, the election of the Residential Directors as set forth in Article 10 of these Articles). All members shall vote on matters concerning both the Hotel Unit and Residential Units and matters that cannot be clearly categorized as affecting only the Hotel Unit or Residential Units exclusively. All votes shall be exercised or cast in the manner provided by the Declaration and Bylaws. Any person or entity owning more than one (1) Unit shall be entitled to cast the aggregate number of votes attributable to all Units owned. 6.4 Meetings. The Bylaws shall provide for an annual meeting of members, and may make provision for regular and special meetings of members other than the annual meeting. ARTICLE 7 TERM OF EXISTENCE The Association shall have perpetual existence, unless dissolved in accordance with applicable law. ARTICLE 8 INCORPORATOR The name and address of the Incorporator of this Corporation is:   NAME    ADDRESS Mary Koberstein    225 W. Hubbard Street, #400    Chicago, Illinois 60610   3 -------------------------------------------------------------------------------- ARTICLE 9 OFFICERS The affairs of the Association shall be administered by the officers holding the offices designated in the Bylaws. The officers shall be elected by the Board of Directors of the Association at its first meeting following the annual meeting of the members of the Association and shall serve at the pleasure of the Board of Directors. The Bylaws may provide for the removal from office of officers, for filling vacancies and for the duties and qualifications of the officers. The names and addresses of the officers who shall serve until their successors are designated by the Board of Directors are as follows:   President:    Dan Tucker    225 W. Hubbard Street, #400    Chicago, Illinois 60610 Vice President:    Nick Stocking    225 W. Hubbard Street, #400    Chicago, Illinois 60610 Vice President:    Jennifer Arons    225 W. Hubbard Street, #400    Chicago, Illinois 60610 Treasurer/Secretary:    Brian Niven    225 W. Hubbard Street, #400    Chicago, Illinois 60610 ARTICLE 10 DIRECTORS 10.1 Number and Qualification. For so long as the Developer is in control of the Board of Directors, there shall be three (3) directors. At the time of turnover of control, the number of directors shall be increased to five (5); four (4) of whom will be elected by the Residential Unit Owners and one (1) of whom will be appointed by the Hotel Operator (the “Board”). Residential Unit Owners other than the Developer may elect no less than one third (1/3) of the Residential members of the Board of Directors upon the sale of fifteen percent (15%) of the Units in the Condominium that will ultimately be operated by the Association. Residential Unit Owners other than the Developer are entitled to elect not less than a majority of the members of the Board of Directors as follows: (a) three (3) years after fifty percent (50%) of the Units that will ultimately be operated by the Association have been conveyed to purchasers, (b) three (3) months after ninety percent (90%) of the Units that will ultimately be operated by the Association have been conveyed to purchasers, (c) when all the Units that will ultimately be operated by the Association have been completed and some have been conveyed to purchasers and none of the others are being constructed or offered for sale by the Developer in the ordinary course of business, (d) when some of the Units have been conveyed to purchasers and none of the others are being constructed or offered for sale by the Developer in the ordinary course of business, or (e) seven (7) years after recording the Declaration, which ever shall first occur. The Developer reserves the right to elect at least one (1) director of the Condominium Association so long as it owns at least five percent (5%) of the Units. Directors, other than the Developer, or its designee, must be Unit Owners (or, if a Unit is owned by a business entity, then the director(s) may be an officer, director, shareholder, manager, or   4 -------------------------------------------------------------------------------- member of such business entity, as applicable) and be natural persons who are 18 years of age or older. Any person who has been convicted of any felony by any court of record in the United States and who has not had his or her right to vote restored pursuant to law in the jurisdiction of his or her residence is not eligible for Board of Directors membership (provided, however, that the validity of any Board of Directors action is not affected if it is later determined that a member of the Board of Directors is ineligible for Board of Directors membership due to having been convicted of a felony). 10.2 Duties and Powers. All of the duties and powers of the Association existing under the Act, the Declaration, these Articles and the Bylaws shall be exercised exclusively by the Board of Directors, its agents, contractors or employees, subject only to approval by Unit Owners when such approval is specifically required. 10.3 Election; Removal. Directors of the Association shall be elected at the annual meeting of the members in the manner determined by and subject to the qualifications set forth in the Bylaws. Directors may be removed and vacancies on the Board of Directors shall be filled in the manner provided by the Bylaws. 10.4 Term of Developer’s Directors. The Developer of the Condominium shall appoint the members of the first Board of Directors and their replacements who shall hold office for the periods described in the Bylaws. 10.5 First Directors. The names and addresses of the members of the first Board of Directors who shall hold office until their successors are elected and have taken office, as provided in the Bylaws, are as follows:   NAME    ADDRESS Arthur Slaven    225 W. Hubbard Street, #400    Chicago, Illinois 60610 Michael Lerner    1555 N. Sheffield    Chicago, Illinois 60622 Laurence Ashkin    225 W. Hubbard Street, #400    Chicago, Illinois 60610 10.6 Standards. A Director shall discharge his or her duties as a director, including any duties as a member of a Committee: in good faith; with the care an ordinary prudent person in a like position would exercise under similar circumstances; and in a manner reasonably believed to be in the best interests of the Association. Unless a Director has knowledge concerning a matter in question that makes reliance unwarranted, a Director, in discharging his or her duties, may rely on information, opinions, reports or statements, including financial statements and other data, if prepared or presented by: one or more officers or employees of the Association whom the Director reasonably believes to be reasonable and competent in the manners presented; legal counsel, public accountants or other persons as to matters the Director reasonably believes are within the persons’ professional or expert competence; or a Committee of which the Director is not a member if the Director reasonably believes the Committee merits confidence. A Director is not liable for any action taken as a director, or any failure to take action, if he performed the duties of his or her office in compliance with the foregoing standards.   5 -------------------------------------------------------------------------------- ARTICLE 11 INDEMNIFICATION 11.1 Indemnitees. The Association shall indemnify any person who was, will be or is a party to any proceeding (other than an action by, or in the right of, the Association) by reason of the fact that he or she is or was a director, officer, employee or agent (each, an “Indemnitee”) of the Association, against liability incurred in connection with such proceeding, including any appeal thereof, if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Association and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any proceeding by judgment, order, settlement, or conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and. in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Association or, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. 11.2 Indemnification. The Association shall indemnify any person, who was, will be or is a party to any proceeding, or any threat of same, by or in the right of the Association to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer, employee, or agent of the Association against expenses and amounts paid in settlement not exceeding, in the judgment of the Board of Directors, the estimated expense of litigating the proceeding to conclusion, actually and reasonably incurred, in connection with the defense or settlement of such proceeding, including any appeal thereof. Such indemnification shall be authorized if such person acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Association, except that no indemnification shall be made under this Article 11 in respect of any claim, issue, or matter as to which such person shall have been adjudged to be liable unless, and only to the extent that, the court in which such proceeding was brought, or any other court of competent jurisdiction, shall determine upon application that; despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. 11.3 Indemnification for Expenses. To the extent that a director, officer, employee, or agent of the Association has been successful on the merits or otherwise in defense of any proceeding referred to in Section 11.1 or Section 11.2, or in defense of any claim, issue, or matter therein, he or she shall be indemnified against expenses actually and reasonably incurred by him or her in connection therewith. 11.4 Determination of Applicability. Any indemnification under Section 11.1 or Section 11.2 unless pursuant to a determination by a court, shall be made by the Association only as authorized in the specific case upon a determination that indemnification of the director, officer, employee, or agent is proper under the circumstances because he or she has met the applicable standard of conduct set forth in Section 11.1 or Section 11.2. Such determination shall be made: (a) By the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such proceeding; (b) If such a quorum is not obtainable or, even if obtainable, by majority vote of a Committee duly designated by the Board of Directors (in which directors who are parties may participate) consisting solely of two or more Directors not at the time parties to the proceeding; (c) By independent legal counsel: (i) selected by the Board of Directors prescribed in Section 11.4(a) or the committee prescribed in Section 11.4(b); or   6 -------------------------------------------------------------------------------- (ii) if a quorum of the Directors cannot be obtained for Section 11.4(a) and the Committee cannot be designated under Section 11.4(b), selected by majority vote of the full Board of Directors (in which Directors who are parties may participate); or (d) By a majority of the voting interests of the members of the Association who were not parties to such proceeding. 11.5 Determination Regarding Expenses. Evaluation of the reasonableness of expenses and authorization of indemnification shall be made in the same manner as the determination that indemnification is permissible. However, if the determination of permissibility is made by independent legal counsel, persons specified by Section 11.4(c) shall evaluate the reasonableness of expenses and may authorize indemnification. 11.6 Advancing Expenses. Expenses incurred by an officer or director in defending a civil or criminal proceeding, or the threat of same, may be paid by the Association in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if he is ultimately found not to be entitled to indemnification by the Association pursuant to this section. Expenses incurred by other employees and agents may be paid in advance upon such terms or conditions that the Board of Directors deems appropriate. 11.7 Exclusivity: Exclusions. The indemnification and advancement of expenses provided pursuant to this section are not exclusive, and the Association may make any other or further indemnification or advancement of expenses of any of its directors, officers, employees, or agents, under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office. However, indemnification or advancement of expenses shall not be made to or on behalf of any director, officer, employee, or agent if a judgment or other final adjudication establishes that his or her actions, or omissions to act, were material to the cause of action so adjudicated and constitute: (a) A violation of the criminal law, unless the director, officer, employee, or agent had reasonable cause, to believe his or her conduct was lawful or had no reasonable cause to believe his or her conduct was unlawful; (b) A transaction from which the director, officer, employee, or agent derived an improper personal benefit; or (c) Willful misconduct or a conscious disregard for the best interests of the Association in a proceeding by or in the right of the Association to procure a judgment in its favor or in a proceeding by or in the right of the members of the Association. 11.8 Continuing Effect. Indemnification and advancement of expenses as provided in this Article 11 shall continue as, unless otherwise provided when authorized or ratified, to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person, unless otherwise provided when authorized or ratified. 11.9 Application to Court. Notwithstanding the failure of the Association to provide indemnification, and despite any contrary determination of the Board of Directors or of the members in the specific case, a director, officer, employee, or agent of the Association who is or was a party to a proceeding may apply for indemnification or advancement of expenses, or both, to the court   7 -------------------------------------------------------------------------------- conducting the proceeding, to the circuit court, or to another court of competent jurisdiction. On receipt of an application, the court, after giving any notice that it considers necessary, may order indemnification and advancement of expenses, including expenses incurred in seeking court-ordered indemnification or advancement of expenses, if it determines that: (a) The director, officer, employee, or agent is entitled to mandatory indemnification under Section 11.3, in which case the court shall also order the Association to pay the director reasonable expenses incurred in obtaining court-ordered indemnification or advancement of expenses; (b) The director, officer, employee, or agent is entitled to indemnification or advancement of expenses, or both, by virtue of the exercise by the Association of its power pursuant to Section 11.7; or (c) The director, officer, employee, or agent is fairly and reasonably entitled to indemnification or advancement of expenses, or both, in view of all the relevant circumstances, regardless of whether such person met the standard of conduct set forth in Section 11.1, Section 11.2, or Section 11.7, unless (a) a court of competent jurisdiction determines, after all available appeals have been exhausted or not pursued by the proposed indemnitee, that he or she did not act in good faith or acted in a manner he or she reasonably believed to be not in, or opposed to, the best interest of the Association, and, with respect to any criminal action or proceeding, that he or she had reasonable cause to believe his or her conduct was unlawful, and (b) such court further specifically determines that indemnification should be denied. The termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith or did act in a manner which he or she reasonably believed to be not in, or opposed to, the best interest of the Association, and, with respect to any criminal action or proceeding, that he or she had reasonable cause to believe that his or her conduct was unlawful. 11.10 Definitions. For purposes of this Article 11, the term “expenses” shall be deemed to include attorneys’ fees and related “out-of-pocket” expenses, including those for any appeals; the term “liability” shall be deemed to include obligations to pay a judgment, settlement, penalty, fine, and expenses actually and reasonably incurred with respect to a proceeding; the term “proceeding” shall be deemed to include any threatened, pending, or completed action, suit, or other type of proceeding, whether civil, criminal, administrative or investigative, and whether formal or informal; and the term “agent” shall be deemed to include a volunteer; the term “serving at the request of the Association” shall be deemed to include any service as a director, officer, employee or agent of the Association that imposes duties on, and which are accepted by, such persons. 11.11 Effect. The indemnification provided by this Article 11 shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any applicable law, agreement, vote of members or otherwise. 11.12 Amendment. Anything to the contrary herein notwithstanding, no amendment to the provisions of this Article 11 shall be applicable as to any party eligible for indemnification hereunder who has not given his or her prior written consent to such amendment. ARTICLE 12 BYLAWS The first Bylaws of the Association shall be adopted by the Board of Directors and may be altered, amended or rescinded in the manner provided in the Bylaws and the Declaration.   8 -------------------------------------------------------------------------------- ARTICLE 13 AMENDMENTS Amendments to these Articles shall be proposed and adopted in the following manner: 13.1 Notice. Notice of a proposed amendment shall be included in the notice of any meeting at which the proposed amendment is to be considered and shall be otherwise given in the time and manner provided in Chapter 617, Florida Statutes. Such notice shall contain the proposed amendment or a summary of the changes to be affected thereby. 13.2 Adoption. Amendments shall be proposed and adopted in the manner provided in Chapter 617, Florida Statutes and in the Act (the latter to control over the former to the extent provided for in the Act). 13.3 Limitation. No amendment shall make any changes in the qualifications for membership, nor in the voting rights or property rights of members, nor any changes in Sections 5.3, 5.4 or 5.5 above, without the approval in writing of all members and the joinder of all record owners of mortgages upon Units. No amendment shall be made that is in conflict with the Act, the Declaration or the Bylaws, nor shall any amendment make any changes which would in any way affect any of the rights, privileges, powers or options herein provided in favor of or reserved to the Developer and/or Institutional First Mortgagees, unless the Developer and/or the Institutional First Mortgagees, as applicable, shall join in the execution of the amendment. No amendment to this Section 13.3 shall be effective. 13.4 Developer Amendments. Notwithstanding anything herein contained to the contrary, to the extent lawful, the Developer may amend these Articles consistent with the provisions of the Declaration allowing certain amendments to be effected by the Developer alone. 13.5 Recording. A copy of each amendment shall be filed with the Secretary of State pursuant to the provisions of applicable Florida law, and a copy certified by the Secretary of State shall be recorded in the public records of Broward County, Florida with an identification on the first page thereof of the book and page of said public records where the Declaration was recorded which contains, as an exhibit, the initial recording of these Articles. ARTICLE 14 INITIAL REGISTERED OFFICE ADDRESS AND NAME OF REGISTERED AGENT The initial registered office of this corporation shall be at c/o William Bloom, 701 Brickell Avenue, Suite 3000, Miami, Florida 33131 with the privilege of having its office and branch offices at other places within or without the State of Florida. The initial registered agent at that address shall be Mary Koberstein. The Incorporator has affixed his signature this      day of                         , 200  .       Mary Koberstein Incorporator   9 -------------------------------------------------------------------------------- CERTIFICATE DESIGNATING PLACE OF BUSINESS OR DOMICILE FOR THE SERVICE OF PROCESS WITHIN THIS STATE, NAMING AGENT UPON WHOM PROCESS MAY BE SERVED In compliance with the laws of Florida, the following is submitted: First — That desiring to organize under the laws of the State of Florida with its principal office, as indicated in the foregoing Articles of Incorporation, in the County of Broward, State of Florida, the Association named in the said articles has named Mary Koberstein, located at c/o William Bloom, 701 Brickell Avenue, Suite 3000, Miami, Florida 33131, as its statutory registered agent. Having been named the statutory agent of said Association at the place designated in this certificate, I am familiar with the obligations of that position, and hereby accept the same and agree to act in this capacity, and agree to comply with the provisions of Florida law relative to keeping the registered office open.       Mary Koberstein DATED this      day of                     , 200  .   10 -------------------------------------------------------------------------------- EXHIBIT “4” BYLAWS OF SIAN RESORT RESIDENCES I CONDOMINIUM ASSOCIATION, INC.   11 -------------------------------------------------------------------------------- BYLAWS OF SIAN RESORT RESIDENCES I CONDOMINIUM ASSOCIATION, INC. A corporation not for profit organized under the laws of the State of Florida 1. Identity. These are the Bylaws of SIAN RESORT RESIDENCES I CONDOMINIUM ASSOCIATION, INC. (the “Association”), a corporation not-for-profit incorporated under the laws of the State of Florida, and organized for the purposes set forth in its Articles of Incorporation. 1.1 Fiscal Year. The fiscal year of the Association shall be the twelve month period commencing January 1st and terminating December 31st of each year. The provisions of this Section 1.1 may be amended at any time by a majority of the Board of Directors of the Association. 1.2 Seal. The seal of the Association shall bear the name of the corporation, the word “Florida”, the words “Corporation Not for Profit”, and the year of incorporation. 2. Definitions. For convenience, these Bylaws shall be referred to as the “Bylaws” and the Articles of Incorporation of the Association as the “Articles”. The other terms used in these Bylaws shall have the same definitions and meanings as those set forth in the Declaration for SIAN RESORT RESIDENCES I CONDOMINIUM, unless herein provided to the contrary, or unless the context otherwise requires. 3. Members. 3.1 Annual Meeting. The annual members’ meeting shall be held on the date, at the place and at the time determined by the Board of Directors from time to time, provided that there shall be an annual meeting every calendar year and, to the extent possible, no later than thirteen (13) months after the last preceding annual meeting. The purpose of the meeting shall be, except as provided herein to the contrary, to elect Directors, and to transact any other business authorized to be transacted by the members, or as stated in the notice of the meeting sent to Unit Owners in advance thereof. Unless changed by the Board of Directors, the first annual meeting shall be held in the month of October following the year in which the Declaration is filed. 3.2 Special Meetings. Special members’ meetings shall be held at such places as provided herein for annual meetings, and may be called by the President or by a majority of the Board of Directors of the Association, and must be called by the President or Secretary upon receipt of a written request from a majority of the members of the Association. The business conducted at a special meeting shall be limited to those agenda items specifically identified in the notice of the meeting. Special meetings may also be called by Unit Owners in the manner provided for in the Act. Notwithstanding the foregoing: (i) as to special meetings regarding the adoption of the Condominium’s estimated operating budget, reference should be made to Section 10.1 of these Bylaws; and (ii) as to special meetings regarding recall of Board of Directors members, reference should be made to Section 4.3 of these Bylaws. 3.3 Participation by Unit Owners. Subject to the following and such further reasonable restrictions as may be adopted from time to time by the Board of Directors, Unit Owners shall have the right to speak at the annual and special meetings of the Unit Owners, committee meetings and Board of Directors meetings with reference to all designated agenda items. A Unit Owner does not have the right to speak with respect to items not specifically designated on the agenda, provided, however, that the Board of Directors may permit a Unit Owner to speak on such items in its discretion. Every Unit Owner who desires to speak at a meeting, may do so, provided that the Unit -------------------------------------------------------------------------------- Owner has filed a written request with the Secretary of the Association not less than 24 hours prior to the scheduled time for commencement of the meeting. Unless waived by the chairman of the meeting (which may be done in the chairman’s sole and absolute discretion and without being deemed to constitute a waiver as to any other subsequent speakers), all Unit Owners speaking at a meeting shall be limited to a maximum of three (3) minutes per speaker. Any Unit Owner may tape record or videotape a meeting, subject to the following and such further reasonable restrictions as may be adopted from time to time by the Board of Directors: (a) The only audio and video equipment and devices which Unit Owners are authorized to utilize at any such meeting is equipment which does not produce distracting sound or light emissions; (b) Audio and video equipment shall be assembled and placed in position in advance of the commencement of the meeting; (c) Anyone videotaping or recording a meeting shall not be permitted to move about the meeting room in order to facilitate the recording; and (d) At least 48 hours (or 24 hours with respect to a Board of Directors meeting) prior written notice shall be given to the Secretary of the Association by any Unit Owner desiring to make an audio or video taping of the meeting. 3.4 Notice of Meeting; Waiver of Notice. Notice of a meeting of members (annual or special), stating the time and place and the purpose(s) for which the meeting is called, shall be given by the President or Secretary. A copy of the notice shall be posted at a conspicuous place on the Condominium Property. The notice of an annual or special meeting shall be hand delivered, electronically transmitted (to those primary occupants who consent to receive notice by electronic transmission) or sent by regular mail to each Unit Owner, unless the Unit Owner waives in writing the right to receive notice of the annual meeting by mail. The delivery, mailing or electronic mailing shall be to the address or electronic mailing address of the member as last furnished to the Association by the Unit Owner. However, if a Unit is owned by more than one person, the Association shall provide notice, for meetings and all other purposes, to that one address or electronic mailing address initially identified for that purpose by the Developer and thereafter as one or more of the Owners of the Unit shall so advise the Association in writing, or if no address or electronic mailing address is given or if the Owners disagree, notice shall be sent to the address or electronic mailing address for the Owner as set forth on the deed of the Unit. The posting and mailing of the notice for either special or annual meetings, which notice shall incorporate an identification of agenda items, shall be effected not less than fourteen (14) continuous days, nor more than sixty (60) days, prior to the date of the meeting. The Board of Directors shall adopt by rule, and give notice to Unit Owners of, a specific location on the Condominium Property upon which all notices of members’ meetings shall be posted. In lieu of or in addition to the physical posting of notice of any meeting of the Unit Owners on the Condominium Property, the Association may, by reasonable rule, adopt a procedure for conspicuously posting and repeatedly broadcasting the notice and the agenda on a closed-circuit cable television system serving the Association, if any. However, if broadcast notice is used in lieu of a notice posted physically on the Condominium Property, the notice and agenda must be broadcast at least four times every broadcast hour of each day that a posted notice is otherwise required. When broadcast notice is provided, the notice and agenda must be broadcast in a manner and for a sufficient continuous length of time so as to allow an average reader to observe the notice and read and comprehend the entire content of the notice and the agenda. Notice of specific meetings may be waived before or after the meeting and the attendance of any member (or person authorized to vote for such member), either in person or by proxy, shall   2 -------------------------------------------------------------------------------- constitute such member’s waiver of notice of such meeting, and waiver of any and all objections to the place of the meeting, the time of the meeting or the manner in which it has been called or convened, except when his (or his authorized representative’s) attendance is for the express purpose of objecting at the beginning of the meeting to the transaction of business because the meeting is not lawfully called. An officer of the Association, or the manager or other person providing notice of the meeting shall provide an affidavit or United States Postal Service certificate of mailing, to be included in the official records of the Association, affirming that notices of meetings were posted and mailed, electronically transmitted (for those Members who consent to notice by electronic transmission) or hand delivered in accordance with this Section and Section 718.112(2)(d) of the Act, to each Unit Owner at the appropriate address for such Unit Owner. No other proof of notice of a meeting shall be required. 3.5 Quorum. A quorum at members’ meetings shall be attained by the presence, either in person or by proxy (limited or general), of persons entitled to cast in excess of 33 1/3% of the votes of members entitled to vote at the subject meeting. 3.6 Voting. (a) Number of Votes. Except as provided in Section 3.11 hereof, in any meeting of members, the Owners of each Unit shall be entitled to cast the number of votes designated for their Unit as set forth in the Articles. The vote of a Unit shall not be divisible. (b) Majority Vote. The acts approved by a majority of the votes present in person or by proxy at a meeting at which a quorum shall have been attained shall be binding upon all Unit Owners for all purposes, except where otherwise provided by law, the Declaration, the Articles or these Bylaws. As used in these Bylaws, the Articles or the Declaration, the terms “majority of the Unit Owners” and “majority of the members” shall mean a majority of the votes entitled to be cast by the members and not a majority of the members themselves and shall further mean more than 50% of the then total authorized votes present in person or by proxy and voting at any meeting of the Unit Owners at which a quorum shall have been attained. Similarly, if some greater percentage of members is required herein or in the Declaration or Articles, it shall mean such greater percentage of the votes of members and not of the members themselves. (c) Voting Member. If a Unit is owned by one person, that person’s right to vote shall be established by the roster of members. If a Unit is owned by more than one (1) person, those persons (including husbands and wives) shall decide among themselves as to who shall cast the vote of the Unit. In the event that those persons cannot so decide, no vote shall be cast. A person casting a vote for a Unit shall be presumed to have the authority to do so unless the President or the Board of Directors is otherwise notified. If a Unit is owned by a corporation, the person entitled to cast the vote for the Unit shall be designated by a certificate signed by an appropriate officer of the corporation and filed with the Secretary of the Association. Such person need not be a Unit Owner. Those certificates shall be valid until revoked or until superseded by a subsequent certificate or until a change in the ownership of the Unit concerned. A certificate designating the person entitled to cast the vote for a Unit may be revoked by any record owner of an undivided interest in the Unit. If a certificate designating the person entitled to cast the vote for a Unit for which such certificate is required is not on file or has been revoked, the vote attributable to such Unit shall not be considered in determining whether a quorum is present, nor for any other purpose, and the total number of authorized votes in the Association shall be reduced accordingly until such certificate is filed. (d) Only the Owners of the Hotel Unit may vote as to those matters concerning only the Hotel Unit (including without limitation, the election of the one (1) Hotel Director as set   3 -------------------------------------------------------------------------------- forth in Article IX of the Articles of Incorporation and Article IV of these Bylaws), and only the Owners of the Residential Units may vote as to those matters concerning only Residential Units (including without limitation, the election of the four (4) Residential Directors as set forth in Article IX of the Articles of Incorporation and Article IV of these Bylaws). All members shall vote on matters concerning both the Hotel Unit and Residential Units and matters that cannot be clearly categorized as affecting only the Hotel Unit or Residential Units exclusively. 3.7 Proxies. Votes to be cast at meetings of the Association membership may be cast in person or by proxy. Except as specifically provided herein, Unit Owners may not vote by general proxy, but may vote by limited proxies substantially conforming to the limited proxy form approved by the Division. Limited proxies shall be permitted for votes to the extent permitted by the Act. No proxy, limited or general, shall be used in the election of Board of Directors members. General proxies may be used for other matters for which limited proxies are not required and may also be used in voting for nonsubstantive changes to items for which a limited proxy is required and given. A proxy may be made by any person entitled to vote, but shall only be valid for the specific meeting for which originally given and any lawful adjourned meetings thereof. In no event shall any proxy be valid for a period longer than 90 days after the date of the first meeting for which it was given. Every proxy shall be revocable at any time at the pleasure of the person executing it. A proxy must be in writing, signed by the person authorized to cast the vote for the Unit (as above described), name the person(s) voting by proxy and the person authorized to vote for such person(s) and filed with the Secretary before the appointed time of the meeting, or before the time to which the meeting is adjourned. Each proxy shall contain the date, time and place of the meeting for which it is given and, if a limited proxy, shall set forth the matters on which the proxy holder may vote and the manner in which the vote is to be cast. There shall be no limitation on the number of proxies which may be held by any person (including a designee of the Developer). If a proxy expressly provides, any proxy holder may appoint, in writing, a substitute to act in its place. If such provision is not made, substitution is not permitted. 3.8 Adjourned Meeting. If any proposed meeting cannot be organized because a quorum has not been attained, the members who are present, either in person or by proxy, may adjourn the meeting from time to time until a quorum is present, provided notice of the newly scheduled meeting is given in the manner required for the giving of notice of a meeting. Except as required above, proxies given for the adjourned meeting shall be valid for the newly scheduled meeting unless revoked. 3.9 Order of Business: If a quorum has been attained, the order of business at annual members’ meetings, and, if applicable, at other members’ meetings, shall be:     (a) Collect any ballots not yet cast;     (b) Call to order by President;     (c) Appointment by the President of a chairman of the meeting (who need not be a member or a director);     (d) Appointment of inspectors of election;     (e) Counting of Ballots for Election of Directors;     (f) Proof of notice of the meeting or waiver of notice;     (g) Reading of minutes;   4 --------------------------------------------------------------------------------   (h) Reports of officers;     (i) Reports of committees;     (j) Unfinished business;     (k) New business;     (l) Adjournment. Such order may be waived in whole or in part by direction of the chairman. 3.10 Minutes of Meeting. The minutes of all meetings of Unit Owners shall be kept in a book available for inspection by Unit Owners or their authorized representatives and Board of Directors members at any reasonable time. The Association shall retain these minutes for a period of not less than seven (7) years. 3.11 Action Without A Meeting. Anything to the contrary herein notwithstanding, to the extent lawful, any action required or which may be taken at any annual or special meeting of members, may be taken without a meeting, without prior notice and without a vote if a consent in writing, setting forth the action so taken, shall be signed by the members (or persons authorized to cast the vote of any such members as elsewhere herein set forth) having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting of members at which all members (or authorized persons) entitled to vote thereon were present and voted. In order to be effective, the action must be evidenced by one or more written consents describing the action taken, dated and signed by approving members having the requisite number of votes and entitled to vote on such action, and delivered to the Secretary of the Association, or other authorized agent of the Association. Written consent shall not be effective to take the corporate action referred to in the consent unless signed by members having the requisite number of votes necessary to authorize the action within sixty (60) days of the date of the earliest dated consent and delivered to the Association as aforesaid. Any written consent may be revoked prior to the date the Association receives the required number of consents to authorize the proposed action. A revocation is not effective unless in writing and until received by the Secretary of the Association, or other authorized agent of the Association. Within ten (10) days after obtaining such authorization by written consent, notice must be given to members who have not consented in writing. The notice shall fairly summarize the material features of the authorized action. A consent signed in accordance with the foregoing has the effect of a meeting vote and may be described as such in any document. 4. Directors. 4.1 Membership. The first Board of Directors shall consist of not less than three (3) persons as designated in the Articles of Incorporation. Pursuant to the Declaration of Condominium, the Developer reserves the right to appoint Directors to the Board as set forth therein. At such time as the Members, other than the Developer, are entitled to elect the majority of the Directors, the number of Directors shall be increased to five (5); four (4) of whom will be elected by the Residential Unit Owners and one (1) of whom will be elected by the Hotel Operator. Directors, other than the Developer, or its designee, must be Unit Owners (or, if a Unit is owned by a business entity, then the director(s) may be an officer, director, shareholder, manager, or member of such business entity, as applicable) and be natural persons who are 18 years of age or older. Any person who has been convicted of any felony by any court of record in the United States and who has   5 -------------------------------------------------------------------------------- not had his or her right to vote restored pursuant to law in the jurisdiction of his or her residence is not eligible for Board membership (provided, however, that the validity of any Board action is not affected if it is later determined that a member of the Board is ineligible for Board membership due to having been convicted of a felony). Directors may not vote at Board meetings by proxy or by secret ballot. 4.2 Election of Directors. (a) In the election of Residential Directors, there shall be appurtenant to each Residential Unit one (1) vote for each Director to be elected. Provided, however, that no Residential Unit Owner may cast more than one (1) vote for any person nominated as a Director, it being the intent hereof that voting for Directors shall be non-cumulative. The election shall be by secret ballot, but if there is only one (1) candidate for election to fill each vacancy, no election is required. (b) The Hotel Director shall be appointed by the Hotel Operator. (c) Election of Directors shall be held at the annual members’ meeting, except as herein provided to the contrary. Not less than sixty (60) days prior to a scheduled election, the Association shall mail, deliver or electronically transmit (for those Members who consent to notice by electronic transmission) to each Unit Owner entitled to vote, a first notice of the date of election. Any Unit Owner or other eligible person desiring to be a candidate for the Board shall give written notice to the Secretary of the Association not less than forty (40) days prior to the scheduled election. Together with the notice of meeting and agenda sent in accordance with Section 3.4 above, the Association shall then, mail, deliver or electronically transmit (for those Members who consent to notice by electronic transmission) a second notice of the meeting, not less than fourteen (14) days prior to the date of the meeting, to all Unit Owners entitled to vote therein, together with a ballot which shall list all candidates. Upon request of a candidate, the Association shall include an information sheet, no larger than 8-1/2 inches by 11 inches furnished by the candidate, which must be furnished by the candidate to the Association not less than thirty five (35) days before the election, to be included with the mailing of the ballot, with the costs of mailing, electronically transmitting (for those Members who consent to notice by electronic transmission) or delivery and copying to be borne by the Association. The Association is not liable for the contents of the information sheets prepared by the candidates. In order to reduce costs, the Association may print or duplicate the information sheets on both sides of the paper. (d) Only Residential Unit Owners may serve as Residential members of the Board and only the Hotel Operator may serve as the Hotel Unit member of the Board. Any Member desiring to be a candidate for the Board must give written notice to the Board not less than forty (40) days before the scheduled election. The Association shall mail, electronically transmit (for those Members who consent to notice by electronic transmission) or deliver a written notice of the meeting and agenda together with a second notice of the election to all Members, together with a ballot which shall list all candidates and may contain such information about the candidate as provided in accordance with the rules and regulations of the Board. (e) For so long as the Developer has the right to appoint at least one (1) member of the Board of Directors, as provided in Section 718.301, Florida Statutes, the Director appointed by the Developer shall be a Hotel Director. The remaining members of the Board of Directors shall be elected at large, by a plurality of the votes cast at the annual meeting of the general membership; provided that the Residential Units Owners will elect the Residential members of the Board and the Hotel Operator will elect the Hotel Unit member of the Board (except to the extent the Developer has the right to appoint a Hotel Director). Commencing with the first annual election of Directors after the Developer shall have lost or relinquished the right to appoint at least one (1) Director, the Members shall elect all the Directors, by a plurality of the votes cast by written ballot or voting   6 -------------------------------------------------------------------------------- (e) The election of directors shall be by written ballot or voting machine. Proxies shall in no event be used in electing the Board of Directors at general elections or to fill vacancies caused by resignation or otherwise, provided, however, that limited proxies may be used to fill a vacancy resulting from the recall of a director, in the manner provided by the rules of the Division. Elections shall be decided by a plurality of those ballots and votes cast. There shall be no quorum requirement, however at least 20 percent of the eligible voters must cast a ballot in order to have a valid election of members of the Board of Directors. There shall be no cumulative voting. (f) Notwithstanding the provisions of this Section 4.2, an election is not required unless more candidates file notices of intent to run or are nominated than vacancies exist on the Board of Directors. 4.3 Vacancies and Removal. (a) Except as to vacancies resulting from removal of Directors by members (as addressed in Section 4.3(b) below), vacancies in the Board of Directors occurring between annual meetings of members shall be filled by a majority vote of the remaining Directors at any Board of Directors meeting (even if the remaining Directors constitute less than a quorum), provided that all vacancies in directorships to which Directors were appointed by the Developer pursuant to the provisions of Section 4.15 hereof shall be filled by the Developer without the necessity of any meeting. Vacancies on the Board of Directors may be filled, through the next regularly scheduled election, by the remaining Directors except that should any vacancy on the Board of Directors be created in a directorship previously filled by any person appointed by Developer, such vacancy should be filled by Developer appointing by written instrument delivered to any officer of the Association, the successor Director, who shall fill the vacated directorship. The vacancy of a Residential member of the Board of Directors must be filled by a Residential member. The vacancy of a Hotel Unit member of the Board of Directors must be filled by a Hotel Unit member. (b) Any Director elected by the members (other than the Developer) may be removed by concurrence of a majority of the voting interests of the members at a special meeting of members called for that purpose or by written agreement signed by a majority of all voting interests. The vacancy in the Board of Directors so created shall be filled by the members at a special meeting of the members called for such purpose, or by the Board of Directors, in the case of removal by a written agreement unless said agreement also designates a new Director to take the place of the one removed. The conveyance of all Units owned by a Director in the Condominium (other than appointees of the Developer or Directors who were not Unit Owners) shall constitute the resignation of such Director. (c) Anything to the contrary herein notwithstanding, until a majority of the Directors are elected by members other than the Developer of the Condominium, neither the first Directors of the Association, nor any Directors replacing them, nor any Directors named by the Developer, shall be subject to removal by members other than the Developer. The first Directors and Directors replacing them may be removed and replaced by the Developer without the necessity of any meeting. (d) If a vacancy on the Board of Directors results in the inability to obtain a quorum of directors in accordance with these Bylaws, and the remaining Directors fail to fill the vacancy by appointment of a director in accordance with applicable law, then any Owner may apply to the Circuit Court within whose jurisdiction the Condominium lies for the appointment of a receiver to manage the affairs of the Association. At least thirty (30) days prior to applying to the Circuit Court, the Unit Owner shall mail or electronically transmit (for those Members who consent to notice by electronic transmission) to the Association and post in a conspicuous place on the Condominium Property a notice describing the intended action and giving the Association an   7 -------------------------------------------------------------------------------- opportunity to fill the vacancy(ies) in accordance with these Bylaws. If, during such time, the Association fails to fill the vacancy(ies), the Unit Owner may proceed with the petition. If a receiver is appointed, the Association shall be responsible for the salary of the receiver, court costs and attorneys’ fees. The receiver shall have all powers and duties of a duly constituted Board of Directors, and shall serve until the Association fills the vacancy(ies) on the Board of Directors sufficient to constitute a quorum in accordance with these Bylaws. 4.4 Term. Until such time as the Members are entitled to elect all of the Directors, each Director shall serve for one (1) year until the next annual meeting or such other time as his successor is duly elected and has taken office, or until he is removed in the manner elsewhere provided. At the turnover meeting at which the Members are entitled to elect all of the members of the Board of Directors, one (1) Residential directorship and the one (1) Hotel Unit directorship shall be designated as a three (3) year director, one (1) Residential directorship shall be designated as a two (2) year director and the remaining Residential directors shall be for a one (1) year term. The intent hereof is to stagger the terms of the directorships so that there shall be some members of the Board with prior experience. Notwithstanding the foregoing, each Director elected at the turnover meeting to serve a one (1) year term shall serve until the first annual meeting following the turnover meeting; provided however that if such period shall be less than six (6) months, such directors shall serve until the second annual meeting following the turnover meeting. Notwithstanding the foregoing, any Director designated by the Developer shall serve at the pleasure of the Developer and may be removed and replaced by the Developer at any time. 4.5 Organizational Meeting. The organizational meeting of newly-elected or appointed Directors shall be held within ten (10) days of their election or appointment. The directors calling the organizational meeting shall give at least three (3) days advance notice thereof, stating the time and place of the meeting. 4.6 Meetings. Meetings of the Board of Directors may be held at such time and place as shall be determined, from time to time, by a majority of the Directors. Meetings of the Board of Directors may be held by telephone conference, with those Directors attending by telephone counted toward the quorum requirement, provided that a telephone speaker must be used so that the conversation of those Directors attending by telephone may be heard by the Directors and any Unit Owners attending such meeting in person. Notice of meetings shall be given to each Director, personally, by mail, electronically transmit (for those Members who consent to notice by electronic transmission), telephone or telegraph, and shall be transmitted at least three (3) days prior to the meeting. Meetings of the Board of Directors and any Committee thereof at which a quorum of the members of that Committee are present shall be open to all Unit Owners. Any Unit Owner may tape record or videotape meetings of the Board of Directors, in accordance with the rules of the Division. The right to attend such meetings includes the right to speak at such meetings with respect to all designated agenda items. The Association may adopt reasonable rules governing the frequency, duration and manner of Unit Owner statements. Adequate notice of such meetings, which notice shall specifically incorporate an identification of agenda items, shall be posted conspicuously on the Condominium Property at least forty-eight (48) continuous hours preceding the meeting, except in the event of an emergency. Any item not included on the notice may be taken up on an emergency basis by at least a majority plus one of the members of the Board of Directors. Such emergency action shall be noticed and ratified at the next regular meeting of the Board of Directors. Notwithstanding the foregoing, written notice of any meeting of the Board of Directors at which nonemergency special assessments, or at which amendment to rules regarding unit use will be proposed, discussed or approved, shall be mailed, delivered or electronically transmitted (for those Members who consent to notice by electronic transmission) to all Unit Owners and posted conspicuously on the Condominium Property not less than fourteen (14) continuous days prior to the meeting. Evidence of compliance with this fourteen (14) continuous day notice shall be made by an affidavit executed by the Secretary of the Association and filed among the official records of the   8 -------------------------------------------------------------------------------- Association. The Board of Directors shall adopt by rule; and give notice to Unit Owners of, a specific location on the Condominium Property upon which all notices of Board of Directors and/or Committee meetings shall be posted. In lieu of or in addition to the physical posting of notice of any meeting of the Board of Directors on the Condominium Property, the Association may, by reasonable rule, adopt a procedure for conspicuously posting and repeatedly broadcasting the notice and the agenda on a closed-circuit cable television system serving the Association, if any. However, if broadcast notice is used in lieu of a notice posted physically on the Condominium Property, the notice and agenda must be broadcast at least four times every broadcast hour of each day that a posted notice is otherwise required. When broadcast notice is provided, the notice and agenda must be broadcast in a manner and for a sufficient continuous length of time so as to allow an average reader to observe the notice and read and comprehend the entire content of the notice and the agenda. Special meetings of the Directors may be called by the President, and must be called by the President or Secretary at the written request of one-third (1/3) of the Directors or where required by the Act. A Director or member of a Committee of the Board of Directors may submit in writing his or her agreement or disagreement with any action taken at a meeting that the Board of Directors member or committee member did not attend, but the agreement or disagreement may not be used as a vote for or against the action taken and may not be used for purposes of creating a quorum. 4.7 Waiver of Notice. Any Director may waive notice of a meeting before or after the meeting and that waiver shall be deemed equivalent to the due receipt by said Director of notice. Attendance by any Director at a meeting shall constitute a waiver of notice of such meeting, and a waiver of any and all objections to the place of the meeting, to the time of the meeting or the manner in which it has been called or convened, except when a Director states at the beginning of the meeting, or promptly upon arrival at the meeting, any objection to the transaction of affairs because the meeting is not lawfully called or convened. 4.8 Quorum. A quorum at Directors’ meetings shall consist of a majority of the entire Board of Directors. The acts approved by a majority of those present at a meeting at which a quorum is present shall constitute the acts of the Board of Directors, except when approval by a greater number of Directors is specifically required by the Declaration, the Articles or these Bylaws. 4.9 Adjourned Meetings. If, at any proposed meeting of the Board of Directors, there is less than a quorum present, the majority of those present may adjourn the meeting from time to time until a quorum is present, provided notice of such newly scheduled meeting is given as required hereunder. At any newly scheduled meeting, any business that might have been transacted at the meeting as originally called may be transacted as long as notice of such business to be conducted at the rescheduled meeting is given, if required (e.g., with respect to budget adoption). 4.10 Joinder in Meeting by Approval of Minutes. The joinder of a Director in the action of a meeting by signing and concurring in the minutes of that meeting shall constitute the approval of that Director of the business conducted at the meeting; but such joinder shall not be used as a vote for or against any particular action taken and shall not allow the applicable Director to be counted as being present for purposes of quorum. 4.11 Presiding Officer. The presiding officer at the Directors’ meetings shall be the President (who may, however, designate any other Unit Owner to preside). 4.12 Order of Business. If a quorum has been attained, the order of business at Directors’ meetings shall be:     (a) Proof of due notice of meeting;     (b) Reading and disposal of any unapproved minutes;   9 --------------------------------------------------------------------------------   (c) Reports of officers and committees;     (d) Election of officers;     (e) Unfinished business;     (f) New business;     (g) Adjournment. Such order may be waived in whole or in part by direction of the presiding officer. 4.13 Minutes of Meetings. The minutes of all meetings of the Board of Directors shall be kept in a book available for inspection by Unit Owners, or their authorized representatives, and Board of Directors members at any reasonable time. The Association shall retain these minutes for a period of not less than seven years. 4.14 Committees. The Board of Directors may by resolution also create Committees and appoint persons to such Committees and vest in such Committees such powers and responsibilities as the Board of Directors shall deem advisable. 4.15 Proviso. Notwithstanding anything to the contrary contained in this Article 4 or otherwise, the Board of Directors shall consist of three directors during the period that the Developer is entitled to appoint a majority of the Directors, as hereinafter provided. The Developer shall have the right to appoint all of the members of the Board of Directors until Unit Owners other than the Developer own fifteen (15%) percent or more of the Units in the Condominium. When Unit Owners other than the Developer own fifteen percent (15%) or more of the Units in the Condominium that will be operated ultimately by the Association, the Unit Owners other than the Developer shall be entitled to elect not less than one-third (1/3) of the members of the Board of Directors. Upon the election of such director(s), the Developer shall forward to the Division of Florida Land Sales, Condominiums and Mobile Homes the name and mailing address of the director(s) elected. Unit Owners other than the Developer are entitled to elect not less than a majority of the members of the Board of Directors: (a) three years after fifty (50%) percent of the Units that will be operated ultimately by the Association have been conveyed to purchasers; (b) three months after ninety (90%) percent of the Units that will be operated ultimately by the Association have been conveyed to purchasers; (c) when all of the Units that will be operated ultimately by the Association have been completed, some of them have been conveyed to purchasers, and none of the others are being offered for sale by the Developer in the ordinary course of business; (d) when some of the Units have been conveyed to purchasers, and none of the others are being constructed or offered for sale by the Developer in the ordinary course of business; or (e) seven (7) years after recordation of the Declaration, whichever occurs first. The Developer is entitled (but not obligated) to elect at least one (1) member of the Board of Directors as long as the Developer holds for sale in the ordinary course of business five percent (5%) of the Units that will be operated ultimately by the Association. The Developer may transfer control of the Association to Unit Owners other than the Developer prior to such dates in its sole discretion by causing enough of its appointed Directors to resign, whereupon it shall be the affirmative obligation of Unit Owners other than the Developer to elect Directors and assume control of the Association. Provided at least sixty (60) days’ notice of Developer’s decision to cause its appointees to resign is given to Unit Owners, neither the Developer, nor such appointees, shall be liable in any manner in connection with such resignations even if the Unit Owners other than the Developer refuse or fail to assume control.   10 -------------------------------------------------------------------------------- Within seventy-five (75) days after the Unit Owners other than the Developer are entitled to elect a member or members of the Board of Directors, or sooner if the Developer has elected to accelerate such event as aforesaid, the Association shall call, and give not less than sixty (60) days’ notice of an election for the member or members of the Board of Directors. The notice may be given by any Unit Owner if the Association fails to do so. At the time the Unit Owners other than the Developer elect a majority of the members of the Board of Directors of the Association, the Developer shall relinquish control of the Association and such Unit Owners shall accept control. At that time (except as to Section 4.15(g), which may be ninety (90) days thereafter) Developer shall deliver to the Association, at Developer’s expense, all property of the Unit Owners and of the Association held or controlled by the Developer, including, but not limited to, the following items, if applicable to the Condominium: (a) The original or a photocopy of the recorded Declaration of Condominium, and all amendments thereto. If a photocopy is provided, the Developer must certify by affidavit that it is a complete copy of the actual recorded Declaration. (b) A certified copy of the Articles of Incorporation of the Association. (c) A copy of the Bylaws of the Association. (d) The minute book, including all minutes, and other books and records of the Association. (e) Any rules and regulations which have been adopted. (f) Resignations of resigning officers and Board of Directors members who were appointed by the Developer. (g) The financial records, including financial statements of the association, and source documents from the incorporation of the Association through the date of the turnover. The records shall be audited for the period from the incorporation of the Association or from the period covered by the last audit, if applicable, by an independent certified public accountant. All financial statements shall be prepared in accordance with generally accepted accounting principles and shall be, audited in accordance with generally accepted auditing standards as prescribed by the Florida Board of Accountancy. The accountant performing the audit shall examine to the extent necessary supporting documents and records, including the cash disbursements and related paid invoices to determine if expenditures were for Association purposes, and billings, cash receipts and related records to determine that the Developer was charged and paid the proper amounts of Assessments. (h) Association funds or the control thereof. (i) All tangible personal property that is the property of the Association or is or was represented by the Developer to be part of the Common Elements or is ostensibly part of the Common Elements, and an inventory of such property. (j) A copy of the plans and specifications utilized in the construction or remodeling of Improvements and the supplying of equipment, and for the construction and installation of all mechanical components serving the Improvements and the Condominium Property, with a certificate, in affidavit form, of an officer of the Developer or an architect or engineer authorized to practice in Florida, that such plans and specifications represent, to the best of their knowledge and belief, the actual plans and specifications utilized in the construction and   11 -------------------------------------------------------------------------------- improvement of the Condominium Property and the construction and installation of the mechanical components serving the Improvements and the Condominium Property. (k) A list of the names and addresses of all contractors, subcontractors and suppliers, of which Developer had knowledge at any time in the development of the Condominium, utilized in the construction or remodeling of the improvements and the landscaping of the Condominium Property. (1) Insurance policies. (m) Copies of any Certificates of Occupancy which may have been issued for the Condominium Property. (n) Any other permits issued by governmental bodies applicable to the Condominium Property in force or issued within one (1) year prior to the date the Unit Owners take control of the Association. (o) All written warranties of contractors, subcontractors, suppliers and manufacturers, if any, that are still effective. (p) A roster of Unit Owners and their addresses and telephone numbers, if known, as shown on the Developer’s records. The Association shall also maintain the electronic mailing addresses and the numbers designated by Members for receiving notice sent by electronic transmissions (for those Members who consent to notice by electronic transmission). (q) Leases of the Common Elements and other leases to which the Association is a party, if applicable. (r) Employment contracts or service contracts in which the Association is one of the contracting parties, or service contracts in which the Association or Unit Owners have an obligation or responsibility, directly or indirectly, to pay some or all of the fee or charge of the person or persons performing the service. (s) All other contracts to which the Association is a party.   5. Authority of the Board. 5.1 Powers and Duties. The Board of Directors shall have the powers and duties necessary for the administration of the affairs of the Condominium and may take all acts, through the proper officers of the Association, in executing such powers, except such acts which by law, the Declaration, the Articles or these Bylaws may not be delegated to the Board of Directors by the Unit Owners. Such powers and duties of the Board of Directors, shall include, without limitation (except as limited elsewhere herein), the following: (a) Operating and maintaining all Common Elements. (b) Determining the expenses required for the operation of the Common Elements. (c) Employing and dismissing the personnel necessary for the maintenance and operation of the Common Elements.   12 -------------------------------------------------------------------------------- (d) Adopting and amending rules and regulations concerning the details of the operation and use of the Common Elements, subject to a right of the Unit Owners to overrule the Board of Directors as provided in Article 14 hereof. (e) Maintaining bank accounts on behalf of the Association and designating the signatories required therefore. (f) Purchasing, leasing or otherwise acquiring title to, or an interest in, property in the name of the Association, or its designee, for the use and benefit of its members. The power to acquire personal property shall be exercised by the Board of Directors and the power to acquire real property shall be exercised as described herein and in the Declaration. (g) Purchasing, leasing or otherwise acquiring Units or other property, including, without limitation, Units at foreclosure or other judicial sales, all in the name of the Association, or its designee. (h) Selling, leasing, mortgaging or otherwise dealing with Units acquired, and subleasing Units leased, by the Association, or its designee. (i) Organizing corporations and appointing persons to act as designees of the Association in acquiring title to or leasing Units or other property. (j) Obtaining and reviewing insurance for the Common Elements. (k) Making repairs, additions and improvements to, or alterations of, Common Elements, and repairs to and restoration of Common Elements, in accordance with the provisions of the Declaration after damage or destruction by fire or other casualty, or as a result of condemnation or eminent domain proceedings or otherwise. (1) Enforcing obligations of the Unit Owners, allocating profits and expenses and taking such other actions as shall be deemed necessary and proper for the sound management of the Common Elements. (m) Levying fines against appropriate Unit Owners for violations of the rules and regulations established by the Association to govern the conduct of such Unit Owners. No fine shall be levied except after giving reasonable notice and opportunity for a hearing to the affected Unit Owner and, if applicable, his tenant, licensee or invitee. The hearing must be held before a committee of other Unit Owners. If the committee does not agree with the fine, the fine may not be levied. No fine may exceed $100.00 per violation, however, a fine may be levied on the basis of each day of a continuing violation with a single notice and opportunity for hearing, provided however, that no such fine shall in the aggregate exceed $1,000.00. No fine shall become a lien upon a Unit. (n) Borrowing money on behalf of the Association when required in connection with the operation, care, upkeep and maintenance of Common Elements (if the need for the funds is unanticipated) or the acquisition of real property, and granting mortgages on and/or security interests in Association owned property; provided, however, that the consent of the Owners of at least two-thirds (2/3rds) of the Units represented at a meeting at which a quorum has been attained in accordance with the provisions of these Bylaws shall be required for the borrowing of any sum which would cause the total outstanding indebtedness of the Association to exceed $50,000.00 if any sum borrowed by the Board of Directors pursuant to the authority contained in this Section 5.l(o) is not repaid by the Association, a Unit Owner who pays to the creditor such portion thereof as his interest in his Common Elements bears to the interest of all the Unit Owners in the Common Elements shall be entitled to obtain from the creditor a release of any judgment or other lien which   13 -------------------------------------------------------------------------------- said creditor shall have filed or shall have the right to file against, or which will affect, such Owner’s Unit. Notwithstanding the foregoing, the restrictions on borrowing contained in this Section 5.1(o) shall not apply if such indebtedness is entered into for the purpose of financing insurance premiums, which action may be undertaken solely by the Board of Directors, without requiring a vote of the Unit Owners. (o) Subject to the provisions of Section 5.2 below, contracting for the management and maintenance of the Common Elements and authorizing a management agent (who may be an affiliate of the Developer) to assist the Association in carrying out its powers and duties by performing such functions as the submission of proposals, collection of Assessments, preparation of records, enforcement of rules and maintenance, repair, and replacement of the Common Elements with such funds as shall be made available by the Association for such purposes. The Association and its officers shall, however, retain at all times the powers and duties granted by the Declaration, the Articles, these Bylaws and the Act, including, but not limited to, the making of Assessments, promulgation of rules and execution of contracts on behalf of the Association. (p) Executing all documents or consents, on behalf of all Unit Owners (and their mortgagees), required by all governmental and/or quasi-governmental agencies in connection with land use and development matters (including, without limitation, plats, waivers of plat, unities of title, covenants in lieu thereof, etc.), and in that regard, each Owner, by acceptance of the deed to such Owner’s Unit, and each mortgagee of a Unit Owner by acceptance of a lien on said Unit, appoints and designates the President of the Association as such Owner’s agent and attorney-in-fact to execute any and all such documents or consents. (q) Responding to Unit Owner inquiries in accordance with Section 718.112(2)(a)(2), Florida Statutes. (r) Exercising (i) all powers specifically set forth in the Declaration, the Articles, these Bylaws and in the Act, (ii) all powers incidental thereto, and (iii) all other powers of a Florida corporation not for profit. 5.2 Contracts. Any contract which is not to be fully performed within one (1) year from the making thereof, for the purchase, lease or renting of materials or equipment to be used by the Association in accomplishing its purposes, and all contracts for the provision of services, shall be in writing. Where a contract for purchase, lease or renting of materials or equipment, or for the provision of services, requires payment by the Association in the aggregate that exceeds five percent (5%) of the total annual budget, including reserves, the Association shall obtain competitive bids for the materials, equipment or services. Nothing contained herein shall be construed to require the Association to accept the lowest bid. Notwithstanding the foregoing, contracts with employees of the Association and contracts for attorney, accountant, architect, community association manager, engineering and landscape architect services shall not be subject to the provisions hereof. Further, nothing contained herein is intended to limit the ability of the Association to obtain needed products and services in an emergency; nor shall the provisions hereof apply if the business entity with which the Association desires to contract is the only source of supply within the County. 6. Officers. 6.1 Executive Officers. The executive officers of the Association shall be a President, Vice-Presidents (whether executive vice-presidents, senior vice-presidents or otherwise), a Treasurer and a Secretary (none of whom need be Directors), all of whom shall be elected by the Board of Directors and who may be peremptorily removed at any meeting by concurrence of a majority of all of the Directors. A person may hold more than one office, except that the President may not also be the Secretary. No person shall sign an instrument or perform an act in the capacity of more than one   14 -------------------------------------------------------------------------------- office. The Board of Directors from time to time shall elect such other officers and designate their powers and duties as the Board of Directors shall deem necessary or appropriate to manage the affairs of the Association. Officers, other than designees of the Developer, must be Unit Owners (or authorized representatives of corporate/partnership/trust Unit Owners). 6.2 President. The President shall be the chief executive officer of the Association. He shall have all of the powers and duties that are usually vested in the office of president of an association. 6.3 Vice-President. A Vice-President shall exercise the powers and perform the duties of the President in the absence or disability of the President. He also shall assist the President and exercise such other powers and perform such other duties as are incident to the office of the vice president of an association and as may be required by the Directors or the President. 6.4 Secretary. The Secretary shall keep the minutes of all proceedings of the Directors and the members. The Secretary shall attend to the giving of all notices to the members and Directors and other notices required by law. The Secretary shall have custody of the seal of the Association and shall affix it to instruments requiring the seal when duly signed. The Secretary shall keep the records of the Association, except those of the Treasurer, and shall perform all other duties incident to the office of the secretary of an association and as may be required by the Directors or the President. 6.5 Treasurer. The Treasurer shall have custody of all property of the Association, including funds, securities and evidences of indebtedness. The Treasurer shall keep books of account for the Association in accordance with good accounting practices, which, together with substantiating papers, shall be made available to the Board of Directors for examination at reasonable times. The Treasurer shall submit a treasurer’s report to the Board of Directors at reasonable intervals and shall perform all other duties incident to the office of treasurer and as may be required by the Directors or the President. All monies and other valuable effects shall be kept for the benefit of the Association in such depositories as may be designated by a majority of the Board of Directors. 7. Fiduciary Duty. The officers and directors of the Association, as well as any manager employed by the Association, have a fiduciary relationship to the Unit Owners. No officer, director or manager shall solicit, offer to accept, or accept any thing or service of value for which consideration has not been provided for his own benefit or that of his immediate family, from any person providing or proposing to provide goods or services to the Association. Any such officer, director or manager who knowingly so solicits, offers to accept or accepts any thing or service of value shall, in addition to all other rights and remedies of the Association and Unit Owners, be subject to a civil penalty in accordance with the Act. Notwithstanding the foregoing, this Section shall not prohibit an officer, director or manager from accepting services or items received in connection with trade fairs or education programs. 8. Compensation. Neither Directors nor officers shall receive compensation for their services as such, but this provision shall not preclude the Board of Directors from employing a Director or officer as an employee of the Association, nor preclude contracting with a Director or officer for the management of the Condominium or for any other service to be supplied by such Director or officer. Directors and officers shall be compensated for all actual and proper out of pocket expenses relating to the proper discharge of their respective duties. 9. Resignations. Any Director or officer may resign his post at any time by written resignation, delivered to the President or Secretary, which: shall take effect upon its receipt unless a later date is specified in the resignation, in which event the resignation shall be effective from such date unless withdrawn. The acceptance of a resignation shall not be required to make it effective. The   15 -------------------------------------------------------------------------------- conveyance of all Units owned by any Director or officer (other than appointees of the Developer or officers who were not Unit Owners) shall constitute a written resignation of such Director or officer. 10. Fiscal Management. The provisions for fiscal management of the Association set forth in the Declaration and Articles shall be supplemented by the following provisions: 10.1 Budget. (a) Adoption by Board Items; The Board of Directors shall from time to time, and at least annually, prepare a budget for all Condominiums governed and operated by the Association (which shall detail all accounts and items of expense and contain at least all items set forth in Section 718.504(21) of the Act, if applicable), determine the amount of Assessments payable by the Unit Owners to meet the expenses of such Condominium(s) and allocate and assess such expenses among the Unit Owners in accordance with the provisions of the Declaration. In addition to annual operating expenses, the budget shall include reserve accounts for capital expenditures and deferred maintenance (to the extent required by law). These accounts shall include, but not be limited to, roof replacement, building painting and payement resurfacing regardless of the amount of deferred maintenance expense or replacement cost, and for any other item for which the deferred maintenance expense or replacement cost exceeds $10,000.00. The amount of reserves shall be computed by means of a formula which is based upon the estimated remaining useful life and the estimated replacement cost of each reserve item. The Association may adjust replacement and reserve assessments annually to take into account any changes in estimates or extension of the useful life of a reserve item caused by deferred maintenance. Reserves shall not be required if the members of the Association have, by a majority vote at a duly called meeting of members, determined for a specific fiscal year to provide, no reserves or reserves less adequate than required hereby. Prior to transfer of control of the Association to Unit Owners other than the Developer, the Developer may vote to waive reserves or reduce the funding of reserves for the first two (2) fiscal years of operation of the Association, beginning with the fiscal year in which the Declaration is recorded, with the vote taken each fiscal year and to be effective for only one annual budget, after which time and until transfer of control of the Association to Unit Owners other than the Developer reserves may only be waived or reduced upon the vote of a majority of all non-Developer voting interests voting in person or by limited proxy at a duly called meeting of the Association. Following transfer of control of the Association to Unit Owners other than the Developer, the Developer may vote its voting interest to waive or reduce the funding of reserves. If a meeting of Unit Owners has been called to determine to provide no reserves or reserves less adequate than required, and such result is not attained or a quorum is not attained, the reserves, as included in the budget, shall go into effect. Reserve funds and any interest accruing thereon shall remain in the reserve account or accounts and shall be used only for authorized reserve expenditures, unless their use for any other purposes is approved in advance by a majority vote at a duly called meeting of the Association. Prior to transfer of control of the Association to Unit Owners other than the Developer, the Association shall not vote to use reserves for purposes other than that for which they were intended without the approval of a majority of all non-Developer voting interests voting in person or by limited proxy at a duly called meeting of the Association. The adoption of a budget for the Condominium shall comply with the requirements hereinafter set forth: (i) Notice of Meeting. A copy of the proposed budget of Common Expenses shall be hand delivered, mailed or electronically transmitted (for those Members who consent to notice by electronic transmission) to each Unit Owner (at the address last furnished to the Association) not less than fourteen (14) days prior to the meeting of the Board of Directors at which the budget will be considered, together with a notice of that meeting indicating the time and place of such meeting. An officer or manager of the Association, or other person providing notice of such   16 -------------------------------------------------------------------------------- meeting, shall execute an affidavit evidencing compliance with such notice requirement and such affidavit shall be filed among the official records of the Association. (ii) Special Membership Meeting. If the Board of Directors adopts in any fiscal year an annual budget which requires assessments against Unit Owners which exceed one hundred fifteen percent (115%) of such Assessments for the preceding fiscal year, the Board of Directors shall conduct a special meeting of the Unit Owners to consider a substitute budget if the Board of Directors receives, within twenty-one (21) days following the adoption of the annual budget, a written request for a special meeting, from at least ten percent (10%) of all voting interests. The special meeting shall be conducted within sixty (60) days following the adoption of the annual budget. At least fourteen (14) days prior to such special meeting, the Board of Directors shall hand deliver to each Unit Owner, or mail to each Unit Owner at the address last furnished to the Association, a notice of the meeting. An officer or manager of the Association, or other person providing notice of such meeting, shall execute an affidavit evidencing compliance with this notice requirement and such affidavit shall be filed among the official records of the Association. Unit Owners may consider and adopt a substitute, budget at the special meeting. A substitute budget is adopted if approved by a majority of all voting interests. If there is not a quorum at the special meeting or a substitute budget is not adopted, the annual budget previously adopted by the Board of Directors shall take effect as scheduled. (iii) Determination of Budget Amount. Any determination of whether assessments exceed one hundred fifteen percent (115%) of assessments for the preceding fiscal year shall exclude any authorized provision for reasonable reserves for repair or replacement of the Condominium Property, anticipated expenses of the Association which the Board of Directors does not expect to be incurred on a regular or annual basis, or assessments for betterments to the Condominium Property. (iv) Proviso. As long as the Developer is in control of the Board of Directors of the Association, the Board of Directors shall not impose Assessments for a year greater than one hundred fifteen percent (115%) of the prior fiscal year’s Assessments, as herein defined, without the approval of a majority of all voting interests. (b) Adoption by Membership. In the event that the Board of Directors shall be unable to adopt a budget for a fiscal year in accordance with the requirements of Section 10.1(a) above, the Board of Directors may call a special meeting of Unit Owners for the purpose of considering and adopting such budget, which meeting shall be called and held in the manner provided for such special meetings in said subsection, or propose a budget in writing to the members, and if such budget is adopted by the members, upon ratification by a majority of the Board of Directors, it shall, become the budget for such year. 10.2 Assessments. Assessments against Unit Owners for their share of the items of the budget shall be made for the applicable fiscal year annually at least twenty (20) days preceding the year for which the Assessments are made. Such Assessments shall be due in equal installments, payable in advance on the first day of each month (or each quarter at the election of the Board of Directors) of the year for which the Assessments are made. If annual Assessments are not made as required, Assessments shall be presumed to have been made in the amount of the last prior Assessments, and monthly (or quarterly) installments on such Assessments shall be due upon each installment payment date until changed by amended Assessments. In the event the annual Assessments prove to be insufficient, the budget and Assessments may be amended at any time by the Board of Directors, subject to the provisions of Section 10.1 hereof, if applicable. Unpaid Assessments for the remaining portion of the fiscal year for which amended Assessments are made shall be payable in as many equal installments as there are full months (or quarters) of the fiscal year left as of the date of such amended Assessments, each such monthly (or quarterly) installment to be paid on   17 -------------------------------------------------------------------------------- the first day of the month (or quarter), commencing the first day of the next ensuing month (or quarter). If only a partial month (or quarter) remains, the amended Assessments shall be paid with the next regular installment in the following year, unless otherwise directed by the Board of Directors in its resolution. 10.3 Special Assessments and Assessments for Capital Improvements. Special Assessments and Capital Improvement Assessments (as defined in the Declaration) shall be levied as provided in the Declaration and shall be paid in such manner as the Board of Directors of the Association may require in the notice of such Assessments. The funds collected pursuant to a Special Assessment shall be used only for the specific purpose or purposes set forth in the notice of adoption of same. However, upon completion of such specific purpose or purposes, any excess funds will be considered Common Surplus, and may, at the discretion of the Board of Directors, either be returned to the Unit Owners or applied as a credit towards future assessments. 10.4 Depository. The depository of the Association shall be such bank or banks in the State of Florida, which bank or banks must be insured by the FDIC, as shall be designated from time to time by the Directors and in which the monies of the Association shall be deposited. Withdrawal of monies from those accounts shall be made only by checks signed by such person or persons as are authorized by the Directors. All sums collected by the Association from Assessments or otherwise may be commingled in a single fund or divided into more than one fund, as determined by a majority of the Board of Directors. In addition, a separate reserve account should be established for the Association in such a depository for monies specifically designated as reserves for capital expenditures and/or deferred maintenance. Reserve and operating funds of the Association shall not be commingled unless combined for investment purposes, provided that the funds so commingled shall be accounted for separately and the combined account balance of such commingled funds may not, at any time, be less than the amount identified as reserve funds in the combined account. 10.5 Acceleration of Installments Upon Default. If a Unit Owner shall be in default in the payment of an installment upon his Assessments, the Board of Directors or its agent may accelerate the balance of the current budget years’ Assessments upon thirty (30) days’ prior written notice to the Unit Owner and the filing of a claim of lien, and the then unpaid balance of the current budget years’ Assessments shall be due upon the date stated in the notice, but not less than five (5) days after delivery of the notice to the Unit Owner, or not less than ten (10) days after the mailing of such notice to him by certified mail, whichever shall first occur. 10.6 Fidelity Insurance or Fidelity Bonds. The Association shall obtain and maintain adequate insurance or fidelity bonding of all persons who control or disburse Association funds, which shall include, without limitation, those individuals authorized to sign Association checks and the president, secretary and treasurer of the Association. The insurance policy or fidelity bond shall be in such amount as shall be determined by a majority of the Board of Directors, but must be sufficient to cover the maximum funds that will be in the custody of the Association or its management agent at any one time. The premiums on such bonds and/or insurance shall be paid by the Association as a Common Expense. 10.7 Accounting Records and Reports. The Association shall maintain accounting records in the State, according to accounting practices normally used by similar associations. The records shall be open to inspection by Unit Owners or their authorized representatives at reasonable times and written summaries of them shall be supplied at least annually. The records shall include, but not be limited to, (a) a record of all receipts and expenditures, and (b) an account for each Unit designating the name and current mailing address of the Unit Owner, the amount of Assessments, the dates and amounts in which the Assessments come due, the amount paid upon the account and the dates so paid, and the balance due. Written summaries of the records described in clause (a) above, in the form and manner specified below, shall be supplied to each Unit Owner annually.   18 -------------------------------------------------------------------------------- Within ninety (90) days following the end of the fiscal year, the Association shall prepare and complete, or contract for the preparation and completion of, a financial report for the preceding fiscal year (the “Financial Report”). Within twenty-one (21) days after the final Financial Report is completed by the Association, or received from a third party, but not later than one hundred twenty (120) days following the end of the fiscal year, the Board of Directors shall mail, or furnish by personal delivery, a copy of the Financial Report to each Unit Owner, or a notice that a copy of the Financial Report will be mailed or hand delivered to the Unit Owner, without charge, upon receipt of a written request from the Unit Owner. The Financial Report shall be prepared in accordance with the rules adopted by the Division. The type of Financial Report to be prepared shall, unless modified in the manner set forth below, be based upon the Association’s total annual revenues, as follows: (a) REPORT OF CASH RECEIPTS AND EXPENDITURES - if the Association’s revenues are less than $100,000.00 or if the Association operates less than fifty (50) Units (regardless of revenue) [or, if determined by the Board of Directors, the Association may prepare any of the reports described in Sections 10.7(b), (c) or (d) below in lieu of the report described in this Section 10.7(a)]. (b) COMPILED FINANCIAL STATEMENTS - if the Association’s revenues are equal to or greater than $100,000.00, but less than $200,000.00 [or, if determined by the Board of Directors, the Association may prepare any of the reports described in Sections 10.7(c) or (d) below in lieu of the report described in this Section 10.7(b)]. (c) REVIEWED FINANCIAL STATEMENTS - if the Association’s revenues are equal to or greater than $200,000.00, but less than $400,000.00 [or, if determined by the Board of Directors, the Association may prepare the report described in Section 10.7(d) below in lieu of the report described in this Section 10.7(c)]. (d) AUDITED FINANCIAL STATEMENTS - if the Association’s revenues are equal to or exceed $400,000.00. A report of cash receipts and expenditures must disclose the amount of receipts by accounts and receipt classifications and the amount of expenses by accounts and expense classifications, including, but not limited to, the following, as applicable: costs for security, professional and management fees and expenses, taxes, costs for recreation facilities, expenses for refuse collection and utility services, expenses for lawn care, costs for building maintenance and repair, insurance costs, administration and salary expenses, and reserves accumulated and expended for capital expenditures, deferred maintenance, and any other category for which the association maintains reserves. If approved by a majority of the voting interests present at a properly called meeting of the Association, the Association may prepare or cause to be prepared: (i) a report of cash receipts and expenditures in lieu of a complied, reviewed, or audited financial statement; (ii) a report of cash receipts and expenditures or a compiled financial statement in lieu of a reviewed or audited financial statement; or (iii) a report of cash receipts and expenditures, a compiled financial statement or a reviewed financial statement in lieu of an audited financial statement. Such meeting and approval must occur prior to the end of the fiscal year and is effective only for the fiscal year in which the vote is taken. Prior to the time that control of the Association has been turned over to Unit Owners other than the Developer, all Unit Owners, including the Developer, may vote on issues related to the preparation of financial reports for the first two (2) fiscal years of the Association’s operation. Thereafter, until control of the Association has been turned over to Unit Owners other than the Developer, all Unit Owners except for the Developer may vote on such issues.   19 -------------------------------------------------------------------------------- 10.8 Application of Payment. All payments made by a Unit Owner shall be applied as provided in these Bylaws and in the Declaration or as otherwise determined by the Board of Directors. 10.9 Notice of Meetings. Notice of any meeting where Assessments against Unit Owners are to be considered for any reason shall specifically contain a statement that Assessments will be considered and the nature of any such Assessments. 11. Roster of Unit Owners. Each Unit Owner shall file with the Association a copy of the deed or other document showing his ownership. The Association shall maintain such information. The Association may rely upon the accuracy of such information for all purposes until notified in writing of changes therein as provided above. Only Unit Owners of record on the date notice of any meeting requiring their vote is given shall be entitled to notice of and to vote at such meeting, unless prior to such meeting other Owners shall produce adequate evidence, as provided above, of their interest and shall waive in writing notice of such meeting. 12. Arbitration. In the event that there are internal disputes among Members, the Association or their agents and assigns arising from or in connection with the operation of the Condominium, the parties shall enter into mandatory non-binding arbitration pursuant to the rules and regulations of the Division in accordance with Section 718.1255, Florida Statutes. 13. Parliamentary Rules. Except when specifically or impliedly waived by the chairman of a meeting (either of members or directors), Robert’s Rules of Order (latest edition) shall govern the conduct of the Association meetings when not in conflict with the Act, the Declaration, the Articles or these Bylaws; provided, however, that a strict or technical reading of said Robert’s Rules shall not be made so as to frustrate the will of the persons properly participating in said meeting. 14. Amendments. Except as may be provided in the Declaration to the contrary, these Bylaws may be amended in the following manner: 14.1 Notice. Notice of the subject matter of a proposed amendment shall be included in the notice of a meeting at which a proposed amendment is to be considered. 14.2 Adoption. A resolution for the adoption of a proposed amendment may be proposed either by a majority of the Board of Directors or by not less than one-third (1/3) of the members of the Association. Directors and members not present in person or by proxy at the meeting considering the amendment may express their approval in writing, but the agreement or disagreement may not be used as a vote for or against the action taken and may not be used for purposes of creating a quorum. The approval must be: (a) by not less than a majority of the votes of all members of the Association voting in person or by proxy at a meeting at which a quorum has been attained and by not less than 66 2/3% of the entire Board of Directors; or (b) after control of the Association has been turned over to Unit Owners other than the Developer, by not less than 80% of the votes of the members of the Association voting in person or by proxy at a meeting at which a quorum has been attained. 14.3 Proviso. No amendment may be adopted which would eliminate, modify, prejudice, abridge or otherwise adversely affect any rights, benefits, privileges or priorities granted or reserved to the Developer or mortgagees of Units without the consent of said Developer and mortgagees in each instance. No amendment shall be made that is in conflict with the Articles or Declaration. No amendment to this Section shall be valid.   20 -------------------------------------------------------------------------------- 14.4 Execution and Recording. A copy of each amendment shall be attached to a certificate certifying that the amendment was duly adopted as an amendment of these Bylaws, which certificate shall be executed by the President or a Vice-President and attested by the Secretary or Assistant Secretary of the Association with the formalities of a deed, or by the Developer alone if the amendment has been adopted consistent with the provisions of the Declaration allowing such action by the Developer. The amendment shall be effective when the certificate and a copy of the amendment is recorded in the Public Records of the County with an identification on the first page of the amendment of the Official Records Book and Page of said Public Records where the Declaration is recorded. 15. Rules and Regulations. Attached hereto as Schedule “A” and made a part hereof are initial rules and regulations concerning the use of portions of the Condominium Property. The Board of Directors may, from time to time, modify, amend or add to such rules and regulations, except that subsequent to the date control of the Board of Directors is turned over by the Developer to Unit Owners other than the Developer, Owners of a majority of the Units may overrule the Board of Directors with respect to any such modifications, amendments or additions. Copies of such modified, amended or additional rules and regulations shall be furnished by the Board of Directors to each affected Unit Owner not less than thirty (30) days prior to the effective date thereof. At no time may any rule or regulation be adopted which would prejudice the rights reserved to the Developer. 16. Written Inquiries. When a Unit Owner files a written inquiry by certified mail with the Board of Directors, the Board of Directors shall respond in writing to the Unit Owner within thirty (30) days of receipt of such inquiry and more particularly in the manner set forth in Section 718.112(2)(a)2, Florida Statutes. The Association may, through its Board of Directors, adopt reasonable rules and regulations regarding the frequency and manner of responding to Unit Owner inquiries. 17. Official Records. From the inception of the Association, the Association shall maintain for the condominium, a copy of each of the following, where applicable, which shall constitute the official records of the Association: 17.1 The plans, permits, warranties, and other items provided by the Developer pursuant to Section 718.301(4) of the Act; 17.2 A photocopy of the recorded Declaration of Condominium and all amendments thereto; 17.3 A photocopy of the recorded Bylaws of the Association and all amendments thereto; 17.4 A certified copy of the Articles of Incorporation of the Association or other documents creating the Association and all amendments thereto; 17.5 A copy of the current Rules and Regulations of the Association; 17.6 A book or books containing the minutes of all meetings of the Association, of the Board of Directors, and of Unit Owners, which minutes shall be retained for a period of not less than seven (7) years; 17.7 A current roster of all Unit Owners, their mailing addresses, Unit identifications, voting certifications, and if known, telephone numbers. The Association shall also maintain the electronic mailing addresses and the numbers designated by Unit Owners for receiving notices sent by electronic transmission of those Unit Owners consenting to receive   21 -------------------------------------------------------------------------------- notice by electronic transmission. The electronic mailing addresses and numbers provided by Unit Owners to receive notice by electronic transmission shall be removed from Association records when consent to receive notice by electronic transmission is revoked. However, the Association shall not be liable for an erroneous disclosure of the electronic mail address or the number for receiving electronic transmission of notices; 17.8 All current insurance policies of the Association and of all Condominiums operated by the Association; 17.9 A current copy of any management agreement, lease, or other contract to which the Association is a party or under which the Association or the Unit Owners have an obligation or responsibility; 17.10 Bills of Sale or transfer for all property owned by the Association; 17.11 Accounting records for the Association and the accounting records for the Condominium. All accounting records shall be maintained for a period of not less than seven (7) years. The accounting records shall include, but not be limited to: (a) Accurate, itemized, and detailed records for all receipts and expenditures. (b) A current account and a monthly, bimonthly, or quarterly statement of the account for each Unit designating the name of the Unit Owner, the due date and amount of each Assessment, the amount paid upon the account, and the balance due. (c) All audits, reviews, accounting statements, and financial reports of the Association or Condominium. (d) All contracts for work to be performed. Bids for work to be performed shall also be considered official records and shall be maintained for a period of one (1) year. 17.12 Ballots, sign-in sheets, voting proxies and all other papers relating to elections which shall be maintained for a period of one (1) year from the date of the meeting to which the document relates; 17.13 All rental records where the Association is acting as agent for the rental of Units; 17.14 A copy of the current Question and Answer Sheet, in the form promulgated by the Division, which shall be updated annually; and 17.15 All other records of the Association not specifically listed above which are related to the operation of the Association. The official records of the Association shall be maintained in the County in which the Condominium is located, or if in another county, then within twenty five (25) miles of the Condominium. The official records of the Association shall be open to inspection by any Association member or the authorized representative of such member and shall be made available to a Unit Owner within five (5) working days after receipt of a written request by the Board of Directors or its designees. The right to inspect the records includes the right to make or obtain copies, at a reasonable expense, if any, of the Association member. The Association may adopt reasonable rules regarding the time, location, notice and manner of record inspections and copying. The failure of an Association to provide official records to a Unit Owner or his authorized representative within ten   22 -------------------------------------------------------------------------------- (10) working days after receipt of a written request therefore shall create a rebuttable presumption that the Association willfully failed to comply with this paragraph. The damages for failure to comply with this Section are set forth in Section 718.111(12)(c), Florida Statutes. The Association shall maintain on the Condominium Property an adequate number of copies of the Declaration, Articles, Bylaws and rules, and all amendments to the foregoing, as well as the Question and Answer Sheet and year-end financial information required by the Act, to ensure their availability to Unit Owners and prospective purchasers. The Association may charge its actual costs for preparing and furnishing these documents to those persons requesting same. Notwithstanding the provisions of this Section 16, the following records shall not be accessible to Unit Owners: (a) Any record protected by the lawyer-client privilege as described in Section 90.502, Florida Statutes, and any record protected by the work-product privilege including any record prepared by an Association attorney or prepared at the attorney’s express direction, which reflects a mental impression, conclusion, litigation strategy, or legal theory of the attorney or the Association, and which was prepared exclusively for civil or criminal litigation or for adversarial administrative proceedings, or which was prepared in anticipation or imminent civil or criminal litigation or imminent adversarial administrative proceedings until the conclusion of the litigation or adversarial administrative proceedings. (b) Information obtained by an Association in connection with the approval of the lease, sale or other transfer of a Unit. (c) Medical records of Unit Owners. 18. Certificate of Compliance. A certificate of compliance from a licensed electrical contractor or electrician may be accepted by the Association’s Board of Directors as evidence of compliance of the Units to the applicable condominium fire and life safety code. 19. Provision of Information to Purchasers or Lienholders. The Association or its authorized agent shall not be required to provide a prospective purchaser or lienholder with information about the Condominium or the Association other than information or documents required by the Act to be made available or disclosed. The Association or its authorized agent shall be entitled to charge a reasonable fee to the prospective purchaser, lienholder, or the current Unit Owner for its time in providing good faith responses to requests for information by or on behalf of a prospective purchaser or lienholder, other than that required by law, provided that such fee shall not exceed $150.00 plus the reasonable cost of photocopying and any attorney’s fees incurred by the Association in connection with the Association’s response. 20. Electronic Transmission. For purposes hereof, “electronic transmission” means any form of communication, not directly involving the physical transmission or transfer of paper, which creates a record that may be retained, retrieved, and reviewed by a recipient thereof and which may be directly reproduced in a comprehensible and legible paper form by such recipient through an automated process. Examples of electronic transmission include, but are not limited to, telegrams, facsimile transmissions of images, and text that is sent via electronic mail between computers. Notwithstanding the provision for electronic transmission of notices by the Association, same may be only be sent to Unit Owners that consent to receipt of Association notices by electronic transmission (and only for long as such consent remains in effect). Further, in no event may electronic transmission be used as a method of giving notice of a meeting called in whole or in part regarding the recall of a Director. 21. Construction. Wherever the context so permits, the singular shall include the plural, the plural shall include the singular, and the use of any gender shall be deemed to include all genders.   23 -------------------------------------------------------------------------------- To the extent not otherwise provided for or addressed in these Bylaws, the Bylaws shall be deemed to include the provision of Section 718.112(2)(a) through (m) of the Act. 22. Captions. The captions herein are inserted only as a matter of convenience and for reference, and in no way define or limit the scope of these Bylaws or the intent of any provision hereof. The foregoing was adopted as the Bylaws of SIAN RESORT RESIDENCES I CONDOMINIUM ASSOCIATION, INC., a corporation not for profit under the laws of the State of Florida, at the first meeting of the Board of Directors.   24 -------------------------------------------------------------------------------- EXHIBIT N Amendment to Declaration of Condominium The Condominium Documents will be amended to reflect the following: 1. The Master Association Amendment; 2. That the management agreement between Coral Hospitality and the Master Association will be amended to exclude responsibility for the areas covered by the Management Agreement and to disclose the Management Agreement; 3. To reflect that the Owner of the Hotel Unit is obligated to pay .002567515 percent of the condominium assessments and .070560055 percent of the Shared Costs, as defined in the Condominium Documents; 4. To reflect that the Shared Costs do not include electricity costs for the kitchen and the restaurant as contemplated by Section 42 of this Third Amendment.   32 -------------------------------------------------------------------------------- EXHIBIT O Management Agreement   33 -------------------------------------------------------------------------------- CONDOMINIUM ASSOCIATION MANAGEMENT AGREEMENT THIS CONDOMINIUM ASSOCIATION MANAGEMENT AGREEMENT (hereinafter referred to as “Agreement”) is made as of the      day of                     , 2006, by and between SIAN RESORT RESIDENCES I CONDOMINIUM ASSOCIATION, INC., a Florida not-for-profit corporation (hereinafter referred to as the “Association”), whose address is c/o Michael Lerner, 1555 North Sheffield, Chicago, Illinois 60622 and MHI HOSPITALITY TRS, L.L.C., a Delaware Limited Liability Company, (hereinafter referred to as “Manager”), having its principal office at 6411 Ivy Lane, Suite 510, Greenbelt, Maryland 20770. Recitals: WHEREAS, the Association desires to employ Manager as managing agent for Sian Resort Residences I Condominium (“Condominium”) located at 4000 South Ocean Drive, Hollywood, Florida 33019 in Broward County, established by the Declaration of Condominium thereof recorded, or to be recorded, in the Public Records of Broward County, Florida (“Declaration”), which consists of three hundred nine (309) residential condominium hotel units and one (1) commercial hotel unit (collectively the “Property”). Manager understands that the function of the Association is the operation and management of the Common Elements of the Property and all such other duties as are set forth in the Declaration, as amended from time to time. Manager agrees to confer with the Directors of the Association in the performance of its duties as set forth herein. NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE I Management 1. The Association hereby appoints Manager as the managing agent for the Association and Manager hereby accepts such position on the terms and conditions set forth herein. 2. Manager will manage, operate, maintain and supervise the routine management of the Common Elements, excluding the Shared Components, in the manner as set forth in the Declaration. All references to the “Common Elements” and the “Shared Components” herein shall mean and include the Common Elements and the Shared Components, as described in the Declaration. All services and actions provided under this Agreement shall be performed on the Association’s behalf and at the Association’s expense. The Manager shall not have any responsibility for the management or supervision of individual Units pursuant to this Agreement except as directed by the Association in writing and authorized by the Declaration. Each individual Member may contract with Manager on an individual basis for the provisions of certain rental, maintenance and/or repairs, and other related services in accordance with an agreement between Manager (or an affiliate of Manager) and Member. The Manager or an affilaite will operate the commercial unit of the Condominium as a hotel (the “Hotel”) and will manage certain of the Units as hotel rooms. The operation of the Hotel and provision of services   1 -------------------------------------------------------------------------------- to Unit owners shall not be considered to be conflict of interest or otherwise obligate Manager to take any action, except as it may agree with a Member. 3. Manager agrees to handle the bookkeeping for the Association; said bookkeeping will include all monthly disbursements in connection with maintaining and operating of the Association Property, excluding the Shared Components. Not later than the twentieth (20th) day of each month, the Manager will render a detailed financial report to the Association’s Board of Directors. (a) Manager shall aid and assist the Association in any reasonable manner requested by the Association as to the collection of Assessments. The Association hereby authorizes Manager to assist in the collection of assessments and all charges which may at any time be or become due to the Association and to take such action deemed necessary pursuant to the Association Documents (as herein defined), in the name of the Association, by way of legal process or otherwise, as may be required for the collection of delinquent assessments at the associations expense. “Association Documents” are herein defined as the Declaration, Articles of Incorporation and Bylaws of the Association, and all amendments to such Association Documents from time to time. (b) As a standard practice, Manager shall furnish the Association’s Board of Directors with an itemized list of all delinquent accounts immediately following the completion of the monthly statement each month. 4. From the funds collected and deposited in the special account established for said funds, the Manager will disburse regularly the funds required for the costs to the Association such as, but not limited to: (a) The Management Fee; (b) Operating costs set forth in the annual budget approved by the Association’s Board of Directors. The initial annual budget is attached as Exhibit. A. (c) Insurance premiums other than with respect to the insurance to be maintained by the Hotel Operator, as defined in the Declaration; (d) Real estates taxes, if any; (e) Sums otherwise due and payable by the Association in accordance with the budget approved by the Association’s Board of Directors; (f) Emergency expenditures disbursed as indicated in Article I (8) above. (g) Administer the Association’s capital reserve fund as directed specifically by the Board of Directors of the Association. (h) After disbursement as indicated herein, any balance remaining in the special account will be disbursed only as directed specifically by the President of the Association or his designated representative.   2 -------------------------------------------------------------------------------- 5. In accordance with the Association Documents, the Manager shall prepare and the Board of Directors will approve the annual budget. The Manager will consult with the Association, as requested whenever there are deviations between actual and budget line items. 6. Manager agrees that all books and records will be available during normal business hours for the purpose of an audit of said books and records and shall prepare and deliver the annual audit in accordance with the provisions of Chapter 718 of the Florida Statutes, and any other applicable rules and regulations, at the Association’s expense. 7. Manager agrees to have prepared, for and at the cost of the Association, any required Federal and State Tax Reports. 8. Manager is authorized at the expense of the Association to make, or cause to be made, such routine repair work or normal maintenance work to the Common Elements, excluding the Shared Components, as may be required for the operation or physical protection of the Common Elements, excluding the Shared Components. The expenditures to be incurred for any one item or replacement shall be in accordance with the approved budget, unless authorized specifically by the Association’s President or his duly authorized representative. However, under such circumstances as the Manager shall deem to be an emergency, the Manager will cause emergency repairs to be made for the following reasons: (i) to avert danger to life and/or property; (ii) when such repairs are necessary immediately for the preservation and safety of the property; (iii) for the safety of the members of the Association; or (iv) when such repairs are required to be made to avoid the suspension of any service to the Association. Such emergency repairs may be made by the Manager irrespective of the budget limitation imposed herein but shall not include any expenses associated with the Shared Components. Notwithstanding this authority as to emergency repairs, it is agreed that the Manager, if at all possible, will notify the President of the Association, or his designated representative, immediately concerning the ordered emergency repairs. Supervision of extraordinary repairs (such as fire, flood or windstorm) and significant capital improvements will be billed at the rate of $50.00 per hour. 9. Subject to the approval of the Association’s Board of Directors and consistent with the approved budget, Manager will make contracts for routine janitorial services, secretarial services, bookkeeping services, payroll services, security services, accounting services and maintenance services (where applicable), refuse collection, vermin exterminating and other necessary services or such service as the Association’s Board of Directors shall deem advisable with respect to the Common Elements, other than the Shared Components. Such contracts will be signed by the Association’s President or his designated representative. 10. In connection with obtaining services for the Condominium, the Manager agrees to comply with the requirements of Chapter 718 of the Florida Statutes, to obtain any required bids for services. 11. Manager will conduct regular inspections of the Common Elements, excluding the Shared Components, on a not less than weekly basis and will take action to correct any deficiencies of the service performed for the Association and report such irregularities to the Association’s President or his designated representative. Other management inspections will   3 -------------------------------------------------------------------------------- include overseeing and supervising duly authorized routine work being performed on the Common Elements, excluding the Shared Components, on behalf of the Association. 12. Manager and or its designate agrees to attend regular scheduled board meetings as requested by the Board of Directors The Association will have written records taken of proceedings of such meetings and will provide such records to the Manager so that the Manager can prepare the Association minutes. Such minutes will be approved by the President of the Association or his designated representative prior to distribution to the Association’s members. Manager will send notice to all members of the Association concerning annual, semi-annual and special meetings, and proxies will be solicited as required under the Association Documents. 13. Except for the insurance which is the obligation of the Hotel Operation, at the Association’s expense and direction, Manager will cause to be placed and kept in force all forms of insurance to protect the Association, its members and mortgagees, as required under the Association Documents. All of the various types of insurance coverage required shall be placed with such companies, in such amounts, with beneficial interest appearing therein and shall list Manager and all Manager’s subagents as additional insureds. The Manager will promptly investigate and make a full written report as to all accidents or claims for damage to the Common Elements, excluding the Shared Components, to the designated person on the Board. Such report shall include a description of any damage or destruction of the property, the estimated cost of repair, and shall cooperate and make any and all reports required by any insurance company in connection therewith. 14. Manager will take such action as may be necessary to comply promptly with any and all orders or requirements affecting the Common Elements, excluding the Shared Components, placed thereon by any governmental authority having jurisdiction, and orders of the Board of Fire Underwriters, or other similar bodies subject to the same limitation. The Manager, however, shall not take any action under this paragraph so long as the Association is contesting or has affirmed its intention to contest any such order or requirement. The Manager shall promptly, and in no event later than seventy-two (72) hours from the time of their receipt, notify the Association in writing of all such orders and requirements. 15. Manager will prepare for execution and filing by the Association’s Board of Directors any forms, reports and returns which may be required by law in connection with the operation of the Association. 16. Manager shall see that all members are informed with respect to such rules, regulations and notices as may be promulgated by the Association from time to time and ensure that said members, guests and renters conform therewith. 17. Manager shall maintain business like relations with Members, whose service requests shall be received, considered and recorded in a systematic fashion in order to show the action taken with respect to each. Manager shall report complaints of a serious nature to the Board with appropriate recommendations. 18. All actions taken by Manager under the foregoing paragraphs shall be done as the agent of the Association, and all obligations or expenses incurred thereunder shall be paid   4 -------------------------------------------------------------------------------- directly by the Association. Manager shall not be obliged to make any advance to or for the account of the Association or to pay any sum, except out of the funds held or provided as aforesaid, nor shall Manager be obliged to incur any liability or obligations for the account of the Association without the assurance that the necessary funds for the discharge thereof will be provided. 19. Notwithstanding anything to the contrary contained herein, Manager shall not expend any funds of the Association with respect to the Shared Components and the items that constitute Shared Costs, as defined in the Declaration. ARTICLE II Term 1. The initial term of this Agreement shall be for a period of ten (10) years, commencing on the date of recording of the Declaration; provided, however, the initial term of this Agreement, and any renewal thereof, shall at all times be subject to all statutory rights of the Association. The term shall automatically renew for successive five (5) year terms unless either party serves written notice thirty (30) days prior to the expiration of the applicable term of its intent not to renew. Notwithstanding the foregoing, unit owners may terminate this Agreement pursuant to the provisions of Section 718.302, Florida Statutes. The Manager shall be entitled to terminate this Agreement upon ninety (90) days prior written notice to the Association. 2. In the event a petition in bankruptcy is filed by or against the Manager or Association, or in the event that the Manager or Association shall make an assignment for the benefit of creditors to take advantage of any insolvency act, either party hereto may terminate this Agreement effective upon written notice to the other. 3. In the event that Manager or the Association fails to perform its obligations under this Agreement or otherwise defaults hereunder, the non-defaulting party shall give the other party written notice specifying the default, and the defaulting party shall have thirty (30) days from the date of such notice to cure the default. If the defaulting party has not cured such default within thirty (30) days then the non-defaulting party may terminate this Agreement. 4. Upon termination, (i) the parties shall account to each other with respect to all matters outstanding as of the date of termination, (ii) the Association shall furnish the Manager security, satisfactory to the Manager, against any outstanding obligations or liabilities which the Manager may have incurred hereunder and all Management Fees through the date of termination shall be paid in full, and (iii) at the Association’s option, all records of the Association shall be transferred electronically to the Association, where available. ARTICLE III Compensation/Personnel 1. In consideration of the Hotel Operator retaining Manager to manage the Shared Components for Twenty-four Thousand and 00/100 ($24,000.00), Manager’s compensation for services rendered and as described in this Agreement shall be ten dollars ($10.00) per year.   5 -------------------------------------------------------------------------------- 2. Subject to the inclusion of wages, benefits and other amounts with respect thereto that are required to be paid under applicable laws in the Association’s annual budget, Manager will hire or cause to be hired employees to perform the services required hereunder and the Association with reimburse Manager for salaries and related benefits incurred in connection therewith in accordance with the budget. Manager is authorized to subcontract such duties as it in its reasonable discretion deems to be efficient or necessary; provided, however, that the salaries, wages and other compensation and fringe benefits, union dues, insurance, employers’ and employees’ taxes, and vacation (collectively, “Wages”) of such employees and personnel shall be negotiated by Manager and subject to the Association’s approval (except in the event of an engagement where the total obligation of the Association is less than $500). Employees of Manager who have signing authority in respect of any accounts shall be subject to the Association’s approval. Notwithstanding anything to the contrary in this Agreement, the Association’s obligation to pay directly or reimburse Manager for the cost of personnel necessary to perform the accounting aspects of Manager’s Obligations under this Agreement shall not exceed the amount reflected in the budget. All employees who are responsible for the handling of the Association’s money shall be bonded by a fidelity bond, at the expense of the Association. 3. It is specifically understood and agreed that the Manager shall perform all of the services required of it hereunder at no cost and expense whatsoever to itself, but solely at the cost and expense of the Association. All of the management and maintenance services required in this Agreement shall be rendered on a basis of “out-of-pocket” costs and expenses, and the Association shall pay or reimburse the Manager for all costs and expenses incurred by the Manager in providing services, materials and supplies to the Association, including specifically, but not limited to: the cost of all employees of the Manager for the time spent upon performance of matters required by the terms of this Agreement. Without limiting the foregoing, the Association will pay or reimburse the Manager separately for the following services or costs: (a) Clerical or secretarial services necessary to: (a) prepare, print, and distribute Owners’ Roster; (b) print, duplicate, and distribute Rules and Regulations; (c) type and distribute Board Meeting Agenda and Minutes; (d) type and distribute members Meeting Agenda and Minutes; and (e) type and mail President’s Correspondence (b) Postage, telephone calls, office supplies, and all costs necessary for management of the Association. (c) Costs of duplication of any reports, forms, letters, correspondence or other items not specifically described herein as being their responsibility of the Manager. (d) Notices, letters, newsletters, etc. approved by the Board to be mailed to members of the Association. (e) All costs expended by the Manager for materials, supplies and services other than the management and overhead expenses of the Manager’s office operations, in addition to the employees that the Manager may secure, for the performance of the maintenance, repair and operations, and expenses, such as mileage, tolls, air fare, and similar expenses.   6 -------------------------------------------------------------------------------- (f) All applicable sales taxes. (g) Any other amount expended by the Manager at the direction and request of the Association. 4. The Manager shall have the authority to terminate any employee(s) of the Manager as it deems reasonably appropriate. Upon request made by the Association, Manager shall replace any employee of Manager that is performing services in respect of the property. ARTICLE IV Manager’s Insurance The Manager hereby warrants that, at all times, in the performance of this Agreement, it will maintain in full force and effect, insurance coverages as follows: (a) Worker’s Compensation insurance and occupational disease coverage in accordance with statutory limits; (b) General liability insurance in an amount not less than $1,000,000.00, including coverage for bodily injury, property damage, and personal injury, $1,000,000.00 per occurrence; (c) Comprehensive automobile liability insurance in an amount not less than $1,000,000.00 per occurrence, including coverage for bodily injury and property damage arising out of the use of a vehicle while in the performance of any duty relating to this Agreement (provided such vehicle is owned or leased by the Manager and provided further Manager shall cause its employees and agents to obtain and maintain the same insurance coverage on their owned or leased vehicles used in the performance of any duty relating to this Agreement); (d) An umbrella policy in the minimum amount of $ 10,000.00; (e) Fidelity insurance in accordance with Chapter 718, Florida Statutes; and (f) Certificates of Insurance shall be submitted to the Board of Directors, naming the Association as an additional insured under the above referenced policies. These Certificates shall contain a provision that thirty (30) days prior notice has been given to the Association. The Association agrees that the Manager will be named as an additional insured on its general liability insurance coverage. ARTICLE V Indemnity 1. The Association shall indemnify Manager and save it harmless from and against all claims, losses and liabilities, including all costs, fees and reasonable attorneys’ fees and expenses in connection therewith, arising out of acts or omissions of the Association, its officers and directors, including, without limitation any damage to property, or injury to, or death of   7 -------------------------------------------------------------------------------- persons (including the property and persons of the parties hereto, and their agents, subcontractors and employees) occasioned by or in connection with gross negligence and willful misconduct of the Association or Association’s agents (other than the Manager or the Manager’s agents). 2. Manager shall indemnify Association and save it harmless from and against all claims, losses, liabilities, including all costs, fees and reasonable attorneys’ fees and expenses in connection therewith, arising out of acts or omissions of the Manager or its employees or agents including without limitation any damage to property, injury to, or death of persons (including the property and persons of the parties hereto and their agents, subcontractors and employees) occasioned by or in connection with the gross negligence or willful misconduct of the Manager or the Manager’s agents or employees. ARTICLE VI Miscellaneous Provisions 1. This Agreement cannot be amended or modified except in writing signed by both parties. 2. In the event that either party brings a legal action to enforce its rights hereunder the prevailing party will be entitled to be reimbursed for attorney’s fees and costs whether arising before or at trial, on appeal, in bankruptcy or in post judgment collection. 3. All notices required hereunder shall be sent via first class mail or hand delivery to the addresses indicated on the first page of this Agreement or to such other address as directed by the parties from time to time. 4. Manager shall not assign this Agreement or delegate any duties hereunder without the prior written consent of the Association; provided that Manager may, at its sole discretion, delegate all or any portion of its duties hereunder to MHI Hotels Services LLC, without the prior written consent of the Association which is hereby deemed to be given. Any attempt by Manager to assign this Agreement in whole or in part shall render this Agreement null and void. 5. The invalidity in whole or in part of any covenant, promise or undertaking, or any section, subsection, sentence, clause, phrase or word, or of any provision of this Agreement and the Declaration, shall not affect the validity of the remaining portions thereof. The provisions of this Agreement shall be paramount to the Condominium Act as to those provisions where permissive variances are permitted; otherwise the provisions of said Condominium Act shall prevail and shall be deemed incorporated herein.   8 -------------------------------------------------------------------------------- The parties hereto have executed this Association Management Agreement on the day and year first above written.   SIAN RESORT RESIDENCES I CONDOMINIUM ASSOCIATION, INC. By:      Print Name:      Its:      MHI HOSPITALITY TRS, L.L.C. By:      Print Name:      Its:        9 -------------------------------------------------------------------------------- EXHIBIT K-l Concession Agreement   29 -------------------------------------------------------------------------------- CONCESSION AGREEMENT THIS CONCESSION AGREEMENT (the “Agreement”) is made as of the         day of                     , 2006, by and between SIAN OCEAN RESIDENCES & RESORT MASTER ASSOCIATION, INC., a Florida not-for-profit corporation (hereinafter referred to as the “Association”), whose address is 4001 South Ocean Drive, Hollywood, Florida 33409, and MHI Hospitality TRS, L.L.C., a Delaware limited liability company (hereinafter referred to as “Operator”), having its principal office at 6411 Ivy Lane, Suite 510, Greenbelt, Maryland 20770. RECITALS: WHEREAS, the Association consists of the condominium units which are a part of the Sian Ocean Residences & Resort, South Ocean Drive, Hollywood, Florida (the “Community”). The function of the Association is the operation and management of the Common Property of the Community and all such other duties as are set forth in the Declaration of Easements, Covenants, Conditions and Restrictions for Sian Ocean Residences and Resort Master Association, as amended from time to time (“Declaration”). WHEREAS, the Association desires to employ Operator as the sole and exclusive concessionaire to operate the food and beverage operation serving the swimming pool to be located along the intracoastal waterway and identified as the Resort Pool on the site plan attached as Exhibit 1 (the “Site Plan”). WHEREAS, Operator is the lessee of the commercial unit (the “Commercial Unit”) of Sian Resort Residences I Condominium (the “Condominium Hotel”) and has entered into a management agreement pursuant to which the Condominium Hotel will be operated as a hotel (the “Hotel”). In addition Operator has entered into a facilities management agreement (the “Management Agreement”) with the Association to manage and operate the Resort Pool and the walkway between the Resort Pool and the Condominium Hotel and related landscaping along such walkway (the “Managed Property”). WHEREAS, the Resort Pool will be an integral part of the experience of the guests of the Hotel and the Association acknowledges and agrees that the food and beverage operation at the Resort Pool will be operated hereunder in a manner to facilitate their use by guests of the Hotel as well as the members of the Association in accordance with the terms and provisions of the Declaration. WHEREAS, in consideration of Operator’s agreement to provide the management services to the Association in accordance with the Management Agreement, the Association desires to grant to Operator the sole and exclusive right to provide food and beverage and other services to Pool Patrons, as hereinafter defined, utilizing the Resort Pool, as hereinafter provided. NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: -------------------------------------------------------------------------------- ARTICLE I Resort Pool Services Section 1.1. Commercial Activities. Operator shall have the sole and exclusive right to utilize the deck surrounding the Resort Pool and the immediately adjacent space for purposes of offering to all Members, Member’s Permittees (as defined in the Declaration) and Hotel patrons and guests (collectively the “Pool Patrons”), for its own account and not at the expense of the Association, services such as private functions, live music, lectures, classes, food and beverage service and activities and amenities of a similar nature customarily offered or made available to guests of a resort hotel (the “Services”). The Services shall at all times be provided in accordance with the Hotel Standards, as defined in the Declaration, and in accordance with all rules and regulations (the “Rules”) enacted by the Board of Directors of the Association (the “Board”). Any such Services offered by Operator shall be provided in a principal capacity and not as an agent of the Association. Section 1.2. Cost of Operation and Revenues. Operator shall bear the entire cost and expense incurred by Operator in connection with providing the Services and Operator shall be entitled to all revenues derived from providing the Services. Section 1.3. Charges to Pool Patrons. All charges for Services to Pool Patrons shall apply uniformly to all Members, Members Permittees and Hotel patrons and guests and Operator shall not discriminate against any Pool Patrons. Section 1.4. Repair and Maintenance. Operator, at its sole cost and expense, shall make, or cause to be made all repairs and perform, or cause to be performed, all maintenance to Operator’s equipment to provide the Services in accordance with Hotel Standards and the Rules. Section 1.5. Rules. Operator shall comply with all Rules enacted by the Board, as amended from time to time. Section 1.6. Compliance. Operator shall take all action as may be necessary to comply promptly with any and all orders or requirements affecting the Services or required to provide the Services by any governmental authority having jurisdiction, including without limitation the Health Department and orders of the Board of Fire Underwriters, or other similar bodies having jurisdiction. Section 1.7. Licenses and Permits. Operator, at its sole cost and expense shall obtain all licenses and permits required to provide the Services by any governmental authority having jurisdiction, including, without limitation, a liquor license. The Association agrees to cooperate with Operator for purposes of obtaining any licenses or authorizations, including any alcoholic beverage license in connection with the Services. Section 1.8. Employees. Operator shall be responsible for and hire and properly supervise all employees required to provide the Services. All such employees shall be employees of Operator and not employees of the Association.   2 -------------------------------------------------------------------------------- Section 1.9. Inventory and Equipment. Operator shall at all times maintain an adequate inventory of supplies and equipment to provide the Services in accordance with Hotel Standards. Section 1.10. Hotel Standards. Notwithstanding the obligations of the Operator to provide the Services in accordance with Hotel Standards, none of the Services to be provided by Operator shall utilize the tradename or trademark(s) used in connection with the operation of the Hotel. Section 1.11. Subcontractors. Operator shall also be entitled, without the prior approval of the Association, to subcontract with a third party to operate such facilities or provide any of the Services provided that the Association has no financial obligation with respect to such operation or subcontract and all such Services are provided in accordance with the Hotel Standards and the Rules. Section 1.12. Insurance. During the term of this Agreement, Operator shall maintain as a minimum, the following insurance underwritten by an insurer approved by the Association, which approval shall not be unreasonably withheld: (1) employer’s liability with minimum limits of $10,000,000 per occurrence; and (2) worker’s compensation insurance; and (3) employment practices liability insurance (including coverage for harassment, discrimination and wrongful termination, and covering defense and indemnity costs) with a limit of $1,000,000 per loss; and (4) the holder of the liquor license will maintain liquor liability insurance with single limit coverage for personal and bodily injury and property damage of at least $10,000,000 for each occurrence naming the Association as additional insured; and (5) commercial general liability insurance (including coverage for product liability, completed operations, contractual liability, host liquor liability and fire legal liability) and comprehensive automobile liability insurance (including hired and non-owned liability) with single-limit coverage for personal and bodily injury and property damage of at least $10,000,000 per occurrence, naming the Association as additional insured. All policies must be written on a fully insured basis. Section 1.13. Evidence of Insurance. At all times during the term of this Agreement, Operator will furnish to the Association certificates of insurance evidencing the term and limits of coverage in force, names of applicable insurers and persons insured, and a statement that coverage may not be canceled, altered or permitted to lapse or expire without thirty (30) days advance written notice to the Association. Revised certificates of insurance shall be forwarded to the Association each time a change in coverage or insurance carrier is made by Operator, and/or upon renewal of expired coverages. At Association’s option, Operator may be required to provide certified insurance policy copies.   3 -------------------------------------------------------------------------------- ARTICLE II Term Section 2.1. Term. The initial term of this Agreement shall be for a period of ten (10) years, commencing on the date of recording of the Declaration. The term shall automatically renew for successive additional five (5) year terms unless either party serves notice with cause at least ninety (90) days prior to the expiration of the applicable term of its intent not to renew. Section 2.2. Insolvency. In the event a petition in bankruptcy is filed by or against the Operator or Association, or in the event that the Operator or Association shall make an assignment for the benefit of creditors, either party hereto may terminate this Agreement effective upon written notice to the other. Section 2.3. Breach and Cure. In the event that Operator or the Association fails to perform its obligations under this Agreement or otherwise defaults hereunder, the non-defaulting party shall give the other party written notice specifying the default, and the defaulting party shall have thirty (30) days from the date of such notice to cure the default. If the defaulting party has not cured such default within thirty (30) days then the non-defaulting party may terminate this Agreement. Section 2.4. Termination of Operator. Either party may terminate this Agreement on ninety (90) days prior written notice to the Association in the event Operator is neither the licensee of a hotel franchise for the Condominium Hotel nor the owner or lessee of the Commercial Unit. ARTICLE III Indemnity Section 3.1. Indemnification by the Association. The Association shall indemnify Operator and save it harmless from and against all claims, damages, losses and liabilities, including all costs, fees and reasonable attorneys’ fees and expenses in connection therewith, arising out of acts or omissions of the Association, its officers and directors, including, without limitation any damage to property, or injury to, or death of persons (including the Pool Patrons) occasioned by or in connection with gross negligence and willful misconduct of the Association or Association’s agents (other than the Operator or the Operator’s agents). Section 3.2. Indemnification by Operator. Operator shall indemnify Association and save it harmless from and against all claims, damages, losses, liabilities, including all costs, fees and reasonable attorneys’ fees and expenses in connection therewith, arising out of acts or omissions of the Operator or its employees, subcontractors or agents including without limitation any damage to property, injury to, or death of persons (including the Pool Patrons) occasioned by or in connection with the gross negligence or willful misconduct of the Operator or the Operator’s agents, subcontractors or employees.   4 -------------------------------------------------------------------------------- ARTICLE IV Miscellaneous Provisions Section 4.1. Amendment and Modification. This Agreement cannot be amended or modified except in writing signed by both parties. Section 4.2. Fees and Costs. In the event that either party brings a legal action to enforce its rights hereunder the prevailing party will be entitled to be reimbursed for attorneys fees and costs whether arising before or at trial, on appeal, in bankruptcy or in post judgment collection. Section 4.3. Notices. All notices required hereunder shall be sent via first class mail or hand delivery to the addresses indicated on the first page of this Agreement or to such other address as directed by the parties from time to time. The parties hereto have executed this Agreement on the day and year first above written.   SIAN OCEAN RESIDENCES & RESORT MASTER ASSOCIATION, INC. By:      Name:      Title:        MHI HOSPITALITY TRS, L.L.C. By:      Name:      Title:        5 -------------------------------------------------------------------------------- EXHIBIT P Hotel Plans and Specifications   34 -------------------------------------------------------------------------------- Exhibit “P” Design Plans Architectural Fullerton Diaz Architects Drawing Date: 2/24/06 Mechanical, Electrical, & Plumbing TWR Consulting Engineers, Inc. Drawing Date: 3/3/06 Structural DHI Structural Engineers, Inc. Drawing Date: 11/18/05 Interior Design Ferrari Interiors, Inc. Drawing Date: 1/27/06 Civil Drawings Kimley-Horn & Associates, Inc. Drawing Date: 08/06 Landscape Kimley-Horn & Associates, Inc. Drawing Date: 03/06 Resort Pool Aquadynamics Design Group, Inc. Drawing Date: 1/27/06 -------------------------------------------------------------------------------- EXHIBIT Q Crowne Plaza® Certificate   35 -------------------------------------------------------------------------------- DISCLOSURE, ACKNOWLEDGMENT AND AGREEMENT Sian Resort Residences I Condominium This Disclosure, Acknowledgement and Agreement (this “Instrument”) is made as of the            day of                     , 200   by                                             , the purchaser(s) (“Purchaser” or “you”) of Unit #                     (“the Unit” or “your Unit”) of Sian Resort Residences I Condominium (the “Condominium”). Purchaser acknowledges and agrees that: (1) The seller and offerer of the Condominium, including your Unit, is MCZ/Centrum Florida XIX, L.L.C. (the “Developer”). The Developer intends the Condominium to be developed as a hotel (the “Hotel”). The Condominium will be part of a larger mixed-use development that will be governed by a master declaration of covenants, restrictions and easements and a master homeowners’ association (the “Master Development”). (2) It is intended (but not guaranteed) that the commercial unit of the Condominium (a) will be owned by MHI Hollywood, LLC (the “Hotel Owner”), (b) will be leased by the Hotel Owner to an affiliate of the Hotel Owner, MHI Hospitality TRS, LLC (“Franchisee”), and (c) will be operated by another affiliate of the Hotel Owner, MHI Hotel Services LLC (“Hotel Manager”) (Hotel Owner, Franchisee and Hotel Manager will collectively be referred to as the “Franchisee Parties”). (3) It is intended (but not guaranteed) that initially there will be a franchise or license agreement (“License Agreement”) between Franchisee and Holiday Hospitality Franchising, Inc. (including its affiliates, “Franchisor”) for the licensing of the Hotel operation as a “Crowne Plaza®” resort hotel. (4) Franchisor is merely licensing the use of certain trademarks, tradenames and systems to enable the Hotel to be operated for a period of time as a “Crowne Plaza®” resort hotel. Franchisor is not the developer, operator, manager, seller, builder, broker, offeror or lessor of your Unit, or of the Condominium, the Hotel or any associated rental program. Franchisor is not an affiliate of the Developer or Franchisee Parties or any related entity. (5) Any right to use the “Crowne Plaza®” tradename, trademarks, service marks or systems, or any other trademarks, service marks, systems or other intellectual property of Franchisor (collectively, the “Trademarks”) in connection with the Hotel is a right only of Franchisee under the License Agreement and is limited strictly by the terms of the License Agreement. You have not been granted and do not have any right to use the Trademarks for any purpose including, without limitation, in connection with the sale, rental or resale (or marketing or advertising for sale, rental or resale) of your Unit. (6) You and the other residential unit owners (a) do not have any right, title or interest in or to the License Agreement or any of the rights or licenses granted in the License Agreement, (b) are not a licensee, co-licensee or sublicensee under the License Agreement, (c) are not a third party beneficiary of the License Agreement, and (d) do not have the right to object to or defend -------------------------------------------------------------------------------- or take any other action against, or delay or impede, any termination, expiration, modification or non-renewal of the License Agreement. (7) Franchisee’s right to use the Trademarks is subject to the terms, provisions, obligations and limitations set forth in the License Agreement. The License Agreement may be terminated at any time or may expire in accordance with its terms, without notice to you and without your consent, in which event the Hotel will promptly cease operating as a Crowne Plaza® resort hotel. You will have no recourse against Franchisor, and Franchisor will have no liability to you or any other unit owner, the Condominium association or Master Development association as a result of the termination of the License Agreement, and you hereby release Franchisor with respect to any and all liability arising as a result of or in connection with the termination of the License Agreement. Franchisor has no obligation to renew or extend the License Agreement beyond its original term. (8) Franchisor has no duty, obligation or responsibility of any kind to you or your guests, invitees or lenders (including, without limitation, any contractual or fiduciary duty or obligation, express or implied). Franchisor has no duty under the License Agreement, the Condominium or Master Development governing or offering documents (including without limitation, any purchase agreement, prospectus, offering statement, budgets or plans), any marketing or sales materials, any unit rental agreement or otherwise (collectively, the “Documents”). Franchisor does not assume nor does it have any liability or responsibility for any financial statements, projections, or other financial information provided to you or any other purchaser or unit owner by any person or entity. You agree to look solely and exclusively to the Developer, Condominium association, Master Development association, Franchisee Parties or other persons or entities, and not to look to Franchisor, with respect to any claims relating to your Unit, the Condominium, the Hotel, Master Development, Documents or any rental program or unit rental agreement. (9) The License Agreement may be amended and modified from time to time by Franchisor and Franchisee without your consent and without notice to you. Franchisor may modify or change the franchise systems, standards or requirements associated with the License Agreement from time to time without your consent and without notice to you. (10) Franchisor has not made, and is not making, any representation, warranty or guaranty, or provided or providing any assurances or promises, with respect to your Unit, the Condominium, the Master Development, the Hotel, Developer, Franchisee Parties or any rental program or unit rental agreement or any aspect of any of the foregoing (including, without limitation, the Documents), and Franchisor has not acted, and is not acting, as a principal, guarantor, offeror, broker, finder, sales person or sales agent with respect to the design, development, construction, sales, marketing, maintenance, rental, operation or management of your Unit, the Condominium, the Master Development, the Hotel, any rental program, any unit rental agreement, or any aspect of any of the foregoing. Franchisor is not a partner or joint venturer with the Developer or any of the Franchisee Parties or with you. (11) The Franchisee Parties and Developer are not acting, nor do they have any authority to act, as agents, representatives or otherwise on behalf of Franchisor with respect to any matter. Nothing contained in any agreement between you and the Developer or between you   2 -------------------------------------------------------------------------------- and any of the Franchisee Parties or any other person or entity will modify the terms and conditions of the License Agreement or any other agreement between Franchisor and Franchisee or their respective affiliates. The rights of Franchisor under the License Agreement and related agreements are solely and exclusively for the benefit of Franchisor and its affiliates and shall not be deemed to create any right in or obligation or liability to you or any other person or entity. (12) No approval or consent by Franchisor pursuant to its rights will constitute any assurance or promise of any sort by Franchisor that any of the actions of any Franchisee Party, the Developer or any other person or entity are in compliance with any legal or contractual obligations. All of the provisions of this Instrument are binding upon you, your heirs, legal representatives, successors and assigns, and inure to the benefit of Franchisor and its agents, employees, representatives, successors and assigns. This Instrument is a legal document, and if you have questions or do not understand it fully, you should consult qualified legal counsel.   Acknowledged and Agreed:     PURCHASER(S):               Printed Name:          Printed Name:        3 -------------------------------------------------------------------------------- EXHIBIT R Alternative Crowne Plaza® Certificate   36 -------------------------------------------------------------------------------- DISCLOSURE AND ACKNOWLEDGEMENT Sian Resort Residences I Condominium This Disclosure and Acknowledgement (this “Instrument”) is made as of the        day of                    , 200__ by                                         , the purchaser(s) (“Purchaser” or “you”) of Unit #                     (“the Unit” or “your Unit”) of Sian Resort Residences I Condominium (the “Condominium”). Purchaser acknowledges by execution of this Instrument that Purchaser has been advised of the following: (1) The seller and offeror of the Condominium, including your Unit, is MCZ/Centrum Florida XIX, L.L.C. (the “Developer”). The Developer intends the Condominium to be developed as a hotel (the “Hotel”). The Condominium will be part of a larger mixed-use development that will be governed by a master declaration of covenants, restrictions and easements and a master homeowners’ association (the “Master Development”). (2) It is intended (but not guaranteed) that the commercial unit of the Condominium (a) will be owned by MHI Hollywood, LLC (the “Hotel Owner”), (b) will be leased by the Hotel Owner to an affiliate of the Hotel Owner, MHI Hospitality TRS, LLC (“Franchisee”), and (c) will be operated by another affiliate of the Hotel Owner, MHI Hotel Services LLC (“Hotel Manager”) (Hotel Owner, Franchisee and Hotel Manager will collectively be referred to as the “Franchisee Parties”). (3) It is intended (but not guaranteed) that initially there will be a franchise or license agreement (“License Agreement”) between Franchisee and Holiday Hospitality Franchising, Inc. (including its affiliates, “Franchisor”) for the licensing of the Hotel operation as a “Crowne Plaza®” resort hotel. (4) Franchisor is merely licensing the use of certain trademarks, tradenames and systems to enable the Hotel to be operated for a period of time as a “Crowne Plaza®” resort hotel. Franchisor is not the developer, operator, manager, seller, builder, broker, offeror or lessor of your Unit, or of the Condominium, the Hotel or any associated rental program. Franchisor is not an affiliate of the Developer or Franchisee Parties or any related entity. (5) Any right to use the “Crowne Plaza®” tradename, trademarks, service marks or systems, or any other trademarks, service marks, systems or other intellectual property of Franchisor (collectively, the “Trademarks”) in connection with the Hotel is a right only of Franchisee under the License Agreement and is limited strictly by the terms of the License Agreement. You have not been granted and do not have any right to use the Trademarks for any purpose including, without limitation, in connection with the sale, rental or resale (or marketing or advertising for sale, rental or resale) of your Unit. (6) You and the other residential unit owners (a) do not have any right, title or interest in or to the License Agreement or any of the rights or licenses granted in the License Agreement, (b) are not a licensee, co-licensee or sublicensee under the License Agreement, (c) are not a third -------------------------------------------------------------------------------- party beneficiary of the License Agreement, and (d) do not have the right to object to or defend or take any other action against, or delay or impede, any termination, expiration, modification or non-renewal of the License Agreement. (7) Franchisee’s right to use the Trademarks is subject to the terms, provisions, obligations and limitations set forth in the License Agreement. The License Agreement may be terminated at any time or may expire in accordance with its terms, without notice to you and without your consent, in which event the Hotel will promptly cease operating as a Crowne Plaza® resort hotel. Franchisor will have no liability to you or any other unit owner, the Condominium association or Master Development association as a result of the termination of the License Agreement. Franchisor has no obligation to renew or extend the License Agreement beyond its original term. (8) Franchisor has no duty, obligation or responsibility of any kind to you or your guests, invitees or lenders (including, without limitation, any contractual or fiduciary duty or obligation, express or implied). Franchisor has no duty under the License Agreement, the Condominium or Master Development governing or offering documents (including without limitation, any purchase agreement, prospectus, offering statement, budgets or plans), any marketing or sales materials, any unit rental agreement or otherwise (collectively, the “Documents”). Franchisor does not assume nor does it have any liability or responsibility for any financial statements, projections, or other financial information provided to you or any other purchaser or unit owner by any person or entity. (9) The License Agreement may be amended and modified from time to time by Franchisor and Franchisee without your consent and without notice to you. Franchisor may modify or change the franchise systems, standards or requirements associated with the License Agreement from time to time without your consent and without notice to you. (10) Franchisor has not made, and is not making, any representation, warranty or guaranty, or provided or providing any assurances or promises, with respect to your Unit, the Condominium, Master Development, Hotel, Developer, Franchisee Parties or any rental program or unit rental agreement or any aspect of any of the foregoing (including, without limitation, the Documents), and Franchisor has not acted, and is not acting, as a principal, guarantor, offerer, broker, finder, sales person or sales agent with respect to the design, development, construction, sales, marketing, maintenance, rental, operation or management of your Unit, the Condominium, the Master Development, the Hotel, any rental program, any unit rental agreement, or any aspect of any of the foregoing. Franchisor is not a partner or joint venturer with the Developer or any of the Franchisee Parties or with you. (11) The Franchisee Parties and Developer are not acting, nor do they have any authority to act, as agents, representatives or otherwise on behalf of Franchisor with respect to any matter. Nothing contained in any agreement between you and the Developer or between you and any of the Franchisee Parties or any other person or entity will modify the terms and conditions of the License Agreement or any other agreement between Franchisor and Franchisee or their respective affiliates. The rights of Franchisor under the License Agreement and related agreements are solely and exclusively for the benefit of Franchisor and its affiliates and shall not be deemed to create any right in or obligation or liability to you or any other person or entity. -------------------------------------------------------------------------------- (12) No approval or consent by Franchisor pursuant to its rights will constitute any assurance or promise of any sort by Franchisor that any of the actions of any Franchisee Party, the Developer or any other person or entity are in compliance with any legal or contractual obligations.   PURCHASER(S):                 Printed Name:                                                                                                      Printed Name:                                                                                                  -------------------------------------------------------------------------------- EXHIBIT S Restrictive Covenant   37 -------------------------------------------------------------------------------- PREPARED BY AND RETURN TO:    William R. Bloom, Esq. Holland & Knight, LLP 701 Brickell Avenue, Suite 3000 Miami, Florida 33131    This space reserved for Recorder’s use only COVENANT THIS COVENANT is made and entered into as of the _____ day of _________, 2006 by and among MCZ/CENTRUM FLORIDA XLX, L.L.C., a Delaware limited liability company (“MCZ/CENTRUM”), MCZ/CENTRUM FLORIDA VI OWNER, L.L.C., an Illinois limited liability company (“MCZ/CENTRUM VI”), and MHI HOLLYWOOD, LLC, a Delaware limited liability company (“MHI”). RECITALS: A. MCZ/CENTRUM is the developer and owner of all of the units comprising Sian Resort Residences I Condominium, the Declaration of which was recorded ____________, 2006 in Official Records Book ___________, at Page of the Public Records of Broward County, Florida (the “Hotel Condominium”). B. MCZ/CENTRUM VI is an affiliate of MCZ/CENTRUM and is the owner of that certain real property described on Exhibit “A” attached hereto and made a part hereof (the “MCZ/CENTRUM VI PROPERTY”) which is adjacent to the Hotel Condominium. -------------------------------------------------------------------------------- C. MCZ/CENTRUM desires to sell to MHI the sole commercial unit of the Hotel Condominium (the “Hotel Unit”) and MHI desires to purchase the Hotel Unit from MCZ/CENTRUM and operate a hotel at the Hotel Condominium (the “Hotel”) provided that MCZ/CENTRUM and MCZ/CENTRUM VI impose certain covenants and restrictions upon the Hotel Unit, Hotel Condominium and the MCZ/CENTRUM VI PROPERTY, as hereinafter provided. D. MCZ/CENTRUM and MCZ/CENTRUM VI desire to have MHI purchase the Hotel Unit and agree to impose certain covenants and restrictions upon the use of the Hotel Condominium and the MCZ/CENTRUM VI PROPERTY, as hereinafter provided. NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. RECITALS. The Recitals and this Covenant are true and correct and are hereby incorporated by reference and made a part hereof. 2. SITE PLAN. MCZ/CENTRUM VI currently intends to develop the MCZ/CENTRUM VI PROPERTY substantially in accordance with the Site Plan shown on Exhibit “B” attached hereto and made a part hereof (the “Site Plan”). The Site Plan reflects the Hotel Condominium as the first phase of the project. The Resort Pool and the Hotel Related Common Property (as said terms are hereinafter defined) and the Hotel Condominium will be constructed substantially in accordance with the Site Plan. The second phase of the project reflected on the Site Plan (“Phase II”) is currently envisioned to consist of a newly constructed 27-story hotel condominium containing approximately 349 hotel rooms, a pool and related   2 -------------------------------------------------------------------------------- parking garage and include ballroom space, meeting space, outdoor function space, restaurant space and laundry facilities. The third phase of the project reflected on the Site Plan (“Phase III”) is currently envisioned to consist of either approximately 7,000 square feet of commercial space (the “Commercial Space”) or approximately 60 townhomes. MCZ/CENTRUM VI covenants and agrees with MHI that the MCZ/CENTRUM VI PROPERTY as shown on the Site Plan, if developed, will be developed substantially in accordance with the Site Plan; provided, however, nothing shall be deemed or construed to require either Phase II or Phase III to be developed. MCZ/CENTRUM VI agrees not to modify the Site Plan in any material respect without the approval of MHI which approval shall not be unreasonably withheld or delayed and which approval shall be granted provided that any changes to the Site Plan do not have a material adverse effect and are not reasonably likely to have a material adverse effect on the operation of the Hotel Condominium, the hotel operation at the Hotel Condominium, or the resort pool located next to the intracoastal waterway as shown on the Site Plan (the “Resort Pool”) or the Hotel Related Common Property. The failure of MHI to respond to any request for approval of any material modification to the Site Plan within fifteen (15) business days shall be deemed approval; provided that any material modification to the Site Plan which has or is reasonably likely to have a material adverse effect on the operation of the Hotel Condominium, the Hotel, the Resort Pool, or the Hotel Related Common Property which requires the approval of Holiday Hospitality Franchising, me. (the “Licensor”) pursuant to the terms of that certain Crowne Plaza® License Agreement by and between Licensor and MHI Hospitality TRS, LLC (the “Licensee”) dated September ___________, 2006 and the addendum thereto (the “License Agreement”) shall not be deemed approved until such approval is actually received by MCZ/CENTRUM VI from Licensor and MHI. The approval of Licensor shall only be required   3 -------------------------------------------------------------------------------- prior to the termination of the License Agreement and thereafter approval from Licensor shall no longer be required. 3. PHASE II AND PHASE III PLANS AND SPECIFICATIONS. If MCZ/CENTRUM VI elects to proceed with the development of Phase II and/or Phase III, MCZ/CENTRUM VI shall submit plans and specifications for Phase II and/or Phase III, as appropriate, and any material modification thereto, to MHI as they are developed for MHI’s review and comment but only to confirm that the exterior appearance of all improvements, facilities and landscaping within Phase II and/or Phase III will be in accordance with standards equal to or better than the Hotel Condominium pursuant to the License Agreement in effect as of the opening of the Hotel and that the interior finishes of Phase II and/or Phase III, as appropriate, will be complementary to or of a better quality than the interior finishes of the Hotel Condominium pursuant to the License Agreement in effect as of the opening of the Hotel. To the extent that MHI believes that the exterior appearance of any of the improvements, facilities or landscaping to be constructed or placed within Phase II and/or Phase III, as appropriate, will not be in accordance with standards equal to or better than the Hotel Condominium pursuant to the License Agreement in effect as of the opening of the Hotel and/or the interior finishes of such improvements will not be complementary to or of a better quality than the interior finishes of the Hotel Condominium pursuant to the License Agreement in effect as of the opening of the Hotel, MHI shall provide written notice of same to MCZ/CENTRUM VI listing the deficiencies within fifteen (15) business days of MHI’s receipt of the plans and specifications for such improvements or finishes, as applicable, or material modification thereof, or proposed replacement or restoration thereof. Any disputes between MCZ/CENTRUM VI and MHI   4 -------------------------------------------------------------------------------- regarding compliance with the terms and provisions of this Section 3 shall be submitted to arbitration in accordance with Section 10(k) of this Covenant. 4. USE RESTRICTIONS REGARDING PHASE II AND PHASE III. The commercial uses of the MCZ/CENTRUM VI PROPERTY shall be upscale uses and not incompatible with or detract from the operation of the Hotel Condominium or the Hotel. MHI acknowledges and agrees that any competition from a second hotel which may be developed on the MCZ/CENTRUM VI PROPERTY shall not be deemed to detract from the operation of the Hotel Condominium or the Hotel. Flea markets, dollar stores, adult entertainment establishments, pawn shops and adult-themed restaurants and establishments are prohibited in or on the Hotel Condominium, the Hotel Unit, the Hotel and the MCZ/CENTRUM VI PROPERTY. Any dispute regarding compliance with the requirements of this Section 4 shall be subject to arbitration in accordance with Section 10(k) of this Covenant. 5. BOARD ACTION BY CONDOMINIUM ASSOCIATION. MCZ/CENTRUM covenants and agrees that so long as it or any of its affiliates controls the board of directors of Sian Resort Residences I Condominium Association, Inc., a not-for-profit Florida corporation (the “Condominium Association”) that neither MCZ/CENTRUM nor any of its affiliates or the board of directors of the Condominium Association will impose any amendments to the declaration of condominium, the articles of incorporation for the Condominium Association, the bylaws of the Condominium Association or rules and regulations for the Hotel Condominium (including the criteria set forth on Exhibit B attached hereto) without MHI’s consent, which consent shall not be unreasonably withheld or delayed and which consent shall be required to be given provided that the proposed amendment(s) does not adversely affect and is not reasonably likely to have an adverse effect on the ability of the Licensee to comply   5 -------------------------------------------------------------------------------- with the terms conditions and payment obligations under the License Agreement and does not negatively affect and is not reasonably likely to have a negative effect on the operation of the Hotel Condominium, the Hotel or the Hotel Related Common Property, as hereinafter defined. The failure of MHI to respond within five (5) business days of receipt of such request shall be deemed approval, provided that any amendment requiring the approval of Licensor pursuant to the License Agreement shall not be deemed approved until such approval is actually received by MCZ/Centrum from MHI and Licensor. Further MCZ/CENTRUM and each of its affiliates covenant and agree that so long as it or they control the board of directors of the Condominium Association, the board of directors of the Condominium Association will not take any action that adversely affects or is reasonably likely to adversely affect the ability of Licensee to comply with the terms, conditions and payment obligations under the License Agreement or which negatively affects or is reasonably likely to negatively affect the operation of the Hotel Condominium or the Hotel and will not deny reasonable requests or refuse to grant approvals reasonably requested by MHI. 6. BOARD ACTION BY MASTER ASSOCIATION. MCZ/CENTRUM VI covenants and agrees that so long as it or any of its affiliates controls the board of directors of the Sian Ocean Residence & Resort Master Association, Inc., a Florida not-for-profit corporation (the “Master Association”) that neither MCZ/CENTRUM VI nor any of its affiliates or the board of directors of the Master Association will impose any amendments to the Declaration of Covenants, Conditions, Restrictions and Easements for the Sian Ocean Residences and Resort Master Association which was recorded in Official Records Book 41532 at Page 1989 of the Public Records of Broward Country, Florida, the articles of incorporation of the Master Association or the bylaws of the Master Association (collectively, the “Master Association   6 -------------------------------------------------------------------------------- Documents”) without MHI’s consent, which consent shall not be unreasonably withheld or delayed and which consent shall be required to be given provided that the proposed amendments do not adversely affect and are not reasonably likely to adversely affect the ability of Licensee to comply with the terms, conditions and payment obligations under the License Agreement and do not negatively affect and are not reasonably likely to negatively affect the operation of the Hotel Condominium, the Hotel, the Resort Pool, or the Hotel Related Common Property. The failure of MHI to respond within five (5) business days of receipt such request shall be deemed approval provided that any amendment requiring the approval of Licensor pursuant to the License Agreement shall not be deemed approved until such approval is actually received by MCZ/Centrum from MHI and Licensor. Notwithstanding the foregoing, it shall not be deemed or construed as an amendment to the Master Association Documents if additional properties are added to the Master Association Documents as contemplated by the Master Association Documents. In addition, MCZ/CENTRUM VI further covenants and agrees that so long as it and/or any of its affiliates controls the board of directors of the Master Association, the board of directors of the Master Association will take any action reasonably requested by MHI to cause the Resort Pool and any other elements of the Hotel Related Common Property to comply with Licensor’s brand standards and will not take any action that adversely affects or is reasonably likely to adversely affect the ability of Licensee to comply with the terms, conditions and payment obligations under the License Agreement or which negatively affects or is reasonably likely to adversely affect the operation of the Hotel, the Resort Pool, or the Hotel Related Common Property and will not deny reasonable requests or refuse to grant approvals reasonably requested by MHI.   7 -------------------------------------------------------------------------------- 7. OWNERSHIP OF SIAN PARCEL. MCZ/CENTRUM VI acknowledges and agrees that so long as MCZ/CENTRUM VI or any of its affiliates have any ownership interests in the Sian Parcel, the Non-Residential Units or the Phase II Hotel Unit (as such terms are defined in the Master Association Documents) they shall refrain from supporting and shall vote all of their voting interests and cause their affiliates to vote all of their voting interests against any action proposed to be taken or approved by the Master Association which could adversely affect or is reasonably likely to have an adverse effect on the operation of the Hotel Condominium, the Hotel, the Resort Pool, including without limitation the commercial operations associated with Resort Pool, or the outdoor function areas which are located on the properties owned by the Master Association and which could be perceived by Hotel guests to be part of the Hotel Condominium (the “Hotel Related Common Property”) or which would adversely affect or is reasonably likely to have an adverse effect on Licensee’s ability to comply with the terms, conditions and payment obligations under the License Agreement, including without limitation, to comply with Licensor’s brand standards. 8. SERVICE PROVIDERS. MCZ/CENTRUM and MHI covenant and agree that all third parties providing services to any of the units included within the Hotel Condominium including the Hotel Unit shall be required to comply with the criteria set forth on Exhibit “C” attached hereto and made a part hereof. 9. NOTICES. All notices, consents, approvals, waivers and elections which any party shall be required or shall desire to make or give under this Covenant shall be in writing and shall be sufficiently made or given only when hand-delivered, telecopied or mailed by certified mail, return receipt requested postage affixed addressed:   8 -------------------------------------------------------------------------------- As to MHI:    MHI Hollywood, LLC    4801 Courthouse Street    Suite 201    Williamsburg, VA 23188    Attn: Andrew M. Sims    Telephone: (757) 564-8684    Facsimile: (757) 564-8801 With a Copy to:    Baker and McKenzie    815 Connecticut Avenue N.W.    Suite 900    Washington, DC 20016    Attn: Thomas J. Egan, Jr., Esq.    Telephone: (202) 452-7050    Facsimile: (202) 452-7093 As to MCZ/CENTRUM:    MCZ/CENTRUM FLORIDA XIX, L.L.C.    c/o MCZ Development, Inc.    1555 N. Sheffield Avenue    Chicago, IL 60622    Attn: Brian Niven and Michael Lerner    Telephone: (312) 573-1122    Facsimile: (312) 573-1028 With a Copy to:    CENTRUM PROPERTIES, INC.    225 West Hubbard Street, Fourth Floor    Chicago, IL 60610    Attn: Arthur Slaven and Mary Koberstein, Esq.    Telephone: (312) 825-2500    Facsimile: (312) 923-0984 Copy to:    Holland & Knight LLP    701 Brickell Avenue, Suite 3000    Miami, FL 33131    Attn: William R. Bloom, Esq.    Telephone: (305) 789-7712    Facsimile: (305) 789-7799 As to MCZ/CENTRUM VI:    MCZ/CENTRUM FLORIDA VI OWNER, L.L.C.    c/o MCZ Development, Inc.    1555 N. Sheffield Avenue    Chicago, IL 60622    Attn: Brian Niven and Michael Lerner    Telephone: (312) 573-1122    Facsimile: (312) 573-1028   9 -------------------------------------------------------------------------------- With a Copy to:    CENTRUM PROPERTIES, INC.    225 West Hubbard Street, Fourth Floor Chicago, IL 60610 Attn: Arthur Slaven and Mary Koberstein, Esq. Telephone: (312)825-2500 Facsimile: (312) 923-0984 Copy to:    Holland & Knight LLP    701 Brickell Avenue, Suite 3000 Miami, FL 33131 Attn: William R. Bloom, Esq. Telephone: (305) 789-7712 Facsimile: (305) 789-7799 or at such other address as any party hereto shall designate by like notice given to the other parties hereto. Notices, consents, approvals, waivers and elections given or made as aforesaid shall have been given when hand-delivered, upon receipt of a telecopy or the date of receipt or date of delivery is refused if mailed by certified mail, return receipt requested. 10. MISCELLANEOUS PROVISION. (a) Mortgagee. All holders of any existing mortgages join in the execution of this Covenant in order to submit their interest in the Hotel Condominium, the Hotel Unit and the MCZ/CENTRUM VI PROPERTY to the terms of this Covenant and are hereby, without the necessity of any additional instruments, made subordinate to the terms of this Covenant. Any future mortgages shall automatically, without the necessity of any additional instrument be subject and subordinate to the terms and conditions of this Covenant. (b) Amendments. This Covenant shall not be amended, modified altered or changed in any respect except by further agreement in writing duly executed by the owners of the Hotel Unit and the MCZ/CENTRUM VI PROPERTY. (c) Severability. Should any of the provisions of this Covenant or the application thereof to any person or situation be held invalid or unenforceable, the remainder of   10 -------------------------------------------------------------------------------- this Covenant and the application of such provision to persons or a situation, other than those as to which it shall have been held invalid or unenforceable, shall not be affected thereby and shall continue valid and be enforced to the fullest extent permitted by law. (d) Captions. The headings contained in this Covenant are for convenience and reference only and in no way define, limit or describe the scope of or intent of the Covenant. (e) Attorneys’ Fees and Costs. In the event of any dispute which shall be arbitrated/litigated between the parties in connection with this Covenant the prevailing party shall be entitled to recover from the other party all of its reasonable attorneys’ fees, costs and expenses at both trial and appellate levels. (f) Governing Laws. The ability of this Covenant and all of its terms and provisions shall be interpreted and in accordance with the laws of the State of Florida. (g) Covenants Running the Land. The terms and provisions of this Covenant shall constitute covenants running with the land and shall be binding upon the owner of and each successor in title to any portion of the Hotel Unit and the MCZ/CENTRUM VI PROPERTY. (h) Entire Agreement. This Covenant by the entire agreement of the parties and supersedes any prior oral or written agreements with respect to the matters stated herein. (i) Waiver of Trial by Jury. The parties knowingly, voluntarily and intentionally waived trial by jury in any action, proceeding or counterclaim brought by or any of them or other matters whatsoever arising out of or in any way connected with this Covenant.   11 -------------------------------------------------------------------------------- (j) Counterparts. This Covenant 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. (k) Arbitration. Any controversy, dispute, or claim of any nature arising out of, in connection with or in relation to sections 2, 3, 4, 5, 6 or 7 of this Covenant shall be resolved at the written request of any party hereto by binding arbitration. The arbitration shall be administered in accordance with the current Commercial Arbitration Rules of the American Arbitration Association. Any matter to be settled by arbitration shall be submitted to the American Arbitration Association in Broward County, Florida. The parties to the dispute shall attempt to designate one arbitrator from the American Arbitration Association. If they are unable to do so within thirty (30) days after written demand therefore, the American Arbitration Association may designate an arbitrator. The arbitration shall be final and binding and enforceable in any court of competent jurisdiction. The arbitrator shall award attorneys’ fees (including those for in-house counsel) and costs to the prevailing party. (1) Estoppel Certificate. MHI, MCZ/CENTRUM and MCZ/CENTRUM VI agree at any time, from time to time, upon not less than ten (10) days prior written notice, to execute, acknowledge and deliver to the requesting party a statement, in writing, setting forth whether or not the party, its successors or assigns, is in default in keeping, observing or performing any of the terms and provisions of this Covenant; and if in default, specifying each such default, and setting forth such other truthful information as may reasonably be requested regarding compliance with this Covenant. [Remainder of Page Intentionally Left Blank]   12 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, MCZ/CENTRUM, MCZ/CENTRUM VI and MHI have caused this Covenant to be executed and delivered as of the date first above written.   MCZ/CENTRUM: MCZ/CENTRUM FLORIDA XIX, L.L.C., a Delaware limited liability company By:      Name:   Title:   MCZ/CENTRUM VI: MCZ/CENTRUM FLORIDA VI OWNER, L.L.C., an Illinois limited liability company By:      Name:   Title:   MHI: MHI HOLLYWOOD, LLC, a Delaware limited liability company By:      Name:   Title:     13 -------------------------------------------------------------------------------- STATE OF FLORIDA    )    ) SS: COUNTY OF                                                 ) The foregoing instrument was acknowledged before me this              day of             , 2006, by                     , as              of MCZ/CENTRUM FLORIDA XIX, L.L.C., a Delaware limited liability company, on behalf of the company; he is ¨ personally known by me or ¨ produced identification.             Print or Stamp Name:      Notary Public, State of Florida at Large My Commission Expires: (NOTARY SEAL)   STATE OF FLORIDA    )    ) SS: COUNTY OF                                                 ) The foregoing instrument was acknowledged before me this              day of             , 2006, by                     , as              of MCZ/CENTRUM FLORIDA VI OWNER, L.L.C., an Illinois limited liability company, on behalf of the company; he is ¨ personally known by me or ¨ produced identification.             Print or Stamp Name:      Notary Public, State of Florida at Large My Commission Expires: (NOTARY SEAL)   14 -------------------------------------------------------------------------------- STATE OF FLORIDA    )    ) SS: COUNTY OF                                                 ) The foregoing instrument was acknowledged before me this              day of             , 2006, by                     , as              of MHI HOLLYWOOD, LLC., a Delaware limited liability company, on behalf of the company; he is ¨ personally known by me or ¨ produced identification.           Print or Stamp Name:      Notary Public, State of Florida at Large My Commission Expires: (NOTARY SEAL)   15 -------------------------------------------------------------------------------- EXHIBIT “A” LEGAL DESCRIPTION MCZ/CENTRUM VI PROPERTY   16 -------------------------------------------------------------------------------- EXHIBIT A PARCEL 1: Commencing at the Northeast corner of Section 26, Township 51 South, Range 42 East; thence running Westerly along the North line of said Section 26, a distance of 297.4 feet to a point on the West Line of the right of way of U.S. Road A-1-A (State Road #140, known as Ocean Beach Road) as described in Easement Deed from Hallandale Beach Improvements Co., Florida corporation, to the State of Florida, dated April 13, 1932, and recorded in Deed Book 232, Page 265. of the Public Records of Broward County, Florida; thence running Southerly along the West right of way line of the aforesaid U.S. Road A-1-A, a distance of 796.3 feet to a point, which is the Point of Beginning of the tract of land herein described; thence running Southerly along the West right of way line of said U.S. Road A-1-A distance of 276.77 feet; thence run South 87°09’08” West for a distance of 293.11 feet to a point; thence, run South 2°50’52” East for a distance of 248.02 feet to a point; thence run South 87°09’08” West for a distance of 281.26 feet to a point; thence continuing along the same Westerly direction a distance of 41.98 feet to a point on the East right of way line of the Intra-Coastal Water Way as described in Easement Deed from the Hallandale Beach Improvement Co., a Florida corporation, to the United States of America, dated May 26, 1931, and recorded in Deed Book 227, Page 419, of the Public Records of Broward County. Florida; thence running Northerly along the East right of way line of said Intra-Coastal Water Way a distance of 490.4 feet more or less, (538.19 feet measured) (to a point 542 feet) (564.17 measured) [measured on a line at right angles to the East Line of said Section 26] West of the Point of Beginning; (thence East 542 feet (564.17 measured) to the Point of Beginning; being a part of parcel of land described as Blocks E and F of a survey of the Northeast 1/4 of the Northeast 1/4 of Section 26, Township 51 South, Range 42 East, made by Frank C. Dickey, Registered Land Surveyor, dated June 1, 1946, and recorded in Deed Book 542, Page 270, of the Public Records of Broward County, Florida. LESS RIGHT OF WAY (PARCEL NO. 101) SEE PARCEL #101 DESCRIPTION: .PARCEL 101: That part of the Northeast one-quarter (NE 1/4) of the Northeast one-quarter (NE 1/4) of Section 26, Township 51 South, Range 42’ East, Broward County, Florida; said part being more particularly described as follows: COMMENCE at a Found Brass Cap in Concrete Monument #2094, marking the Southeast corner of the Northeast one-quarter (NE 1/4) of the Northeast one-quarter (NE 1/4) of said Section 26; thence South 87°09’08” West along the Southerly line of said Northeast one-quarter (NE 1/4) of the Northeast .one-quarter (NE 1/4) of said Section 26 and the Baseline of Survey for State Road 858 (Hallandale Beach Boulevard), a distance of 1,041.67 feet to the Easterly existing Right of Way line of the Intra-Coastal Waterway; thence North 06°39’20” East along said Easterly existing Right of Way line, a distance of 50.68 feet to the Northerly existing Right of Way line for State Road 858 (Hallandale Beach Boulevard) and the Point of Beginning; thence continue North 06°39’20” East, a distance of 62.85 feet; thence North 87°09’08’ East a distance of 311.42 feet; thence South 02°50’52” East, a distance of 62.00 feet to said Northerly existing Right of Way line for State Road 853 (Hallandale Beach Boulevard); thence South 87°09’08” West along said Northerly existing Right of Way line, a distance of 321.71 feet to the Point of Beginning. AND PARCEL II Lot 15, SEACREST PARK, according to the plat thereof, as recorded in Plat Book 23, Page 16 of the Public Records of Broward County, Florida. AND -------------------------------------------------------------------------------- PARCEL III: Lots 10 and 11, SEACREST PARK, according to the plat thereof, as recorded in Plat Book 23, Page 16, of the Public Records of Broward County, Florida, except for the East seven feet of Lot 11. PARCEL IV: A parcel of land lying in the Northeast one-quarter (NE 1/4) of the Northeast one-quarter (NE 1/4) of Section 26, Township 51 South, Range 42 East, Broward County, Florida, more particularly described as follows: Commencing at the Northeast comer of said Section 26; thence run South 86°56’53” West, along the North line of said Section 28, for a distance of 297.10 feet to a point on the Wastrely right of way boundary of U.S. Highway A-1-A (State Road No. 140, also known as Ocean Beach Road) as described in Easement Deed dated April 13,1932, and recorded in Deed Book 232, Page 285, of the Public Records of Broward County, Florida; thence run South 4°45’23” West, along said Westerly right of way boundary for a distance of 1073.0 feet to the Point of Beginning of the parcel of land hereinafter to be described; thence continue South 4°45’23” West, a distance of 25.22 feet to a point; thence run South 87°09’08” West, a distance of 124.77 feet to a point; thence run South 2°50’52” East a distance, of 223.02 feet to a point on a line that is 50 feet North of and parallel to the South line of the Northeast one-quarter (NE 1/4) of the Northeast one-quarter (NE 1/4) of said Section 26; thence run South 67°09’08” West, along a line that is 50 feet North of and parallel to the South line of said Northeast one-quarter (NE 1/4) of the Northeast one-quarter (NE 1/4) of said Section 26, a distance of 165 feet to a point; thence run North 2°50’52” West, a distance of 248.02 feet to a point; thence run North 87°09’08” East a distance of 293.11 feet to the Point of Beginning. LESS AND EXCEPT the following described property taken by Eminent Domain Proceedings as contained in Broward County Circuit Court Case Number 95-15516: A portion of the NE 1/4 of the NE 1/4 of Section 26, Township 51 South, Range 42 East, Broward County, Florida, being more particularly described as follows: Commence at the Found PRM/2094 marking the Northwest comer of Tract ‘A’ of 4112 SOUTH OCEAN PLAT, as recorded in Plat Book 129, Page 38 of the Public Records of Broward County, Florida; then South 02°51’22” East along the Westerly line of said Tract ‘A’, a distance of 223.02 feet to a found drill hole in back of sidewalk, also being the Northerly Existing Right of Way line for State Road 858 (Hallandale Beach Boulevard) and the Point of Beginning; thence South 87°08’38” West along said Northerly Existing Right of Way line, a distance of 165.00 feet; thence North 02°51’22” West, a distance of 62.00 feet thence South 74°48’34” East, a distance of 62.07 feet; thence South 78°31’00” East, a distance of 109.39 feet; hence South 02°51’22” East, a distance of 15.68 feet to the Point of Beginning Less and Except the following described property -------------------------------------------------------------------------------- LEGAL DESCRIPTION The legal description of the Sian Resort Residences I Condominium is as follows: Commencing at the Northeast corner of Section 26, Township 51 South, Range 42 East; thence running Westerly along the North line of said Section 26, a distance of 297.4 feet to a point on the West line of the right of way of U.S. Road A-1-A (State Road #140, known as Ocean beach Road) as described in Easement Deed from Hallandale Beach Improvements Co., a Florida corporation to the State of Florida, dated April 13, 1932, and recorded in Deed Book 232, Page 265, of the Public Records of Broward County, Florida; thence Southerly along the West right of way line of the aforesaid U.S. Road A-1-A South 04’45’23” West, a distance of 796.3 feet to a point, said point being the Southeast corner of Lot 18, SEACREST PARK, according to the plat thereof, as recorded in Plat Book 23, Page 16 of the Public Records of Broward County, Florida; thence continue South 04°45’23” West along said West Right of Way of the aforementioned State Road A-1-A for a distance of 179.29 feet to a point; thence South 86°42’51” West 49.82 feet to the Point of Beginning of the following described parcel; thence South 02°51’49” East for a distance of 38.15 feet to a point; thence south 87°04’41” West for a distance of 12.53 feet to a point; thence South 02°51’49” East for a distance of 18.55 feet to a point; thence South 87°04’41” West for a distance of 27.98 feet to a point; thence south 02°51’49” East for a distance of 13.41 feet to a point; thence South 87°04’41” West for a distance of 253.92 feet to a point; thence North 02°51’49” West for a distance of 13.41 feet to a point; thence South 87»04’41” West for a distance of 17.61 feet to a point; thence North 02”51’49” West for a distance of 18.51 feet to a point; thence South 87°04’41” West for a distance of 22.19 feet to a point; thence North 02”51’49” West for a distance of 38.34 feet to a point; thence North 87°04’41” East for a distance of 22.26 feet to a point; thence North 02°51’49” West for a distance of 32.51 feet to a point; thence North 87°04’41” East for a distance of 299.44 feet to a point; thence South 02°51’49” East for a distance of 32.68 feet to a point; thence North 87°04’41” East for a distance of 12.53 feet to a point; to the Point of Beginning. -------------------------------------------------------------------------------- Exhibit B LOGO [g79817img11.jpg] -------------------------------------------------------------------------------- EXHIBIT “C” CRITERIA FOR SERVICE PROVIDERS All third parties providing goods and/or services to the Hotel Condominium or any Unit therein, including, without limitation, solicitation and/or provision of housekeeping, personal services (e.g., massage, personal training, dry cleaning, transportation services, etc.) and/or food and beverage services shall adhere and shall cause their employees and agents to adhere to the following rules and restrictions:     a) Each provider shall be attired in a fashion consistent with the Hotel Standards, as defined in the Master Association Documents.     b) Each provider shall have all necessary licenses and permits to perform their duties.     c) Each provider shall maintain adequate insurance coverage in keeping with Hotel Standards.     d) Each provider shall have undergone background checks and complied with security procedures in keeping with Hotel Standards.     e) Each provider shall check in with the owner of the Hotel Unit prior to the commencement of any activities.   17 -------------------------------------------------------------------------------- EXHIBIT T Portion of Hotel Unit to be converted to New ADA Units   38 -------------------------------------------------------------------------------- Exhibit “T” 2nd Floor ADA Units LOGO [g79817img13.jpg]

  Execution Copy U.S.$1,000,000,000 364-DAY REVOLVING CREDIT AGREEMENT Dated as of March 31, 2006 Among ALTRIA GROUP, INC. and THE INITIAL LENDERS NAMED HEREIN and JPMORGAN CHASE BANK, N.A. and CITIBANK, N.A. as Administrative Agents and CREDIT SUISSE SECURITIES (USA) LLC and DEUTSCHE BANK SECURITIES INC. as Syndication Agents and ABN AMRO BANK N.V. and BNP PARIBAS and HSBC BANK USA, NATIONAL ASSOCIATION and UBS LOAN FINANCE LLC as Arrangers and Documentation Agents * * * * * * * * * * J.P. MORGAN SECURITIES INC., CITIGROUP GLOBAL MARKETS INC., CREDIT SUISSE SECURITIES (USA) LLC and DEUTSCHE BANK SECURITIES INC. as Joint Lead Arrangers and Bookrunners   --------------------------------------------------------------------------------   Table of Contents               Page ARTICLE I DEFINITIONS AND ACCOUNTING TERMS     1             Section 1.01. Certain Defined Terms     1   Section 1.02. Computation of Time Periods     10   Section 1.03. Accounting Terms     10             ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES     11             Section 2.01. The Pro Rata Advances     11   Section 2.02. Making the Pro Rata Advances     11   Section 2.03. Repayment of Pro Rata Advances     13   Section 2.04. Interest on Pro Rata Advances     13   Section 2.05. Additional Interest on LIBO Rate Advances     13   Section 2.06. Conversion of Pro Rata Advances     14   Section 2.07. The Competitive Bid Advances     14   Section 2.08. LIBO Rate Determination     18   Section 2.09. Fees     20   Section 2.10. Termination or Reduction of the Commitments     20   Section 2.11. Prepayments     20   Section 2.12. Increased Costs     21   Section 2.13. Illegality     22   Section 2.14. Payments and Computations     22   Section 2.15. Taxes     23   Section 2.16. Sharing of Payments, Etc.     25   Section 2.17. Evidence of Debt     26   Section 2.18. Use of Proceeds     26             ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING     27             Section 3.01. Conditions Precedent to Effectiveness     27   Section 3.02. Initial Advance to Each Designated Subsidiary     28   Section 3.03. Conditions Precedent to Each Pro Rata Borrowing     29   Section 3.04. Conditions Precedent to Each Competitive Bid Borrowing     29    i --------------------------------------------------------------------------------   Table of Contents (continued)               Page ARTICLE IV REPRESENTATIONS AND WARRANTIES     30             Section 4.01. Representations and Warranties of Altria     30             ARTICLE V COVENANTS OF ALTRIA     31             Section 5.01. Affirmative Covenants     31   Section 5.02. Negative Covenants     32     ARTICLE VI EVENTS OF DEFAULT     34     Section 6.01. Events of Default     34   Section 6.02. Lenders’ Rights upon Event of Default     35             ARTICLE VII THE ADMINISTRATIVE AGENTS     36             Section 7.01. Authorization and Action     36   Section 7.02. Administrative Agents’ Reliance, Etc.     36   Section 7.03. JPMorgan Chase, Citibank and Affiliates     37   Section 7.04. Lender Credit Decision     37   Section 7.05. Indemnification     37   Section 7.06. Successor Administrative Agents     38   Section 7.07. Syndication Agents and Arrangers and Documentation Agents     38             ARTICLE VIII GUARANTY     39             Section 8.01. Guaranty     39   Section 8.02. Guaranty Absolute     39   Section 8.03. Waivers     39   Section 8.04. Continuing Guaranty     40             ARTICLE IX MISCELLANEOUS     40             Section 9.01. Amendments, Etc.     40   Section 9.02. Notices, Etc.     41   Section 9.03. No Waiver; Remedies     42   Section 9.04. Costs and Expenses     42   Section 9.05. Right of Set-Off     43    ii --------------------------------------------------------------------------------   Table of Contents (continued)               Page Section 9.06. Binding Effect     44   Section 9.07. Assignments and Participations     44   Section 9.08. Designated Subsidiaries     47   Section 9.09. Governing Law     47   Section 9.10. Execution in Counterparts     47   Section 9.11. Jurisdiction, Etc.     47   Section 9.12. Confidentiality     48   Section 9.13. Integration     48   Section 9.14. USA Patriot Act Notice     49   SCHEDULE           Schedule I   -   List of Applicable Lending Offices Schedule II   -   Certain Subsidiary Information           EXHIBITS                   Exhibit A-1   -   Form of Pro Rata Note Exhibit A-2   -   Form of Competitive Bid Note Exhibit B-1   -   Form of Notice of Pro Rata Borrowing Exhibit B-2   -   Form of Notice of Competitive Bid Borrowing Exhibit C   -   Form of Assignment and Acceptance Exhibit D   -   Form of Designation Agreement Exhibit E-1   -   Form of Opinion of Counsel for Altria Exhibit E-2   -   Form of Opinion of Counsel for Altria Exhibit F   -   Form of Opinion of Counsel for Designated Subsidiary Exhibit G   -   Form of Opinion of Counsel for JPMorgan Chase, as Adminstrative Agent  iii --------------------------------------------------------------------------------   364-DAY REVOLVING CREDIT AGREEMENT Dated as of March 31, 2006           ALTRIA GROUP, INC., a Virginia corporation (“Altria”), the banks, financial institutions and other institutional lenders (the “Initial Lenders”) listed on the signature pages hereof, and JPMORGAN CHASE BANK, N.A. (“JPMorgan Chase”) and CITIBANK, N.A. (“Citibank”), as administrative agents (each, in such capacity, an “Administrative Agent”), CREDIT SUISSE SECURITIES (USA) LLC and DEUTSCHE BANK SECURITIES INC., as syndication agents (each, in such capacity, a “Syndication Agent”) and ABN AMRO BANK N.V., BNP PARIBAS, HSBC BANK USA, NATIONAL ASSOCIATION and UBS LOAN FINANCE LLC, as arrangers and documentation agents (each, in such capacity, an “Arranger and Documentation Agent”) for the Lenders (as hereinafter defined), agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS           Section 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):      “Advance” means a Pro Rata Advance or a Competitive Bid Advance.      “Agents” means each Administrative Agent, each Syndication Agent and each Arranger and Documentation Agent.      “Applicable Facility Fee Rate” means, for any period, a percentage per annum equal to 0.0800%.      “Applicable Interest Rate Margin” means for any Interest Period a percentage per annum equal to 0.3700% provided that for any day during any Interest Period that the aggregate amount of Advances outstanding under this Agreement and the 5-Year Facility exceeds 50% of the aggregate amount of Commitments under this Agreement and commitments under the 5-Year Facility, the Applicable Interest Rate Margin shall be increased by 0.1000% per annum.      “Applicable Lending Office” means, with respect to each Lender, such Lender’s Domestic Lending Office in the case of a Pro Rata Advance and, in the case of a Competitive Bid Advance, the office of such Lender notified by such Lender to JPMorgan Chase, as Administrative Agent, as its Applicable Lending Office with respect to such Competitive Bid Advance.      “Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by JPMorgan Chase, as Administrative Agent, in substantially the form of Exhibit C hereto.   --------------------------------------------------------------------------------        “Base Rate” means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of:                (i) the rate of interest announced publicly by JPMorgan Chase in New York, New York, from time to time, as JPMorgan Chase’s prime rate; and                (ii) 1/2 of one percent per annum above the Federal Funds Effective Rate.      “Base Rate Advance” means a Pro Rata Advance that bears interest as provided in Section 2.04(a)(i).      “Board” means the Board of Governors of the Federal Reserve System of the United States (or any successor).      “Borrowers” means, collectively, Altria and each Designated Subsidiary that shall become a party to this Agreement pursuant to Section 9.08.      “Borrowing” means a Pro Rata Borrowing or a Competitive Bid Borrowing.      “Business Day” means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any LIBO Rate Advances or Floating Rate Bid Advances, on which dealings are carried on in the London interbank market and banks are open for business in London.      “Commitment” means as to any Lender (i) the Dollar amount set forth opposite such Lender’s name on the signature pages hereof or (ii) if such Lender has entered into an Assignment and Acceptance, the Dollar amount set forth for such Lender in the Register maintained by JPMorgan Chase, as Administrative Agent, pursuant to Section 9.07(d), in each case as such amount may be reduced pursuant to Section 2.10.      “Competitive Bid Advance” means an advance by a Lender to any Borrower as part of a Competitive Bid Borrowing resulting from the competitive bidding procedure described in Section 2.07 and refers to a Fixed Rate Bid Advance or a Floating Rate Bid Advance.      “Competitive Bid Borrowing” means a borrowing consisting of simultaneous Competitive Bid Advances from each of the Lenders whose offer to make one or more Competitive Bid Advances as part of such borrowing has been accepted under the competitive bidding procedure described in Section 2.07.      “Competitive Bid Note” means a promissory note of any Borrower payable to the order of any Lender, in substantially the form of Exhibit A-2 hereto, evidencing the indebtedness of such Borrower to such Lender resulting from a Competitive Bid Advance made by such Lender to such Borrower.      “Competitive Bid Reduction” has the meaning specified in Section 2.01. 2 --------------------------------------------------------------------------------        “Consolidated Tangible Assets” means the total assets appearing on a consolidated balance sheet of Altria and its Subsidiaries (as reduced by the total assets appearing on the consolidated balance sheet of Kraft Foods Inc. and its Subsidiaries), less goodwill and other intangible assets and the minority interests of other Persons in such Subsidiaries (as reduced by the goodwill and other intangible assets of Kraft Foods Inc. and its Subsidiaries and the minority interests of other Persons in such Subsidiaries), all as determined in accordance with accounting principles generally accepted in the United States, except that if there has been a material change in an accounting principle as compared to that applied in the preparation of the financial statements of Altria and its Subsidiaries as at and for the year ended December 31, 2005, then such new accounting principle shall not be used in the determination of Consolidated Tangible Assets. A material change in an accounting principle is one that, in the year of its adoption, changes Consolidated Tangible Assets at any quarter in such year by more than 10%.      “Convert,” “Conversion” and “Converted” each refers to a conversion of Pro Rata Advances of one Type into Pro Rata Advances of the other Type pursuant to Section 2.06, 2.08 or 2.13.      “Debt” means, without duplication, (a) indebtedness for borrowed money or for the deferred purchase price of property or services, whether or not evidenced by bonds, debentures, notes or similar instruments, (b) obligations as lessee under leases that, in accordance with accounting principles generally accepted in the United States, are recorded as capital leases, (c) obligations as an account party or applicant under letters of credit (other than trade letters of credit incurred in the ordinary course of business) to the extent such letters of credit are drawn and not reimbursed within five Business Days of such drawing, (d) the aggregate principal (or equivalent) amount of financing raised through outstanding securitization financings of accounts receivable, and (e) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss (including by way of (i) granting a security interest or other Lien on property or (ii) having a reimbursement obligation under or in respect of a letter of credit or similar arrangement (to the extent such letter of credit is not collateralized by assets (other than Operating Assets) having a fair value equal to the amount of such reimbursement obligation), in either case in respect of, indebtedness or obligations of any other Person of the kinds referred to in clause (a), (b), (c) or (d) above). For the avoidance of doubt, the following shall not constitute “Debt” for purposes of this Agreement: (A) any obligation that is fully non-recourse to Altria or any of its Subsidiaries, (B) intercompany debt of Altria or any of its Subsidiaries, (C) any appeal bond or other arrangement to secure a stay of execution on a judgment or order, provided that any such appeal bond or other arrangement issued by a third party in connection with such arrangement shall constitute Debt to the extent Altria or any of its Subsidiaries has a reimbursement obligation to such third party that is not collateralized by assets (other than Operating Assets) having a fair value equal to the amount of such reimbursement obligation, (D) unpaid judgments, or (E) defeased indebtedness.      “Default” means any event specified in Section 6.01 that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. 3 --------------------------------------------------------------------------------        “Designated Subsidiary” means any wholly-owned Subsidiary of Altria designated for borrowing privileges under this Agreement pursuant to Section 9.08.      “Designation Agreement” means, with respect to any Designated Subsidiary, an agreement in the form of Exhibit D hereto signed by such Designated Subsidiary and Altria.      “Dollars” and the “$” sign each means lawful currency of the United States of America.      “Domestic Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Domestic Lending Office” opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to Altria and JPMorgan Chase, as Administrative Agent.      “Earnings Before Income Taxes” means, for any accounting period, income or loss from continuing operations for such period, as determined in accordance with accounting principles generally accepted in the United States, plus total federal, state and foreign income taxes which have been included in the determination of earnings or losses from continuing operations for such period in accordance with accounting principles generally accepted in the United States and amounts which, in the determination of earnings or losses from continuing operations for such period, have been deducted for the items referred to in the definition of the term “Fixed Charges,” except that if there has been a material change in an accounting principle as compared to that applied in the preparation of the financial statements of Altria and its Subsidiaries as at and for the year ended December 31, 2005, then such new accounting principle shall not be used in the determination of Earnings Before Income Taxes. A material change in an accounting principle is one that, in the year of its adoption, changes Earnings Before Income Taxes or Fixed Charges for any quarter in such year by more than 10%.      “Effective Date” has the meaning specified in Section 3.01.      “Eligible Assignee” means (i) a commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $5,000,000,000; (ii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (or any successor) (“OECD”), or a political subdivision of any such country, and having total assets in excess of $5,000,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD or the Cayman Islands; (iii) the central bank of any country which is a member of the OECD; (iv) a commercial finance company or finance Subsidiary of a corporation organized under the laws of the United States, or any State thereof, and having total assets in excess of $3,000,000,000; (v) an insurance company organized under the laws of the United States, or any State thereof, and having total assets in excess of $5,000,000,000; (vi) any Lender; (vii) an affiliate of any Lender; and (viii) any other bank, commercial finance company, insurance company or other Person approved in 4 --------------------------------------------------------------------------------   writing by Altria, which approval shall be notified to JPMorgan Chase, as Administrative Agent.      “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.      “ERISA Affiliate” means any Person that for purposes of Title IV of ERISA is a member of any Borrower’s controlled group, or under common control with any Borrower, within the meaning of Section 414 of the Internal Revenue Code.      “ERISA Event” means (a) (i) the occurrence with respect to a Plan of a reportable event, within the meaning of Section 4043 of ERISA, unless the 30-day notice requirement with respect thereto has been waived by the Pension Benefit Guaranty Corporation (or any successor) (“PBGC”), or (ii) the requirements of subsection (1) of Section 4043(b) of ERISA (without regard to subsection (2) of such section) are met with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of any Borrower or Altria or any of their ERISA Affiliates in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by any Borrower or Altria or any of their ERISA Affiliates from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions set forth in Section 302(f)(1)(A) and (B) of ERISA to the creation of a lien upon property or rights to property of any Borrower or Altria or any of their ERISA Affiliates for failure to make a required payment to a Plan are satisfied; (g) the adoption of an amendment to a Plan requiring the provision of security to such Plan, pursuant to Section 307 of ERISA; or (h) the termination of a Plan by the PBGC pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, a Plan.      “Eurocurrency Liabilities” has the meaning assigned to that term in Regulation D of the Board, as in effect from time to time.      “Eurocurrency Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Eurocurrency Lending Office” opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to Altria and JPMorgan Chase, as Administrative Agent. 5 --------------------------------------------------------------------------------        “Eurocurrency Rate Reserve Percentage” for any Interest Period, for all LIBO Rate Advances or Floating Rate Bid Advances comprising part of the same Borrowing, means the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on LIBO Rate Advances or Floating Rate Bid Advances is determined) having a term equal to such Interest Period.      “Event of Default” has the meaning specified in Section 6.01.      “Existing Loan Agreement” means Altria’s existing U.S.$1,000,000,000 364-Day Revolving Credit Agreement dated as of April 15, 2005.      “Federal Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as amended from time to time.      “Federal Funds Effective Rate” means, for any period, a fluctuating interest rate per annum equal, for each day during such period, to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) on Telerate Page 120 (or any successor page), or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by JPMorgan Chase, as Administrative Agent, from three Federal funds brokers of recognized standing selected by it.      “5-Year Facility” means the U.S.$4,000,000,000 5-Year Revolving Credit Agreement dated as of April 15, 2005 among Altria and the agents and lenders parties thereto.      “Fixed Charges” means, for any accounting period, the sum of (a) interest, whether expensed or capitalized, in respect of any Debt outstanding during such period, plus (b) amortization of debt expense and discount or premium relating to any Debt outstanding during such period, whether expensed or capitalized, plus (c) such portion of rental expense as can be demonstrated to be representative of the interest factor in the particular case, all as to be applicable to continuing operations and determined in accordance with accounting principles generally accepted in the United States, except that if there has been a material change in an accounting principle as compared to that applied in the preparation of the financial statements of Altria as at and for the year ended December 31, 2005, then such new accounting principle shall not be used in the determination of Fixed Charges. A material change in an accounting principle is one that, in the year of its adoption, changes Earnings Before Income Taxes or Fixed Charges for any quarter in such year by more than 10%. 6 --------------------------------------------------------------------------------        “Fixed Rate Bid Advance” means a Competitive Bid Advance bearing interest based on a fixed rate per annum as specified in the relevant Notice of Competitive Bid Borrowing.      “Floating Rate Bid Advance” means a Competitive Bid Advance bearing interest at a rate of interest quoted as a margin over the LIBO Rate as specified in the relevant Notice of Competitive Bid Borrowing.      “Home Jurisdiction Withholding Taxes” means (a) in the case of Altria, withholding for United States income taxes, United States back-up withholding taxes and United States withholding taxes and (b) in the case of a Designated Subsidiary, withholding taxes imposed by the jurisdiction under the laws of which such Designated Subsidiary is organized or any political subdivision thereof.      “Interest Period” means, for each LIBO Rate Advance comprising part of the same Pro Rata Borrowing and each Floating Rate Bid Advance comprising part of the same Competitive Bid Borrowing, the period commencing on the date of such LIBO Rate Advance or Floating Rate Bid Advance or the date of Conversion of any Base Rate Advance into such LIBO Rate Advance and ending on the last day of the period selected by the Borrower requesting such Borrowing pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, or, if available to all Lenders, nine months, as such Borrower may select upon notice received by JPMorgan Chase, as Administrative Agent, not later than 11:00 A.M. (New York City time) on the third Business Day prior to the first day of such Interest Period; provided, however, that:      (a) such Borrower may not select any Interest Period that ends after the Termination Date;      (b) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the immediately preceding Business Day; and      (c) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month.      “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and the rulings issued thereunder.      “JPMorgan Chase’s Administrative Agent Account” means (a) the account of JPMorgan Chase, as Administrative Agent, maintained by JPMorgan Chase, as Administrative Agent, at its office at 1111 Fannin, Houston, Texas 77002, Account No. 7 --------------------------------------------------------------------------------   323243088, Attention: Leah Hughes, or (b) such other account of JPMorgan Chase, as Administrative Agent, as is designated in writing from time to time by JPMorgan Chase, as Administrative Agent, to Altria and the Lenders for such purpose.      “Lenders” means the Initial Lenders and their respective successors and permitted assignees.      “LIBO Rate” means an interest rate per annum equal to either:      (a) the offered rate per annum at which deposits in Dollars appear on Telerate Page 3750 (or any successor page) as of 11:00 A.M. (London time) two Business Days before the first day of such Interest Period, or      (b) if the LIBO Rate does not appear on Telerate Page 3750 (or any successor page), then the LIBO Rate will be determined by taking the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rates per annum at which deposits in Dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period for an amount substantially equal to the amount that would be the Reference Banks’ respective ratable shares of such Borrowing outstanding during such Interest Period and for a period equal to such Interest Period, as determined by JPMorgan Chase, as Administrative Agent, subject, however, to the provisions of Section 2.08.      “LIBO Rate Advance” means a Pro Rata Advance that bears interest as provided in Section 2.04(a)(ii).      “Lien” has the meaning specified in Section 5.02(a).      “Major Subsidiary” means any Subsidiary (except Kraft Foods Inc. and any of its Subsidiaries) (a) more than 50% of the voting securities of which is owned directly or indirectly by Altria, (b) which is organized and existing under, or has its principal place of business in, the United States or any political subdivision thereof, Canada or any political subdivision thereof, any country which is a member of the European Union on the date hereof (other than Greece, Portugal or Spain) or any political subdivision thereof, or Switzerland, Norway or Australia or any of their respective political subdivisions, and (c) which has at any time total assets (after intercompany eliminations) exceeding $1,000,000,000.      “Margin Stock” means margin stock, as such term is defined in Regulation U.      “Multiemployer Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions, such plan being maintained pursuant to one or more collective bargaining agreements. 8 --------------------------------------------------------------------------------        “Multiple Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Borrower or any ERISA Affiliate and at least one Person other than such Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which such Borrower or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated.      “Note” means a Pro Rata Note or a Competitive Bid Note.      “Notice of Competitive Bid Borrowing” has the meaning specified in Section 2.07(b).      “Notice of Pro Rata Borrowing” has the meaning specified in Section 2.02(a).      “Obligations” has the meaning specified in Section 8.01.      “Operating Assets” means, for any accounting period, any assets included in the consolidated balance sheet of Altria and its Subsidiaries as “Inventories,” or “Property, plant and equipment” or “Receivables” for such period.      “Other Taxes” has the meaning specified in Section 2.15(b).      “Patriot Act” has the meaning specified in Section 9.14.      “Person” means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof.      “Plan” means a Single Employer Plan or a Multiple Employer Plan.      “Pro Rata Advance” means an advance by a Lender to any Borrower as part of a Pro Rata Borrowing and refers to a Base Rate Advance or a LIBO Rate Advance (each of which shall be a “Type” of Pro Rata Advance).      “Pro Rata Borrowing” means a borrowing consisting of simultaneous Pro Rata Advances of the same Type made by each of the Lenders pursuant to Section 2.01.      “Pro Rata Note” means a promissory note of any Borrower payable to the order of any Lender, delivered pursuant to a request made under Section 2.17 in substantially the form of Exhibit A-1 hereto, evidencing the aggregate indebtedness of such Borrower to such Lender resulting from the Pro Rata Advances made by such Lender to such Borrower.      “Reference Banks” means JPMorgan Chase, Citibank, Credit Suisse, Cayman Islands Branch and Deutsche Bank AG New York Branch.      “Register” has the meaning specified in Section 9.07(d).      “Regulation A” means Regulation A of the Board, as in effect from time to time. 9 --------------------------------------------------------------------------------        “Regulation U” means Regulation U of the Board, as in effect from time to time.      “Required Lenders” means at any time Lenders owed at least 50.1% of the then aggregate unpaid principal amount of the Pro Rata Advances owing to Lenders, or, if no such principal amount is then outstanding, Lenders having at least 50.1% of the Commitments.      “Single Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Borrower or any ERISA Affiliate and no Person other than such Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which such Borrower or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated.      “Spin-off Transaction” means the spin-off or other not for value disposition of Philip Morris International Inc. (“PMI”) such that Altria owns no more than a de minimus equity interest in PMI.      “Subsidiary” of any Person means any corporation of which (or in which) more than 50% of the outstanding capital stock having voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.      “Taxes” has the meaning specified in Section 2.15(a).      “Termination Date” means the earlier of (a) the date that is the Business Day preceding the first anniversary of the Effective Date, (b) the date that a Spin-off Transaction is effective and (c) the date of termination in whole of the Commitments pursuant to Section 2.10 or 6.02.           Section 1.02. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding.”           Section 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with accounting principles generally accepted in the United States of America, except that if there has been a material change in an accounting principle affecting the definition of an accounting term as compared to that applied in the preparation of the financial statements of Altria as of and for the year ended December 31, 2005, then such new accounting principle shall not be used in the determination of the amount associated with that accounting term. A material change in an accounting principle is one that, in the year of its adoption, changes the amount associated with the relevant accounting term for any quarter in such year by more than 10%. 10 --------------------------------------------------------------------------------   ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES           Section 2.01. The Pro Rata Advances. (a) Obligation to Make Pro Rata Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Pro Rata Advances to any Borrower from time to time on any Business Day during the period from the Effective Date until the Termination Date in an aggregate amount not to exceed at any time outstanding such Lender’s Commitment; provided, however, that the aggregate amount of the Commitments of the Lenders shall be deemed used from time to time to the extent of the aggregate amount of the Competitive Bid Advances then outstanding and such deemed use of the aggregate amount of the Commitments shall be allocated among the Lenders ratably according to their respective Commitments (such deemed use of the aggregate amount of the Commitments being a “Competitive Bid Reduction”).      (b) Amount of Pro Rata Borrowings. Each Pro Rata Borrowing shall be in an aggregate amount of no less than $50,000,000 or an integral multiple of $1,000,000 in excess thereof.      (c) Type of Pro Rata Advances. Each Pro Rata Borrowing shall consist of Pro Rata Advances of the same Type made on the same day by the Lenders ratably according to their respective Commitments. Within the limits of each Lender’s Commitment and subject to this Section 2.01, any Borrower may borrow under this Section 2.01, prepay pursuant to Section 2.11 or repay pursuant to Section 2.03 and reborrow under this Section 2.01.           Section 2.02. Making the Pro Rata Advances. (a) Notice of Pro Rata Borrowing. Each Pro Rata Borrowing shall be made on notice, given not later than (x) 11:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Pro Rata Borrowing in the case of a Pro Rata Borrowing consisting of LIBO Rate Advances, or (y) 9:00 A.M. (New York City time) on the date of the proposed Pro Rata Borrowing in the case of a Pro Rata Borrowing consisting of Base Rate Advances, by the Borrower to JPMorgan Chase, as Administrative Agent, which shall give to each Lender prompt notice thereof by telecopier. Each such notice of a Pro Rata Borrowing (a “Notice of Pro Rata Borrowing”) shall be by telephone, confirmed immediately in writing, by registered mail or telecopier in substantially the form of Exhibit B-1 hereto, specifying therein the requested:                (i) date of such Pro Rata Borrowing,                (ii) Type of Advances comprising such Pro Rata Borrowing,                (iii) aggregate amount of such Pro Rata Borrowing, and                (iv) in the case of a Pro Rata Borrowing consisting of LIBO Rate Advances, the initial Interest Period for each such Pro Rata Advance. Notwithstanding anything herein to the contrary, no Borrower may select LIBO Rate Advances for any Pro Rata Borrowing if the obligation of the Lenders to make LIBO Rate Advances shall then be suspended pursuant to Section 2.08(c) or 2.13. 11 --------------------------------------------------------------------------------        (b) Funding Pro Rata Advances. Each Lender shall, before 11:00 A.M. (New York City time) on the date of such Pro Rata Borrowing, make available for the account of its Applicable Lending Office to JPMorgan Chase, as Administrative Agent, at JPMorgan Chase’s Administrative Agent Account, in same day funds, such Lender’s ratable portion of such Pro Rata Borrowing. After receipt of such funds by JPMorgan Chase, as Administrative Agent, and upon fulfillment of the applicable conditions set forth in Article III, JPMorgan Chase, as Administrative Agent, will make such funds available to the relevant Borrower at the address of JPMorgan Chase, as Administrative Agent, referred to in Section 9.02.      (c) Irrevocable Notice. Each Notice of Pro Rata Borrowing of any Borrower shall be irrevocable and binding on such Borrower. In the case of any Pro Rata Borrowing that the related Notice of Pro Rata Borrowing specifies is to be comprised of LIBO Rate Advances, the Borrower requesting such Pro Rata Borrowing shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Pro Rata Borrowing for such Pro Rata Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Pro Rata Advance to be made by such Lender as part of such Pro Rata Borrowing when such Pro Rata Advance, as a result of such failure, is not made on such date.      (d) Lender’s Ratable Portion. Unless JPMorgan Chase, as Administrative Agent, shall have received notice from a Lender prior to 11:00 A.M. (New York City time) on the day of any Pro Rata Borrowing that such Lender will not make available to JPMorgan Chase, as Administrative Agent, such Lender’s ratable portion of such Pro Rata Borrowing, JPMorgan Chase, as Administrative Agent, may assume that such Lender has made such portion available to JPMorgan Chase, as Administrative Agent, on the date of such Pro Rata Borrowing in accordance with Section 2.02(b) and JPMorgan Chase, as Administrative Agent, may, in reliance upon such assumption, make available to the Borrower proposing such Pro Rata Borrowing on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to JPMorgan Chase, as Administrative Agent, such Lender and such Borrower severally agree to repay to JPMorgan Chase, as Administrative Agent, forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to such Borrower until the date such amount is repaid to JPMorgan Chase, as Administrative Agent, at:                (i) in the case of such Borrower, the higher of (A) the interest rate applicable at the time to Pro Rata Advances comprising such Pro Rata Borrowing and (B) the cost of funds incurred by JPMorgan Chase, as Administrative Agent, in respect of such amount, and                (ii) in the case of such Lender, the Federal Funds Effective Rate. If such Lender shall repay to JPMorgan Chase, as Administrative Agent, such corresponding amount, such amount so repaid shall constitute such Lender’s Pro Rata Advance as part of such Pro Rata Borrowing for purposes of this Agreement. 12 --------------------------------------------------------------------------------        (e) Independent Lender Obligations. The failure of any Lender to make the Pro Rata Advance to be made by it as part of any Pro Rata Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Pro Rata Advance on the date of such Pro Rata Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Pro Rata Advance to be made by such other Lender on the date of any Pro Rata Borrowing.           Section 2.03. Repayment of Pro Rata Advances. Each Borrower shall repay to JPMorgan Chase, as Administrative Agent, for the ratable account of the Lenders on the Termination Date the unpaid principal amount of the Pro Rata Advances then outstanding.           Section 2.04. Interest on Pro Rata Advances. (a) Scheduled Interest. Each Borrower shall pay interest on the unpaid principal amount of each Pro Rata Advance owing by such Borrower to each Lender from the date of such Pro Rata Advance until such principal amount shall be paid in full, at the following rates per annum:                (i) Base Rate Advances. During such periods as such Pro Rata Advance is a Base Rate Advance, a rate per annum equal at all times to the Base Rate in effect from time to time, payable in arrears monthly on the 20th day of each month and on the date such Base Rate Advance shall be Converted or paid in full.                (ii) LIBO Rate Advances. During such periods as such Pro Rata Advance is a LIBO Rate Advance, a rate per annum equal at all times during each Interest Period for such Pro Rata Advance to the sum of (x) the LIBO Rate for such Interest Period for such Pro Rata Advance plus (y) the Applicable Interest Rate Margin in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period, and on the date such LIBO Rate Advance shall be Converted or paid in full.      (b) Default Interest. Upon the occurrence and during the continuance of an Event of Default, each Borrower shall pay interest on the unpaid principal amount of each Pro Rata Advance owing to each Lender, payable in arrears on the dates referred to in Section 2.04(a)(i) or Section 2.04(a)(ii), at a rate per annum equal at all times to 1% per annum above the rate per annum required to be paid on such Pro Rata Advance.           Section 2.05. Additional Interest on LIBO Rate Advances. Each Borrower shall pay to each Lender, so long as such Lender shall be required under regulations of the Board to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional interest on the unpaid principal amount of each LIBO Rate Advance of such Lender to such Borrower, from the date of such Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the LIBO Rate for the Interest Period for such Advance from (ii) the rate obtained by dividing such LIBO Rate by a percentage equal to 100% minus the Eurocurrency Rate Reserve Percentage of such Lender for such Interest Period, payable on each date on which interest is payable on such Advance. Such additional interest shall be determined by such Lender and notified to Altria through JPMorgan Chase, as Administrative Agent. 13 --------------------------------------------------------------------------------             Section 2.06. Conversion of Pro Rata Advances. (a) Conversion Upon Absence of Interest Period. If any Borrower shall fail to select the duration of any Interest Period for any LIBO Rate Advances in accordance with the provisions contained in the definition of the term “Interest Period,” JPMorgan Chase, as Administrative Agent, will forthwith so notify such Borrower and the Lenders, and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances.      (b) Conversion Upon Event of Default. Upon the occurrence and during the continuance of any Event of Default under Section 6.01(a), JPMorgan Chase, as Administrative Agent, or the Required Lenders may elect that (i) each LIBO Rate Advance be, on the last day of the then existing Interest Period therefor, Converted into Base Rate Advances and (ii) the obligation of the Lenders to make, or to Convert Advances into, LIBO Rate Advances be suspended.      (c) Voluntary Conversion. Subject to the provisions of Sections 2.08(c) and 2.13, any Borrower may convert all such Borrower’s Pro Rata Advances of one Type constituting the same Pro Rata Borrowing into Advances of the other Type on any Business Day, upon notice given to JPMorgan Chase, as Administrative Agent, not later than 11:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Conversion; provided, however, that the Conversion of a LIBO Rate Advance into a Base Rate Advance may be made on, and only on, the last day of an Interest Period for such LIBO Rate Advance. Each such notice of a Conversion shall, within the restrictions specified above, specify                (i) the date of such Conversion;                (ii) the Pro Rata Advances to be Converted; and                (iii) if such Conversion is into LIBO Rate Advances, the duration of the Interest Period for each such Pro Rata Advance.      Section 2.07. The Competitive Bid Advances. (a) Competitive Bid Advances’ Impact on Commitments. Each Lender severally agrees that any Borrower may make Competitive Bid Borrowings under this Section 2.07 from time to time on any Business Day during the period from the Effective Date until the Termination Date in the manner set forth below; provided that, following the making of each Competitive Bid Borrowing, the aggregate amount of the Advances then outstanding shall not exceed the aggregate amount of the Commitments of the Lenders. As provided in Section 2.01, the aggregate amount of the Commitments of the Lenders shall be deemed used from time to time to the extent of the aggregate amount of the Competitive Bid Advances then outstanding, and such deemed use of the aggregate amount of the Commitments shall be applied to the Lenders ratably according to their respective Commitments; provided, however, that any Lender’s Competitive Bid Advances shall not otherwise reduce that Lender’s obligation to lend its pro rata share of the remaining available Commitments.      (b) Notice of Competitive Bid Borrowing. Any Borrower may request a Competitive Bid Borrowing under this Section 2.07 by delivering to JPMorgan Chase, as Administrative 14 --------------------------------------------------------------------------------   Agent, by telecopier, a notice of a Competitive Bid Borrowing (a “Notice of Competitive Bid Borrowing”), in substantially the form of Exhibit B-2 hereto, specifying therein the following:                (i) date of such proposed Competitive Bid Borrowing;                (ii) aggregate amount of such proposed Competitive Bid Borrowing;                (iii) interest rate basis and day count convention to be offered by the Lenders;                (iv) in the case of a Competitive Bid Borrowing consisting of Floating Rate Bid Advances, Interest Period, or in the case of a Competitive Bid Borrowing consisting of Fixed Rate Bid Advances, maturity date for repayment of each Fixed Rate Bid Advance to be made as part of such Competitive Bid Borrowing (which maturity date may not be earlier than the date occurring seven days after the date of such Competitive Bid Borrowing or later than the earlier of (A) 360 days after the date of such Competitive Bid Borrowing and (B) the Termination Date);                (v) interest payment date or dates relating thereto;                (vi) location of such Borrower’s account to which funds are to be advanced; and                (vii) other terms (if any) to be applicable to such Competitive Bid Borrowing. A Borrower requesting a Competitive Bid Borrowing shall deliver a Notice of Competitive Bid Borrowing to JPMorgan Chase, as Administrative Agent, not later than 10:00 A.M. (New York City time) (x) at least two Business Days prior to the date of the proposed Competitive Bid Borrowing, if such Borrower shall specify in the Notice of Competitive Bid Borrowing that the Competitive Bid Borrowing shall be Fixed Rate Bid Advances, or (y) at least four Business Days prior to the date of the proposed Competitive Bid Borrowing, if such Borrower shall specify in the Notice of Competitive Bid Borrowing that the Competitive Bid Borrowing shall be Floating Rate Bid Advances. Each Notice of Competitive Bid Borrowing shall be irrevocable and binding on such Borrower. JPMorgan Chase, as Administrative Agent, shall in turn promptly notify each Lender of each request for a Competitive Bid Borrowing received by it from such Borrower by sending such Lender a copy of the related Notice of Competitive Bid Borrowing.      (c) Discretion as to Competitive Bid Advances. Each Lender may, in its sole discretion, elect to irrevocably offer to make one or more Competitive Bid Advances to the applicable Borrower as part of such proposed Competitive Bid Borrowing at a rate or rates of interest specified by such Lender in its sole discretion, by notifying JPMorgan Chase, as Administrative Agent (which shall give prompt notice thereof to such Borrower), before 9:30 A.M. (New York City time) (A) on the Business Day prior to the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate Bid Advances, and (B) on the third Business Day prior to the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Floating Rate Bid Advances; provided that, if JPMorgan Chase in its capacity as a Lender shall, in its sole 15 --------------------------------------------------------------------------------   discretion, elect to make any such offer, it shall notify such Borrower of such offer at least 30 minutes before the time and on the date on which notice of such election is to be given by any other Lender to JPMorgan Chase, as Administrative Agent. In such notice, the Lender shall specify the following:                (i) the minimum amount and maximum amount of each Competitive Bid Advance which such Lender would be willing to make as part of such proposed Competitive Bid Borrowing (which amounts may, subject to the proviso to the first sentence of Section 2.07(a), exceed such Lender’s Commitment);                (ii) the rate or rates of interest therefor; and                (iii) such Lender’s Applicable Lending Office with respect to such Competitive Bid Advance. If any Lender shall elect not to make such an offer, such Lender shall so notify JPMorgan Chase, as Administrative Agent, before 9:30 A.M. (New York City time) on the date on which notice of such election is to be given to JPMorgan Chase, as Administrative Agent, by the other Lenders, and such Lender shall not be obligated to, and shall not, make any Competitive Bid Advance as part of such Competitive Bid Borrowing; provided further that the failure by any Lender to give such notice shall not cause such Lender to be obligated to make any Competitive Bid Advance as part of such proposed Competitive Bid Borrowing.      (d) Borrower Selection of Lender Bids. The Borrower proposing the Competitive Bid Borrowing shall, in turn, (A) before 12:00 noon (New York City time) on the Business Day prior to the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate Bid Advances and (B) before 12:00 noon (New York City time) on the third Business Day prior to the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Floating Rate Bid Advances, either:                (i) cancel such Competitive Bid Borrowing by giving JPMorgan Chase, as Administrative Agent, notice to that effect, or                (ii) accept, in its sole discretion, one or more of the offers made by any Lender or Lenders pursuant to Section 2.07(c), by giving notice to JPMorgan Chase, as Administrative Agent, of the amount of each Competitive Bid Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to such Borrower by JPMorgan Chase, as Administrative Agent on behalf of such Lender, for such Competitive Bid Advance pursuant to Section 2.07(c) to be made by each Lender as part of such Competitive Bid Borrowing) and reject any remaining offers made by Lenders pursuant to Section 2.07(c) by giving JPMorgan Chase, as Administrative Agent, notice to that effect. Such Borrower shall accept the offers made by any Lender or Lenders to make Competitive Bid Advances in order of the lowest to the highest rates of interest offered by such Lenders. If two or more Lenders have offered the same interest rate, the amount to be borrowed at such interest rate will be allocated among such Lenders in proportion to the maximum amount that each such Lender offered at such interest rate. 16 --------------------------------------------------------------------------------   If the Borrower proposing the Competitive Bid Borrowing notifies JPMorgan Chase, as Administrative Agent, that such Competitive Bid Borrowing is canceled pursuant to Section 2.07(d)(i), or if such Borrower fails to give timely notice in accordance with Section 2.07(d), JPMorgan Chase, as Administrative Agent, shall give prompt notice thereof to the Lenders and such Competitive Bid Borrowing shall not be made.      (e) Competitive Bid Borrowing. If the Borrower proposing the Competitive Bid Borrowing accepts one or more of the offers made by any Lender or Lenders pursuant to Section 2.07(d)(ii), JPMorgan Chase, as Administrative Agent, shall in turn promptly notify:                (i) each Lender that has made an offer as described in Section 2.07(c), whether or not any offer or offers made by such Lender pursuant to Section 2.07(c) have been accepted by such Borrower;                (ii) each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing, of the date and amount of each Competitive Bid Advance to be made by such Lender as part of such Competitive Bid Borrowing; and                (iii) each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing, upon receipt, that JPMorgan Chase, as Administrative Agent, has received forms of documents appearing to fulfill the applicable conditions set forth in Article III. When each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing has received notice pursuant to Section 2.07(e)(iii), such Lender shall, before 11:00 A.M. (New York City time), on the date of such Competitive Bid Borrowing specified in the notice received from JPMorgan Chase, as Administrative Agent, pursuant to Section 2.07(e)(i), make available for the account of its Applicable Lending Office to JPMorgan Chase, as Administrative Agent, at its address referred to in Section 9.02, in same day funds, such Lender’s portion of such Competitive Bid Borrowing. Upon fulfillment of the applicable conditions set forth in Article III and after receipt by JPMorgan Chase, as Administrative Agent, of such funds, JPMorgan Chase, as Administrative Agent, will make such funds available to such Borrower at the location specified by such Borrower in its Notice of Competitive Bid Borrowing. Promptly after each Competitive Bid Borrowing, JPMorgan Chase, as Administrative Agent, will notify each Lender of the amount of the Competitive Bid Borrowing, the consequent Competitive Bid Reduction and the dates upon which such Competitive Bid Reduction commenced and will terminate.      (f) Irrevocable Notice. If the Borrower proposing the Competitive Bid Borrowing notifies JPMorgan Chase, as Administrative Agent, that it accepts one or more of the offers made by any Lender or Lenders pursuant to Section 2.07(c), such notice of acceptance shall be irrevocable and binding on such Borrower. Such Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in the related Notice of Competitive Bid Borrowing for such Competitive Bid Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Competitive Bid 17 --------------------------------------------------------------------------------   Advance to be made by such Lender as part of such Competitive Bid Borrowing when such Competitive Bid Advance, as a result of such failure, is not made on such date.      (g) Amount of Competitive Bid Borrowings; Competitive Bid Notes. Each Competitive Bid Borrowing shall be in an aggregate amount of $50,000,000 or an integral multiple of $1,000,000 in excess thereof and, following the making of each Competitive Bid Borrowing, the aggregate amount of Advances then outstanding shall not exceed the aggregate amount of the Commitments of the Lenders. Within the limits and on the conditions set forth in this Section 2.07, any Borrower may from time to time borrow under this Section 2.07, prepay pursuant to Section 2.11 or repay pursuant to Section 2.07(h), and reborrow under this Section 2.07; provided that a Competitive Bid Borrowing shall not be made within two Business Days of the date of any other Competitive Bid Borrowing. The indebtedness of any Borrower resulting from each Competitive Bid Advance made to such Borrower as part of a Competitive Bid Borrowing shall be evidenced by a separate Competitive Bid Note of such Borrower payable to the order of the Lender making such Competitive Bid Advance.      (h) Repayment of Competitive Bid Advances. On the maturity date of each Competitive Bid Advance provided in the Competitive Bid Note evidencing such Competitive Bid Advance, the Borrower shall repay to JPMorgan Chase, as Administrative Agent, for the account of each Lender that has made a Competitive Bid Advance the then unpaid principal amount of such Competitive Bid Advance. Except as required by Section 2.11(b), no Borrower shall have any right to prepay any principal amount of any Competitive Bid Advance unless, and then only on the terms set forth in the Competitive Bid Note evidencing such Competitive Bid Advance.      (i) Interest on Competitive Bid Advances. Each Borrower that has borrowed through a Competitive Bid Borrowing shall pay interest on the unpaid principal amount of each Competitive Bid Advance from the date of such Competitive Bid Advance to the date the principal amount of such Competitive Bid Advance is repaid in full, at the rate of interest for such Competitive Bid Advance and on the interest payment date or dates set forth in the Competitive Bid Note evidencing such Competitive Bid Advance. Upon the occurrence and during the continuance of an Event of Default, such Borrower shall pay interest on the amount of unpaid principal of each Competitive Bid Advance owing to a Lender, payable in arrears on the date or dates interest is payable thereon, at a rate per annum equal at all times to 1% per annum above the rate per annum required to be paid on such Competitive Bid Advance under the terms of the Competitive Bid Note evidencing such Competitive Bid Advance unless otherwise agreed in such Competitive Bid Note.           Section 2.08. LIBO Rate Determination. (a) Methods to Determine LIBO Rate. JPMorgan Chase, as Administrative Agent, shall determine the LIBO Rate by using the methods described in the definition of the term “LIBO Rate,” and shall give prompt notice to the Borrower and Lenders of each such LIBO Rate.      (b) Role of Reference Banks. In the event that the LIBO Rate cannot be determined by the method described in clause (a) of the definition of “LIBO Rate,” each Reference Bank agrees to furnish to JPMorgan Chase, as Administrative Agent, timely information for the purpose of determining the LIBO Rate in accordance with the method described in clause (b) of 18 --------------------------------------------------------------------------------   the definition thereof. If any one or more of the Reference Banks shall not furnish such timely information to JPMorgan Chase, as Administrative Agent, for the purpose of determining a LIBO Rate, JPMorgan Chase, as Administrative Agent, shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. If fewer than two Reference Banks furnish timely information to JPMorgan Chase, as Administrative Agent, for determining the LIBO Rate for any LIBO Rate Advances or Floating Rate Bid Advances, as the case may be, then:                (i) JPMorgan Chase, as Administrative Agent, shall forthwith notify Altria and the Lenders that the interest rate cannot be determined for such LIBO Rate Advance or Floating Rate Bid Advances, as the case may be;                (ii) with respect to each LIBO Rate Advance, such Advance will, on the last day of the then existing Interest Period therefor, be prepaid by the Borrower or be automatically Converted into a Base Rate Advance; and                (iii) the obligation of the Lenders to make LIBO Rate Advances or Floating Rate Bid Advances or to Convert Base Rate Advances into LIBO Rate Advances shall be suspended until JPMorgan Chase, as Administrative Agent, shall notify Altria and the Lenders that the circumstances causing such suspension no longer exist. JPMorgan Chase, as Administrative Agent, shall give prompt notice to Altria and the Lenders of the applicable interest rate determined by JPMorgan Chase, as Administrative Agent, for purposes of Section 2.04(a)(i) or (ii), and the rate, if any, furnished by each Reference Bank for the purpose of determining the interest rate under Section 2.04(a)(ii) or the applicable LIBO Rate.      (c) Inadequate LIBO Rate. If, with respect to any LIBO Rate Advances, the Required Lenders notify JPMorgan Chase, as Administrative Agent, that (i) they are unable to obtain matching deposits in the London interbank market at or about 11:00 A.M. (London time) on the second Business Day before the making of a Borrowing in sufficient amounts to fund their respective LIBO Rate Advances as a part of such Borrowing during the Interest Period therefor or (ii) the LIBO Rate for any Interest Period for such Advances will not adequately reflect the cost to such Required Lenders of making, funding or maintaining their respective LIBO Rate Advances for such Interest Period, JPMorgan Chase, as Administrative Agent, shall forthwith so notify Altria and the Lenders, whereupon (A) the Borrower of such LIBO Rate Advances will, on the last day of the then existing Interest Period therefor, either (x) prepay such Advances or (y) Convert such Advances into Base Rate Advances and (B) the obligation of the Lenders to make, or to Convert Base Rate Advances into, LIBO Rate Advances shall be suspended until JPMorgan Chase, as Administrative Agent, shall notify Altria and the Lenders that the circumstances causing such suspension no longer exist. In the case of clause (ii) above, each Lender shall certify its cost of funds for each Interest Period to JPMorgan Chase, as Administrative Agent, and Altria as soon as practicable (but in any event not later than 10 Business Days after the last day of such Interest Period). 19 --------------------------------------------------------------------------------             Section 2.09. Fees. (a) Facility Fee. Altria agrees to pay to JPMorgan Chase, as Administrative Agent, for the account of each Lender a facility fee on the aggregate amount of such Lender’s Commitment (whether or not used and without giving effect to any Competitive Bid Reduction) from the date hereof in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the Termination Date at the Applicable Facility Fee Rate, in each case payable on the last day of each March, June, September and December until the Termination Date and on the Termination Date.      (b) Agent’s Fees. Altria shall pay to JPMorgan Chase, as Administrative Agent, for its own account such fees as may from time to time be agreed between Altria and such Agent.           Section 2.10. Termination or Reduction of the Commitments. Altria shall have the right, upon at least three Business Days’ notice to JPMorgan Chase, as Administrative Agent, to terminate in whole or reduce ratably in part the unused portions of the respective Commitments of the Lenders; provided that each partial reduction shall be in the aggregate amount of no less than $50,000,000 or the remaining balance if less than $50,000,000; and provided further that the aggregate amount of the Commitments of the Lenders shall not be reduced to an amount that is less than the aggregate principal amount of the Competitive Bid Advances then outstanding.           Section 2.11. Prepayments. (a) Optional Prepayment of Pro Rata Advances. Each Borrower may, in the case of any LIBO Rate Advance, upon at least three Business Days’ notice to JPMorgan Chase, as Administrative Agent, or, in the case of any Base Rate Advance, upon notice given to JPMorgan Chase, as Administrative Agent, not later than 9:00 A.M. (New York City time) on the date of the proposed prepayment, in each case stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given such Borrower shall, prepay the outstanding principal amount of the Pro Rata Advances comprising part of the same Pro Rata Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount of no less than $50,000,000 or the remaining balance if less than $50,000,000 and (y) in the event of any such prepayment of a LIBO Rate Advance, such Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 9.04(b).      (b) Mandatory Prepayment. The Borrower shall, on each Business Day, prepay an aggregate principal amount of the Advances equal to the amount by which (A) the aggregate principal amount of the Advances then outstanding exceeds (B) the aggregate of the Commitments (after giving effect to any Competitive Bid Reduction) on such Business Day. Prepayments under this Section 2.11(b) shall be allocated first to Base Rate Advances, ratably; any excess amount shall then be allocated to LIBO Rate Advances, in such manner as the Borrower shall determine; and any remaining amount shall be allocated to Competitive Bid Advances, in such manner as the Borrower shall determine.           Each prepayment made pursuant to this Section 2.11(b) shall be made together with any interest accrued to the date of such prepayment on the principal amounts prepaid and, in the case of any prepayment of a LIBO Rate Advance or a Floating Rate Bid Advance on a date 20 --------------------------------------------------------------------------------   other than the last day of an Interest Period or at its maturity, any additional amounts which such Borrower shall be obligated to reimburse to the Lenders in respect thereof pursuant to Section 9.04(b). JPMorgan Chase, as Administrative Agent, shall give prompt notice of any prepayment required under this Section 2.11(b) to the Borrowers and the Lenders.           Section 2.12. Increased Costs. (a) Costs from Change in Law or Authorities. If, due to either (i) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements to the extent such change is included in the Eurocurrency Rate Reserve Percentage) in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining LIBO Rate Advances or Floating Rate Bid Advances (excluding for purposes of this Section 2.12 any such increased costs resulting from (i) Taxes or Other Taxes (as to which Section 2.15 shall govern) and (ii) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender is organized or has its Applicable Lending Office or any political subdivision thereof), then the Borrower of the affected Advances shall from time to time, upon demand by such Lender (with a copy of such demand to JPMorgan Chase, as Administrative Agent), pay to JPMorgan Chase, as Administrative Agent, for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost; provided, however, that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate as to the amount of such increased cost, submitted to Altria, such Borrower and JPMorgan Chase, as Administrative Agent, by such Lender, shall be conclusive and binding for all purposes, absent manifest error.      (b) Reduction in Lender’s Rate of Return. In the event that, after the date hereof, the implementation of or any change in any law or regulation, or any guideline or directive (whether or not having the force of law) or the interpretation or administration thereof by any central bank or other authority charged with the administration thereof, imposes, modifies or deems applicable any capital adequacy or similar requirement (including, without limitation, a request or requirement which affects the manner in which any Lender allocates capital resources to its commitments, including its obligations hereunder) and as a result thereof, in the sole opinion of such Lender, the rate of return on such Lender’s capital as a consequence of its obligations hereunder is reduced to a level below that which such Lender could have achieved but for such circumstances, but reduced to the extent that Borrowings are outstanding from time to time, then in each such case, upon demand from time to time Altria shall pay to such Lender such additional amount or amounts as shall compensate such Lender for such reduction in rate of return; provided that, in the case of each Lender, such additional amount or amounts shall not exceed 0.15 of 1% per annum of such Lender’s Commitment. A certificate of such Lender as to any such additional amount or amounts shall be conclusive and binding for all purposes, absent manifest error. Except as provided below, in determining any such amount or amounts each Lender may use any reasonable averaging and attribution methods. Notwithstanding the foregoing, each Lender shall take all reasonable actions to avoid the imposition of, or reduce the amounts of, such increased costs, provided that such actions, in the reasonable judgment of such 21 --------------------------------------------------------------------------------   Lender, will not be otherwise disadvantageous to such Lender, and, to the extent possible, each Lender will calculate such increased costs based upon the capital requirements for its Commitment hereunder and not upon the average or general capital requirements imposed upon such Lender.           Section 2.13. Illegality. Notwithstanding any other provision of this Agreement, if any Lender shall notify JPMorgan Chase, as Administrative Agent, that the introduction of or any change in, or in the interpretation of, any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for any Lender or its Eurocurrency Lending Office to perform its obligations hereunder to make LIBO Rate Advances or Floating Rate Bid Advances or to fund or maintain LIBO Rate Advances or Floating Rate Bid Advances, (a) each LIBO Rate Advance or Floating Rate Bid Advances, as the case may be, will automatically, upon such demand, be Converted into a Base Rate Advance or an Advance that bears interest at the rate set forth in Section 2.04(a)(i), as the case may be, and (b) the obligation of the Lenders to make LIBO Rate Advances or Floating Rate Bid Advances or to Convert Base Rate Advances into LIBO Rate Advances shall be suspended, in each case, until JPMorgan Chase, as Administrative Agent, shall notify Altria and the Lenders that the circumstances causing such suspension no longer exist; provided, however, that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Eurocurrency Lending Office if the making of such a designation would allow such Lender or its Eurocurrency Lending Office to continue to perform its obligations to make LIBO Rate Advances or Floating Rate Bid Advances or to continue to fund or maintain LIBO Rate Advances or Floating Rate Bid Advances, as the case may be, and would not, in the judgment of such Lender, be otherwise disadvantageous to such Lender.           Section 2.14. Payments and Computations. (a) Time and Distribution of Payments. Altria and each Borrower shall make each payment hereunder, without set-off or counterclaim, not later than 11:00 A.M. (New York City time) on the day when due to JPMorgan Chase, as Administrative Agent, at JPMorgan Chase’s Administrative Agent Account in same day funds. JPMorgan Chase, as Administrative Agent, will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or facility fees ratably (other than amounts payable pursuant to Section 2.07, 2.12, 2.15 or 9.04(b)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. From and after the effective date of an Assignment and Acceptance pursuant to Section 9.07, JPMorgan Chase, as Administrative Agent, shall make all payments hereunder in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.      (b) Computation of Interest and Fees. All computations of interest based on JPMorgan Chase’s prime rate shall be made by JPMorgan Chase, as Administrative Agent, on the basis of a year of 365 or 366 days, as the case may be. All computations of interest based on the LIBO Rate or the Federal Funds Effective Rate and of facility fees shall be made by JPMorgan Chase, as Administrative Agent and all computations of interest pursuant to Section 22 --------------------------------------------------------------------------------   2.05 shall be made by a Lender, on the basis of a year of 360 days, and all computations of interest in respect of Competitive Bid Advances shall be made by JPMorgan Chase, as Administrative Agent, as specified in the applicable Notice of Competitive Bid Notice, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or facility fees are payable. Each determination by JPMorgan Chase, as Administrative Agent (or, in the case of Section 2.05 by a Lender), of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error.      (c) Payment Due Dates. Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or facility fee, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of LIBO Rate Advances or Floating Rate Bid Advances to be made in the next following calendar month, such payment shall be made on the immediately preceding Business Day.      (d) Presumption of Borrower Payment. Unless JPMorgan Chase, as Administrative Agent, receives notice from any Borrower prior to the date on which any payment is due to the Lenders hereunder that such Borrower will not make such payment in full, JPMorgan Chase, as Administrative Agent, may assume that such Borrower has made such payment in full to JPMorgan Chase, as Administrative Agent, on such date and JPMorgan Chase, as Administrative Agent, may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent such Borrower has not made such payment in full to JPMorgan Chase, as Administrative Agent, each Lender shall repay to JPMorgan Chase, as Administrative Agent, forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to JPMorgan Chase, as Administrative Agent, at the Federal Funds Effective Rate.           Section 2.15. Taxes. (a) Any and all payments by each Borrower and Altria hereunder shall be made, in accordance with Section 2.14, 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, (i) in the case of each Lender and JPMorgan Chase, as Administrative Agent, taxes imposed on its net income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender or JPMorgan Chase, as Administrative Agent (as the case may be), is organized or any political subdivision thereof, (ii) in the case of each Lender, taxes imposed on its net income, and franchise taxes imposed on it, by the jurisdiction of such Lender’s Applicable Lending Office or any political subdivision thereof, (iii) in the case of each Lender and JPMorgan Chase, as Administrative Agent, taxes imposed on its net income, franchise taxes imposed on it, and any tax imposed by means of withholding to the extent such tax is imposed solely as a result of a present or former connection (other than the execution, delivery and performance of this Agreement or a Note) between the Lender or JPMorgan Chase, as Administrative Agent, as the case may be, and the taxing jurisdiction, and (iv) in the case of each Lender and JPMorgan Chase, as Administrative Agent, taxes imposed by the United States by means of withholding tax if and to the extent that such taxes shall be in effect and shall be applicable on the date hereof to payments to be made to such Lender’s Applicable Lending Office or to JPMorgan Chase, as Administrative Agent (all such 23 --------------------------------------------------------------------------------   non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder being hereinafter referred to as “Taxes”). If any Borrower or Altria shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or JPMorgan Chase, as Administrative Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.15) such Lender or JPMorgan Chase, as Administrative Agent (as the case may be), receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower or Altria shall make such deductions and (iii) such Borrower or Altria shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.      (b) In addition, each Borrower or Altria shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, performing under, or otherwise with respect to, this Agreement (hereinafter referred to as “Other Taxes”).      (c) Each Borrower and Altria shall indemnify each Lender and JPMorgan Chase, as Administrative Agent, for and hold it harmless against the full amount of Taxes or Other Taxes (including, without limitation, Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.15) paid by such Lender or JPMorgan Chase, as Administrative Agent (as the case may be), and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender or JPMorgan Chase, as Administrative Agent (as the case may be), makes written demand therefor.      (d) Within 30 days after the date of any payment of Taxes, each Borrower and Altria shall furnish to JPMorgan Chase, as Administrative Agent, at its address referred to in Section 9.02, the original or a certified copy of a receipt evidencing such payment. If any Borrower or Altria determines that no Taxes are payable in respect thereof, such Borrower or Altria shall, at the request of JPMorgan Chase, as Administrative Agent, furnish or cause the payor to furnish, JPMorgan Chase, as Administrative Agent, and each Lender an opinion of counsel reasonably acceptable to JPMorgan Chase, as Administrative Agent, stating that such payment is exempt from Taxes.      (e) Each Lender, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender and on the date of the Assignment and Acceptance pursuant to which it becomes a Lender in the case of each other Lender, shall provide each of JPMorgan Chase, as Administrative Agent, Altria and such Borrower with any form or certificate that is required by any taxing authority (including, if applicable, two original Internal Revenue Service Forms W-9, W-8BEN or W-8ECI, as appropriate, or any successor or other form prescribed by the Internal Revenue Service), certifying that such Lender is exempt from or entitled to a reduced rate of Home Jurisdiction Withholding Taxes on payments pursuant to this Agreement. Thereafter, each such Lender shall provide additional forms or certificates (i) to the extent a form or certificate previously provided has become inaccurate or invalid or has otherwise ceased to be effective or (ii) as requested in writing by any Borrower, Altria or JPMorgan Chase, as Administrative Agent. Unless the Borrowers, Altria and JPMorgan Chase, 24 --------------------------------------------------------------------------------   as Administrative Agent, have received forms or other documents satisfactory to them indicating that payments hereunder are not subject to Home Jurisdiction Withholding Taxes or are subject to Home Jurisdiction Withholding Taxes at a rate reduced by an applicable tax treaty, such Borrower, Altria or JPMorgan Chase, as Administrative Agent, shall withhold taxes from such payments at the applicable statutory rate in the case of payments to or for any Lender.      (f) Any Lender claiming any additional amounts payable pursuant to this Section 2.15 agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to select or change the jurisdiction of its Applicable Lending Office if the making of such a selection or change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise economically disadvantageous to such Lender.      (g) No additional amounts will be payable pursuant to this Section 2.15 with respect to (i) any Home Jurisdiction Withholding Taxes that would not have been payable had the Lender provided the relevant forms or other documents pursuant to Section 2.15(e); or (ii) in the case of an Assignment and Acceptance by a Lender to an Eligible Assignee, any Home Jurisdiction Withholding Taxes that exceed the amount of such Home Jurisdiction Withholding Taxes that are imposed prior to such Assignment and Acceptance, unless such Assignment and Acceptance resulted from the demand of Altria.      (h) If any Lender or JPMorgan Chase, as Administrative Agent, as the case may be, obtains a refund of any Tax for which payment has been made pursuant to this Section 2.15, which refund in the good faith judgment of such Lender or JPMorgan Chase, as Administrative Agent, as the case may be, (and without any obligation to disclose its tax records) is allocable to such payment made under this Section 2.15, the amount of such refund (together with any interest received thereon and reduced by reasonable costs incurred in obtaining such refund) promptly shall be paid to the Borrower to the extent payment has been made in full by the Borrower pursuant to this Section 2.15.           Section 2.16. Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Pro Rata Advances owing to it (other than pursuant to Section 2.12, 2.15 or 9.04(b)) in excess of its ratable share of payments on account of the Pro Rata Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Pro Rata Advances made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender’s ratable share (according to the proportion of (i) the amount of such Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Each Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.16 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of such Borrower in the amount of such participation. 25 --------------------------------------------------------------------------------             Section 2.17. Evidence of Debt. (a) Lender Records; Pro Rata Notes. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of each Borrower to such Lender resulting from each Pro Rata Advance owing to such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder in respect of Pro Rata Advances. Each Borrower shall, upon notice by any Lender to such Borrower (with a copy of such notice to JPMorgan Chase, as Administrative Agent) to the effect that a Pro Rata Note is required or appropriate in order for such Lender to evidence (whether for purposes of pledge, enforcement or otherwise) the Pro Rata Advances owing to, or to be made by, such Lender, promptly execute and deliver to such Lender a Pro Rata Note payable to the order of such Lender in a principal amount up to the Commitment of such Lender.      (b) Record of Borrowings, Payables and Payments. The Register maintained by JPMorgan Chase, as Administrative Agent, pursuant to Section 9.07(d) shall include a control account, and a subsidiary account for each Lender, in which accounts (taken together) shall be recorded as follows:                (i) the date and amount of each Borrowing made hereunder, the Type of Advances comprising such Borrowing and, if appropriate, the Interest Period applicable thereto;                (ii) the terms of each Assignment and Acceptance delivered to and accepted by it;                (iii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder; and                (iv) the amount of any sum received by JPMorgan Chase, as Administrative Agent, from the Borrowers hereunder and each Lender’s share thereof.      (c) Evidence of Payment Obligations. Entries made in good faith by JPMorgan Chase, as Administrative Agent, in the Register pursuant to Section 2.17(b), and by each Lender in its account or accounts pursuant to Section 2.17(a), shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from each Borrower to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement, absent manifest error; provided, however, that the failure of JPMorgan Chase, as Administrative Agent, or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of any Borrower under this Agreement.           Section 2.18. Use of Proceeds. The proceeds of the Advances shall be available (and each Borrower agrees that it shall use such proceeds) for general corporate purposes of Altria and its Subsidiaries. 26 --------------------------------------------------------------------------------   ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING           Section 3.01. Conditions Precedent to Effectiveness. This Agreement shall become effective on and as of the first date (the “Effective Date”) on which the following conditions precedent have been satisfied:      (a) Altria shall have notified each Lender and JPMorgan Chase, as Administrative Agent, in writing as to the proposed Effective Date.      (b) On the Effective Date, the following statements shall be true and JPMorgan Chase, as Administrative Agent, shall have received for the account of each Lender a certificate signed by a duly authorized officer of Altria, dated the Effective Date, stating that:                (i) the representations and warranties contained in Section 4.01 are correct on and as of the Effective Date, and                (ii) no event has occurred and is continuing that constitutes a Default or Event of Default.      (c) JPMorgan Chase, as Administrative Agent, shall have received on or before the Effective Date copies of the letter from Altria dated on or before such day, terminating in whole the commitments of the banks party to the Existing Loan Agreement.      (d) Prior to or simultaneously with the Effective Date, Altria shall have satisfied all of its obligations under the Existing Loan Agreement including, without limitation, the payment of all loans, accrued interest and fees under the Existing Loan Agreement.      (e) JPMorgan Chase, as Administrative Agent, shall have received on or before the Effective Date the following, each dated such day, in form and substance satisfactory to JPMorgan Chase, as Administrative Agent:                (i) Certified copies of the resolutions of the Board of Directors of Altria approving this Agreement, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement.                (ii) A certificate of the Secretary or an Assistant Secretary of Altria certifying the names and true signatures of the officers of Altria authorized to sign this Agreement and the other documents to be delivered hereunder.                (iii) Favorable opinions of counsel (which may be in-house counsel) for Altria, substantially in the form of Exhibits E-1 and E-2 hereto.                (iv) A favorable opinion of Simpson Thacher & Bartlett LLP, counsel for JPMorgan Chase, as Administrative Agent, substantially in the form of Exhibit G hereto. 27 --------------------------------------------------------------------------------        (f) This Agreement shall have been executed by Altria, JPMorgan Chase and Citibank, as Administrative Agents, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., as Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas, HSBC Bank USA, National Association and UBS Loan Finance LLC, as Arrangers and Documentation Agents, and JPMorgan Chase, as Administrative Agent, shall have been notified by each Initial Lender that such Initial Lender has executed this Agreement. JPMorgan Chase, as Administrative Agent, shall notify Altria and the Initial Lenders of the date which is the Effective Date upon satisfaction of all of the conditions precedent set forth in this Section 3.01. For purposes of determining compliance with the conditions specified in this Section 3.01, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of JPMorgan Chase, as Administrative Agent, responsible for the transactions contemplated by this Agreement shall have received notice from such Lender prior to the date that Altria, by notice to the Lenders, designates as the proposed Effective Date, specifying its objection thereto.           Section 3.02. Initial Advance to Each Designated Subsidiary. The obligation of each Lender to make an initial Advance to each Designated Subsidiary following any designation of such Designated Subsidiary as a Borrower hereunder pursuant to Section 9.08 is subject to the receipt by JPMorgan Chase, as Administrative Agent, on or before the date of such initial Advance of each of the following, in form and substance satisfactory to JPMorgan Chase, as Administrative Agent, and dated such date, and in sufficient copies for each Lender:      (a) Certified copies of the resolutions of the Board of Directors of such Designated Subsidiary (with a certified English translation if the original thereof is not in English) approving this Agreement, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement.      (b) A certificate of a proper officer of such Designated Subsidiary certifying the names and true signatures of the officers of such Designated Subsidiary authorized to sign the Designation Agreement and the other documents to be delivered hereunder.      (c) A certificate signed by a duly authorized officer of the Designated Subsidiary, dated as of the date of such initial Advance, certifying that such Designated Subsidiary shall have obtained all governmental and third party authorizations, consents, approvals (including exchange control approvals) and licenses required under applicable laws and regulations necessary for such Designated Subsidiary to execute and deliver the Designation Agreement and to perform its obligations hereunder.      (d) The Designation Agreement of such Designated Subsidiary, substantially in the form of Exhibit D hereto.      (e) A favorable opinion of counsel (which may be in-house counsel) to such Designated Subsidiary, dated the date of such initial Advance, covering, to the extent customary and appropriate for the relevant jurisdiction, the opinions outlined on Exhibit F hereto. 28 --------------------------------------------------------------------------------        (f) Such other approvals, opinions or documents as any Lender, through JPMorgan Chase, as Administrative Agent, may reasonably request.           Section 3.03. Conditions Precedent to Each Pro Rata Borrowing. The obligation of each Lender to make a Pro Rata Advance on the occasion of each Pro Rata Borrowing is subject to the conditions precedent that the Effective Date shall have occurred and on the date of such Pro Rata Borrowing the following statements shall be true, and the acceptance by the Borrower of the proceeds of such Pro Rata Borrowing shall be a representation by such Borrower or Altria, as the case may be, that:      (a) the representations and warranties contained in Section 4.01 (except the representations set forth in the last sentence of subsection (e) and in subsection (f) thereof (other than clause (i) thereof)) are correct on and as of the date of such Pro Rata Borrowing, before and after giving effect to such Pro Rata Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, and, if such Pro Rata Borrowing shall have been requested by a Designated Subsidiary, the representations and warranties of such Designated Subsidiary contained in its Designation Agreement are correct on and as of the date of such Pro Rata Borrowing, before and after giving effect to such Pro Rata Borrowing and to the application of the proceeds therefrom, as though made on and as of such date;      (b) after giving effect to the application of the proceeds of all Borrowings on such date (together with any other resources of the Borrower applied together therewith) no event has occurred and is continuing, or would result from such Pro Rata Borrowing, that constitutes a Default or Event of Default; and      (c) if such Pro Rata Borrowing is in an aggregate principal amount equal to or greater than $500,000,000 and is being made in connection with any purchase of shares of such Borrower’s or Altria’s capital stock or the capital stock of any other Person, or any purchase of all or substantially all of the assets of any Person (whether in one transaction or a series of transactions) or any transaction of the type referred to in Section 5.02(b), the statement in (b) above shall also be true on a pro forma basis as if such transaction or purchase shall have been completed.           Section 3.04. Conditions Precedent to Each Competitive Bid Borrowing. The obligation of each Lender that is to make a Competitive Bid Advance on the occasion of a Competitive Bid Borrowing is subject to the conditions precedent that (i) JPMorgan Chase, as Administrative Agent, shall have received the written confirmatory Notice of Competitive Bid Borrowing with respect thereto, (ii) on or before the date of such Competitive Bid Borrowing, but prior to such Competitive Bid Borrowing, JPMorgan Chase, as Administrative Agent, shall have received a Competitive Bid Note payable to the order of such Lender for each of the one or more Competitive Bid Advances to be made by such Lender as part of such Competitive Bid Borrowing, in a principal amount equal to the principal amount of the Competitive Bid Advance to be evidenced thereby and otherwise on such terms as were agreed to for such Competitive Bid Advance in accordance with Section 2.07, and (iii) on the date of such Competitive Bid Borrowing the following statements shall be true, and the acceptance by the Borrower of the proceeds of such Competitive Bid Borrowing shall be a representation by such Borrower or Altria, as the case may be, that: 29 --------------------------------------------------------------------------------        (a) the representations and warranties contained in Section 4.01 are correct on and as of the date of such Competitive Bid Borrowing, before and after giving effect to such Competitive Bid Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, and, if such Competitive Bid Borrowing shall have been requested by a Designated Subsidiary, the representations and warranties of such Designated Subsidiary contained in its Designation Agreement are correct on and as of the date of such Competitive Bid Borrowing, before and after giving effect to such Competitive Bid Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, and      (b) after giving effect to the application of the proceeds of all Borrowings on such date (together with any other resources of the Borrower applied together therewith), no event has occurred and is continuing, or would result from such Competitive Bid Borrowing that constitutes a Default or Event of Default. ARTICLE IV REPRESENTATIONS AND WARRANTIES           Section 4.01. Representations and Warranties of Altria. Altria represents and warrants as follows:      (a) It is a corporation duly organized, validly existing and in good standing under the laws of Virginia.      (b) The execution, delivery and performance of this Agreement and the Notes to be delivered by it are within its corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) its charter or by-laws or (ii) in any material respect, any law, rule, regulation or order of any court or governmental agency or any contractual restriction binding on or affecting it.      (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by it of this Agreement or the Notes to be delivered by it.      (d) This Agreement is, and each of the Notes to be delivered by it when delivered hereunder will be, a legal, valid and binding obligation of Altria enforceable against Altria in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.      (e) As reported in Altria’s Annual Report on Form 10-K for the year ended December 31, 2005, the consolidated balance sheets of Altria and its Subsidiaries as of December 31, 2005 and the consolidated statements of earnings of Altria and its Subsidiaries for the year then ended fairly present, in all material respects, the consolidated financial position of Altria and its Subsidiaries as at such date and the consolidated results of the operations of Altria 30 --------------------------------------------------------------------------------   and its Subsidiaries for the year ended on such date, all in accordance with accounting principles generally accepted in the United States. Except as disclosed in Altria’s Annual Report on Form 10-K for the year ended December 31, 2005, and in any Current Report on Form 8-K filed subsequent to December 31, 2005 but prior to March 31, 2006, since December 31, 2005 there has been no material adverse change in such position or operations.      (f) There is no pending or threatened action or proceeding affecting it or any of its Subsidiaries before any court, governmental agency or arbitrator (a “Proceeding”) (i) that purports to affect the legality, validity or enforceability of this Agreement or (ii) except for Proceedings disclosed in Altria’s Annual Report on Form 10-K for the year ended December 31, 2005, any Current Report on Form 8-K filed subsequent to December 31, 2005 but prior to March 31, 2006 and, with respect to Proceedings commenced after the date of the most recent such document but prior to March 31, 2006, a certificate delivered to the Lenders, that may materially adversely affect the financial position or results of operations of Altria and its Subsidiaries taken as a whole.      (g) It owns directly or indirectly 100% of the capital stock of each other Borrower.      (h) None of the proceeds of any Advance will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any Margin Stock or for any other purpose that would constitute the Advances as a “purpose credit” within the meaning of Regulation U and, in each case, would constitute a violation of Regulation U. ARTICLE V COVENANTS OF ALTRIA           Section 5.01. Affirmative Covenants. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, Altria will:      (a) Compliance with Laws, Etc. Comply, and cause each Major Subsidiary to comply, in all material respects, with all applicable laws, rules, regulations and orders (such compliance to include, without limitation, complying with ERISA and paying before the same become delinquent all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith), noncompliance with which would materially adversely affect the financial condition or operations of Altria and its Subsidiaries taken as a whole.      (b) Maintenance of Ratio of Earnings Before Income Taxes to Fixed Charges. Maintain a ratio of aggregate consolidated Earnings Before Income Taxes for the four most recent fiscal quarters for which consolidated statements of earnings have been delivered pursuant to Section 5.01(c)(i) or (ii) hereof to consolidated Fixed Charges for such four most recent fiscal quarters of not less than 2.5 to 1.0; provided that an amount or amounts up to an aggregate of $5,000,000,000 expensed by Altria (or any Subsidiary thereof) in connection with the settlement of tobacco-related litigation or for bonding or other similar expenses incurred in order to obtain a 31 --------------------------------------------------------------------------------   stay of execution, during the applicable four-quarter period, will not be included in such calculation.      (c) Reporting Requirements. Furnish to the Lenders:                (i) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of Altria, an unaudited interim condensed consolidated balance sheet of Altria and its Subsidiaries as of the end of such quarter and unaudited interim condensed consolidated statements of earnings of Altria and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by the chief financial officer of Altria;                (ii) as soon as available and in any event within 100 days after the end of each fiscal year of Altria, a copy of the consolidated financial statements for such year for Altria and its Subsidiaries, audited by PricewaterhouseCoopers LLP (or other independent auditors which, as of the date of this Agreement, are one of the “big four” accounting firms);                (iii) all reports which Altria sends to any of its shareholders, and copies of all reports on Form 8-K (or any successor forms adopted by the Securities and Exchange Commission) which Altria files with the Securities and Exchange Commission;                (iv) as soon as possible and in any event within five days after the occurrence of each Event of Default and each Default, continuing on the date of such statement, a statement of the chief financial officer or treasurer of Altria setting forth details of such Event of Default or Default and the action which Altria has taken and proposes to take with respect thereto; and                (v) such other information respecting the condition or operations, financial or otherwise, of Altria or any Major Subsidiary as any Lender through JPMorgan Chase, as Administrative Agent, may from time to time reasonably request. In lieu of furnishing the Lenders the items referred to in clauses (i), (ii) and (iii) above, Altria may make such items available on the internet at www.altria.com (which website includes an option to subscribe to a free service alerting subscribers by e-mail of new Securities and Exchange Commission filings) or any successor or replacement website thereof, or by similar electronic means.           Section 5.02. Negative Covenants. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, Altria will not:      (a) Liens, Etc. Create or suffer to exist, or permit any Major Subsidiary to create or suffer to exist, any lien, security interest or other charge or encumbrance (other than operating leases and licensed intellectual property), or any other type of preferential arrangement (“Liens”), upon or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any Major Subsidiary to assign, any right to receive income, in each case to secure or provide for the payment of any Debt of any Person, other than: 32 --------------------------------------------------------------------------------                  (i) Liens upon or in property acquired or held by it or any Major Subsidiary in the ordinary course of business to secure the purchase price of such property or to secure indebtedness incurred solely for the purpose of financing the acquisition of such property;                (ii) Liens existing on property at the time of its acquisition (other than any such lien or security interest created in contemplation of such acquisition);                (iii) Liens existing on the date hereof securing Debt;                (iv) Liens on property financed through the issuance of industrial revenue bonds in favor of the holders of such bonds or any agent or trustee therefor;                (v) Liens existing on property of any Person acquired by Altria or any Major Subsidiary;                (vi) Liens securing Debt in an aggregate amount not in excess of 15% of Consolidated Tangible Assets;                (vii) Liens upon or with respect to “margin stock” as that term is defined in Regulation U;                (viii) Liens in favor of Altria or any Major Subsidiary;                (ix) Liens in connection with leasing, sale and leaseback and structured finance transactions conducted in the ordinary course of business of Philip Morris Capital Corporation, provided that any such Liens that secure the payment of Debt are without recourse to the general credit or assets of Altria and its Major Subsidiaries;                (x) precautionary Liens provided by Altria or any Major Subsidiary in connection with the sale, assignment, transfer or other disposition of assets by Altria or such Major Subsidiary which transaction is determined by the Board of Directors of Altria or such Major Subsidiary to constitute a “sale” under accounting principles generally accepted in the United States; or                (xi) any extension, renewal or replacement of the foregoing, provided that (A) such Lien does not extend to any additional assets (other than a substitution of like assets), and (B) the amount of Debt secured by any such Lien is not increased.      (b) Mergers, Etc. Consolidate with or merge into, or convey or transfer its properties and assets substantially as an entirety to, any Person, or permit any Subsidiary directly or indirectly owned by it to do so, unless, immediately after giving effect thereto, no Default or Event of Default would exist and, in the case of any merger or consolidation to which it is a party, the surviving corporation is Altria or was a Subsidiary of Altria immediately prior to such merger or consolidation, which is organized and existing under the laws of the United States of America or any State thereof, or the District of Columbia. The surviving corporation of any merger or consolidation involving Altria or any other Borrower shall assume all of Altria’s or such Borrower’s obligations under this Agreement (including without limitation with respect to 33 --------------------------------------------------------------------------------   Altria’s obligations, the covenants set forth in Article V) by the execution and delivery of an instrument in form and substance satisfactory to the Required Lenders. ARTICLE VI EVENTS OF DEFAULT           Section 6.01. Events of Default. Each of the following events (each an “Event of Default”) shall constitute an Event of Default:      (a) Any Borrower or Altria shall fail to pay any principal of any Advance when the same becomes due and payable; or any Borrower shall fail to pay interest on any Advance, or Altria shall fail to pay any fees payable under Section 2.09, within ten days after the same becomes due and payable; or      (b) Any representation or warranty made or deemed to have been made by any Borrower or Altria herein or by any Borrower or Altria (or any of their respective officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made or deemed to have been made; or      (c) Any Borrower or Altria shall fail to perform or observe (i) any term, covenant or agreement contained in Section 5.01(b) or 5.02(b), (ii) any term, covenant or agreement contained in Section 5.02(a) if such failure shall remain unremedied for 15 days after written notice thereof shall have been given to Altria by JPMorgan Chase, as Administrative Agent, or any Lender or (iii) any other term, covenant or agreement contained in this Agreement on its part to be performed or observed if such failure shall remain unremedied for 30 days after written notice thereof shall have been given to Altria by JPMorgan Chase, as Administrative Agent, or any Lender; or      (d) Any Borrower or Altria or any Major Subsidiary shall fail to pay any principal of or premium or interest on any Debt which is outstanding in a principal amount of at least $100,000,000 in the aggregate (but excluding Debt arising under this Agreement) of such Borrower or Altria or such Major Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt unless adequate provision for any such payment has been made in form and substance satisfactory to the Required Lenders; or any Debt of any Borrower or Altria or any Major Subsidiary which is outstanding in a principal amount of at least $100,000,000 in the aggregate (but excluding Debt arising under this Agreement) shall be declared to be due and payable, or required to be prepaid (other than by a scheduled required prepayment), redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof unless adequate provision for the payment of such Debt has been made in form and substance satisfactory to the Required Lenders; or      (e) Any Borrower or Altria or any Major Subsidiary shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall 34 --------------------------------------------------------------------------------   make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Borrower or Altria or any Major Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property, and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or for any of its property constituting a substantial part of the property of Altria and its Subsidiaries taken as a whole) shall occur; or any Borrower or Altria or any Major Subsidiary shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or      (f) Any judgment or order for the payment of money in excess of $100,000,000 shall be rendered against any Borrower or Altria or any Major Subsidiary and there shall be any period of 60 consecutive days during which a stay of enforcement of such unsatisfied judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; provided that such 60-day stay period shall be extended for a period not to exceed an additional 120 days if (i) Altria, such Borrower or such Major Subsidiary is contesting such judgment or enforcement of such judgment in good faith, unless, with respect only to judgments or orders rendered outside the United States, such action is not reasonably required to protect its respective assets from levy or garnishment, and (ii) no assets with a fair market value in excess of $100,000,000 of Altria, such Borrower or such Major Subsidiary have been levied upon or garnished to satisfy such judgment; provided, further, that such 60-day stay period shall be further extended for any judgment or order rendered outside the United States until such time as the conditions in clauses (i) or (ii) are no longer satisfied; or      (g) Any Borrower, Altria or any ERISA Affiliate shall incur, or shall be reasonably likely to incur, liability in excess of $500,000,000 in the aggregate as a result of one or more of the following: (i) the occurrence of any ERISA Event; (ii) the partial or complete withdrawal of any Borrower, Altria or any ERISA Affiliate from a Multiemployer Plan; or (iii) the reorganization or termination of a Multiemployer Plan; provided, however, that no Default or Event of Default under this Section 6.01(g) shall be deemed to have occurred if the Borrower, Altria or any ERISA Affiliate shall have made arrangements satisfactory to the PBGC or the Required Lenders to discharge or otherwise satisfy such liability (including the posting of a bond or other security); or      (h) So long as any Subsidiary of Altria is a Designated Subsidiary, the guaranty provided by Altria under Article VIII hereof shall for any reason cease to be valid and binding on Altria or Altria shall so state in writing.           Section 6.02. Lenders’ Rights upon Event of Default. If an Event of Default occurs or is continuing, then JPMorgan Chase, as Administrative Agent, shall at the request, or may with the consent, of the Required Lenders, by notice to Altria and the Borrowers: 35 --------------------------------------------------------------------------------        (a) declare the obligation of each Lender to make further Advances to be terminated, whereupon the same shall forthwith terminate, and      (b) declare all the Advances then outstanding, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances then outstanding, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrowers; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to any Borrower under the Federal Bankruptcy Code, (i) the obligation of each Lender to make Advances shall automatically be terminated and (ii) the Advances then outstanding, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrowers. ARTICLE VII THE ADMINISTRATIVE AGENTS           Section 7.01. Authorization and Action. Each Lender hereby appoints and authorizes the Administrative Agents to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Administrative Agents by the terms hereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), the Administrative Agents shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that no Administrative Agent shall be required to take any action that exposes such Administrative Agent to personal liability or that is contrary to this Agreement or applicable law. Each of the Administrative Agents agrees to give to each Lender prompt notice of each notice given to it by Altria or any Borrower as required by the terms of this Agreement or at the request of Altria or such Borrower, and any notice provided pursuant to Section 5.01(c)(iv).           Section 7.02. Administrative Agents’ Reliance, Etc. Neither the Administrative Agents nor any of their directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agents:      (a) may treat the Lender that made any Advance as the holder of the Debt resulting therefrom until JPMorgan Chase, as Administrative Agent, receives and accepts an Assignment and Acceptance entered into by such Lender, as assignor, and an Eligible Assignee, as assignee, as provided in Section 9.07; 36 --------------------------------------------------------------------------------        (b) may consult with legal counsel (including counsel for Altria or any Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts;      (c) make no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement;      (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of Altria or any Borrower or to inspect the property (including the books and records) of Altria or such Borrower;      (e) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and      (f) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier, telegram or telex) believed by it to be genuine and signed or sent by the proper party or parties.           Section 7.03. JPMorgan Chase, Citibank and Affiliates. With respect to its Commitment and the Advances made by it, each of JPMorgan Chase and Citibank shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not an Administrative Agent; and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include JPMorgan Chase and Citibank in their individual capacities. JPMorgan Chase and Citibank and their affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, Altria, any Borrower, any of its Subsidiaries and any Person who may do business with or own securities of Altria, any Borrower or any such Subsidiary, all as if JPMorgan Chase and Citibank were not Administrative Agents and without any duty to account therefor to the Lenders.           Section 7.04. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon either Administrative Agent, either Syndication Agent, any Arranger and Documentation Agent, or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Administrative Agent, Syndication Agent, Arranger and Documentation Agent, or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.           Section 7.05. Indemnification. The Lenders agree to indemnify each Administrative Agent (to the extent not reimbursed by Altria or the Borrowers), ratably according to the respective principal amounts of the Pro Rata Advances then owing to each of 37 --------------------------------------------------------------------------------   them (or if no Pro Rata Advances are at the time outstanding, ratably according to the respective amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by such Administrative Agent under this Agreement (collectively, the “Indemnified Costs”), provided that no Lender shall be liable for any portion of the Indemnified Costs resulting from such Administrative Agent’s gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse such Administrative Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by such Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that such Administrative Agent is not reimbursed for such expenses by Altria or the Borrowers. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Costs, this Section 7.05 applies whether any such investigation, litigation or proceeding is brought by any Administrative Agent, any Lender or a third party.           Section 7.06. Successor Administrative Agents. An Administrative Agent may resign at any time by giving written notice thereof to the Lenders and Altria and may be removed at any time with or without cause by the Required Lenders. Upon the resignation or removal of JPMorgan Chase, as Administrative Agent, Citibank, as Administrative Agent, shall succeed to and become vested with all the rights, powers, discretion, privileges and duties of JPMorgan Chase, as Administrative Agent, and JPMorgan Chase, as Administrative Agent shall be discharged from its duties and obligations under this Agreement. Upon any other such resignation or removal which results in there being no Administrative Agent hereunder, the Required Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent’s giving of notice of resignation or the Required Lenders’ removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent’s resignation or removal hereunder as Administrative Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement.           Section 7.07. Syndication Agents and Arrangers and Documentation Agents. Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. have been designated as Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas, HSBC Bank USA, National Association and UBS Loan Finance LLC have been designated as Arrangers and Documentation 38 --------------------------------------------------------------------------------   Agents, under this Agreement, but the use of such titles does not impose on any of them any duties or obligations greater than those of any other Lender. ARTICLE VIII GUARANTY           Section 8.01. Guaranty. Altria hereby unconditionally and irrevocably guarantees (the undertaking of Altria contained in this Article VIII being the “Guaranty”) the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all obligations of each Borrower now or hereafter existing under this Agreement, whether for principal, interest, fees, expenses or otherwise (such obligations being the “Obligations”), and any and all expenses (including counsel fees and expenses) incurred by JPMorgan Chase, as Administrative Agent, or the Lenders in enforcing any rights under the Guaranty.           Section 8.02. Guaranty Absolute. Altria guarantees that the Obligations will be paid strictly in accordance with the terms of this Agreement, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of JPMorgan Chase, as Administrative Agent, or the Lenders with respect thereto. The liability of Altria under this Guaranty shall be absolute and unconditional irrespective of:      (a) any lack of validity, enforceability or genuineness of any provision of this Agreement or any other agreement or instrument relating thereto;      (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from this Agreement;      (c) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Obligations; or      (d) any other circumstance which might otherwise constitute a defense available to, or a discharge of, a Borrower or Altria.           This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by JPMorgan Chase, as Administrative Agent, or any Lender upon the insolvency, bankruptcy or reorganization of a Borrower or otherwise, all as though such payment had not been made.           Section 8.03. Waivers. (a) Altria hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations and this Guaranty and any requirement that JPMorgan Chase, as Administrative Agent, or any Lender protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against a Borrower or any other Person or any collateral.      (b) Altria hereby irrevocably waives any claims or other rights that it may now or hereafter acquire against any Borrower that arise from the existence, payment, performance or 39 --------------------------------------------------------------------------------   enforcement of Altria’s obligations under this Guaranty or this Agreement, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of JPMorgan Chase, as Administrative Agent, or any Lender against such Borrower or any collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from such Borrower, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right. If any amount shall be paid to Altria in violation of the preceding sentence at any time prior to the later of the cash payment in full of the Obligations and all other amounts payable under this Guaranty and the Termination Date, such amount shall be held in trust for the benefit of JPMorgan Chase, as Administrative Agent, and the Lenders and shall forthwith be paid to JPMorgan Chase, as Administrative Agent, to be credited and applied to the Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of this Agreement and this Guaranty, or to be held as collateral for any Obligations or other amounts payable under this Guaranty thereafter arising. Altria acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Agreement and this Guaranty and that the waiver set forth in this Section 8.03(b) is knowingly made in contemplation of such benefits.           Section 8.04. Continuing Guaranty. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until payment in full (after the Termination Date) of the Obligations and all other amounts payable under this Guaranty, (b) be binding upon Altria, its successors and assigns, and (c) inure to the benefit of and be enforceable by the Lenders, JPMorgan Chase, as Administrative Agent, and their respective successors, transferees and assigns. ARTICLE IX MISCELLANEOUS           Section 9.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement, nor consent to any departure by any Borrower or Altria therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders affected thereby, do any of the following: (a) waive any of the conditions specified in Sections 3.01 and 3.02, (b) increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (c) reduce the principal of, or interest on, the Pro Rata Advances or any fees or other amounts payable hereunder, (d) postpone any date fixed for any payment of principal of, or interest on, the Pro Rata Advances or any fees or other amounts payable hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Pro Rata Advances, or the number of Lenders, that shall be required for the Lenders or any of them to take any action hereunder, (f) release Altria from any of its obligations under Article VIII or (g) amend this Section 9.01; provided further that no waiver of the conditions specified in Section 3.04 in connection with any Competitive Bid Borrowing shall be effective unless consented to by all Lenders making Competitive Bid Advances as part of such Competitive Bid Borrowing; and provided further that no amendment, 40 --------------------------------------------------------------------------------   waiver or consent shall, unless in writing and signed by JPMorgan Chase, as Administrative Agent, in addition to the Lenders required above to take such action, affect the rights or duties of JPMorgan Chase, as Administrative Agent, under this Agreement or any Pro Rata Advance.           Section 9.02. Notices, Etc. (a) Addresses. All notices and other communications provided for hereunder shall be in writing (including telecopier communication) and mailed, telecopied, or delivered, as follows:           if to any Borrower:           c/o Altria Group, Inc.     120 Park Avenue     New York, New York 10017     Attention: Vice President and Treasurer     Fax number: (917) 663-5067;           with a copy to:           Altria Corporate Services, Inc.     120 Park Avenue     New York, New York 10017     Attention: Treasury Department — Debt Administration     Fax number: (917) 663-5345;           if to Altria, as guarantor:           Altria Group, Inc.     120 Park Avenue     New York, New York 10017     Attention: Secretary     Fax number: (917) 663-5372;           if to any Initial Lender, at its Domestic Lending Office specified opposite its name on Schedule I hereto;           if to any other Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender;           if to JPMorgan Chase, as Administrative Agent:           c/o JPMorgan Chase Bank, N.A.     270 Park Avenue, 4th Floor     New York, New York 10017     Attention: Robert Sacks     Fax number: (212) 270-6637;           with a copy to: 41 --------------------------------------------------------------------------------             JPMorgan Chase Bank, N.A.     Loan and Agency     1111 Fannin     10th Floor     Houston, Texas 77002     Attention: Leah Hughes     Fax number: (713) 750-2932 and     Jenny Y. Lin     Fax number: (713) 750-2932; or as to any Borrower, Altria or JPMorgan Chase, as Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to Altria and JPMorgan Chase, as Administrative Agent.      (b) Effectiveness of Notices. All such notices and communications shall, when mailed or telecopied, be effective when deposited in the mail or telecopied, respectively, except that notices and communications to JPMorgan Chase, as Administrative Agent, pursuant to Article II, III or VII shall not be effective until received by JPMorgan Chase, as Administrative Agent. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof.           Section 9.03. No Waiver; Remedies. No failure on the part of any Lender or JPMorgan Chase, as Administrative Agent, to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.           Section 9.04. Costs and Expenses. (a) Administrative Agent; Enforcement. Altria agrees to pay on demand all reasonable costs and expenses in connection with the preparation, execution, delivery, administration (excluding any cost or expenses for administration related to the overhead of JPMorgan Chase, as Administrative Agent), modification and amendment of this Agreement and the documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for JPMorgan Chase, as Administrative Agent, with respect thereto and with respect to advising JPMorgan Chase, as Administrative Agent, as to its rights and responsibilities under this Agreement, and all costs and expenses of the Lenders and JPMorgan Chase, as Administrative Agent, if any (including, without limitation, reasonable counsel fees and expenses of the Lenders and JPMorgan Chase, as Administrative Agent), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement and the other documents to be delivered hereunder.      (b) Prepayment of LIBO Rate Advances or Floating Rate Bid Advances. If any payment of principal of LIBO Rate Advance or Floating Rate Bid Advance is made other than on the last day of the Interest Period for such Advance or at its maturity, as a result of a payment 42 --------------------------------------------------------------------------------   pursuant to Section 2.11, acceleration of the maturity of the Advances pursuant to Section 6.02, an assignment made as a result of a demand by Altria pursuant to Section 9.07(a) or for any other reason, Altria shall, upon demand by any Lender (with a copy of such demand to JPMorgan Chase, as Administrative Agent), pay to JPMorgan Chase, as Administrative Agent, for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses which it may reasonably incur as a result of such payment, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. Without prejudice to the survival of any other agreement of any Borrower or Altria hereunder, the agreements and obligations of each Borrower and Altria contained in Section 2.02(c), 2.05, 2.12, 2.15 and this Section 9.04(b) shall survive the payment in full of principal and interest hereunder.      (c) Indemnification. Each Borrower and Altria jointly and severally agree to indemnify and hold harmless the Administrative Agents and each Lender and each of their respective affiliates, control persons, directors, officers, employees, attorneys and agents (each, an “Indemnified Party”) from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and disbursements of counsel) which may be incurred by or asserted against any Indemnified Party, in each case in connection with or arising out of, or in connection with the preparation for or defense of, any investigation, litigation, or proceeding (i) related to any transaction or proposed transaction (whether or not consummated) in which any proceeds of any Borrowing are applied or proposed to be applied, directly or indirectly, by any Borrower, whether or not such Indemnified Party is a party to such transaction or (ii) related to any Borrower’s or Altria’s entering into this Agreement, or to any actions or omissions of any Borrower or Altria, any of their respective Subsidiaries or affiliates (other than Kraft Foods Inc. and its Subsidiaries or affiliates) or any of its or their respective officers, directors, employees or agents in connection therewith, in each case whether or not an Indemnified Party is a party thereto and whether or not such investigation, litigation or proceeding is brought by Altria or any Borrower or any other Person; provided, however, that neither any Borrower nor Altria shall be required to indemnify any such Indemnified Party from or against any portion of such claims, damages, losses, liabilities or expenses that is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnified Party.           Section 9.05. Right of Set-Off. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.02 to authorize JPMorgan Chase, as Administrative Agent, to declare the Advances due and payable pursuant to the provisions of Section 6.02, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of Altria or any Borrower against any and all of the obligations of any Borrower or Altria now or hereafter existing under this Agreement, whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. Each Lender shall promptly notify the appropriate Borrower or Altria, as the case may be, after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and its affiliates under this 43 --------------------------------------------------------------------------------   Section 9.05 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender and its affiliates may have.           Section 9.06. Binding Effect. This Agreement shall be binding upon and inure to the benefit of Altria, JPMorgan Chase, as Administrative Agent, Citibank, as Administrative Agent and each Lender and their respective successors and assigns, except that neither any Borrower nor Altria shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders.           Section 9.07. Assignments and Participations. (a) Assignment of Lender Obligations. Each Lender may and, if demanded by Altria upon at least five Business Days’ notice to such Lender and JPMorgan Chase, as Administrative Agent, will assign to one or more Persons all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and the Pro Rata Advances owing to it), subject to the following:      (i) each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement (other than, except in the case of an assignment made as a result of a demand by Altria pursuant to this Section 9.07(a), any Competitive Bid Advances owing to such Lender or any Competitive Bid Notes held by it);      (ii) the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $10,000,000 (subject to reduction at the sole discretion of Altria) and shall be an integral multiple of $1,000,000;      (iii) each such assignment shall be to an Eligible Assignee;      (iv) each such assignment made as a result of a demand by Altria pursuant to this Section 9.07(a) shall be arranged by Altria after consultation with JPMorgan Chase, as Administrative Agent, and shall be either an assignment of all of the rights and obligations of the assigning Lender under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments which together cover all of the rights and obligations of the assigning Lender under this Agreement;      (v) no Lender shall be obligated to make any such assignment as a result of a demand by Altria pursuant to this Section 9.07(a) unless and until such Lender shall have received one or more payments from either the Borrowers to which it has outstanding Advances or one or more Eligible Assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Lender under this Agreement; and 44 --------------------------------------------------------------------------------        (vi) the parties to each such assignment shall execute and deliver to JPMorgan Chase, as Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $3,500, provided that, if such assignment is made as a result of a demand by Altria under this Section 9.07(a), Altria shall pay or cause to be paid such $3,500 fee. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (other than those provided under Section 9.04) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto), other than Section 9.12.      (b) Assignment and Acceptance. By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower or Altria or the performance or observance by any Borrower or Altria of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon JPMorgan Chase, as Administrative Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee represents that (A) the source of any funds it is using to acquire the assigning Lender’s interest or to make any Advance is not and will not be plan assets as defined under the regulations of the Department of Labor of any Plan subject to Title I of ERISA or Section 4975 of the Code or (B) the assignment or Advance is not and will not be a non-exempt prohibited transaction as defined in Section 406 of ERISA; (vii) such assignee appoints and authorizes JPMorgan Chase, as Administrative Agent, to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to JPMorgan Chase, as Administrative Agent, by the terms hereof, together with such powers and discretion as are reasonably incidental thereto; and (viii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender. 45 --------------------------------------------------------------------------------        (c) Agent’s Acceptance. Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with any Pro Rata Note or Notes subject to such assignment, JPMorgan Chase, as Administrative Agent, shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to Altria.      (d) Register. JPMorgan Chase, as Administrative Agent, shall maintain at its address referred to in Section 9.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Advances owing to, each Lender from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and Altria, the Borrowers, JPMorgan Chase, as Administrative Agent, and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Altria, any Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.      (e) Sale of Participation. Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and any Note or Notes held by it), subject to the following:      (i) such Lender’s obligations under this Agreement (including, without limitation, its Commitment to Altria hereunder) shall remain unchanged,      (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations,      (iii) Altria, the other Borrowers, JPMorgan Chase, as Administrative Agent, and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement, and      (iv) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of this Agreement, or any consent to any departure by any Borrower or Altria therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Advances or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, the Advances or any fees or other amounts payable hereunder, in each case to the extent subject to such participation.      (f) Disclosure of Information. Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to Altria or any Borrower furnished to such Lender by or on behalf of Altria or any Borrower; provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant 46 --------------------------------------------------------------------------------   shall agree to preserve the confidentiality of any confidential information relating to Altria received by it from such Lender.      (g) Regulation A Security Interest. Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and any Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A.           Section 9.08. Designated Subsidiaries. (a) Designation. Altria may at any time, and from time to time, by delivery to JPMorgan Chase, as Administrative Agent, of a Designation Agreement duly executed by Altria and the respective Subsidiary and substantially in the form of Exhibit D hereto, designate such Subsidiary as a “Designated Subsidiary” for purposes of this Agreement and such Subsidiary shall thereupon become a “Designated Subsidiary” for purposes of this Agreement and, as such, shall have all of the rights and obligations of a Borrower hereunder. JPMorgan Chase, as Administrative Agent, shall promptly notify each Lender of each such designation by Altria and the identity of the respective Subsidiary.      (b) Termination. Upon the payment and performance in full of all of the indebtedness, liabilities and obligations under this Agreement of any Designated Subsidiary then, so long as at the time no Notice of Pro Rata Borrowing or Notice of Competitive Bid Borrowing in respect of such Designated Subsidiary is outstanding, such Subsidiary’s status as a “Designated Subsidiary” shall terminate upon notice to such effect from JPMorgan Chase, as Administrative Agent, to the Lenders (which notice JPMorgan Chase, as Administrative Agent, shall give promptly, and only upon its receipt of a request therefor from Altria). Thereafter, the Lenders shall be under no further obligation to make any Advance hereunder to such former Designated Subsidiary until such time as it has been redesignated a Designated Subsidiary by Altria pursuant to Section 9.08(a).           Section 9.09. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York.           Section 9.10. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different 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. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement.           Section 9.11. Jurisdiction, Etc. (a) Submission to Jurisdiction; Service of Process. Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York state court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York state court or, to the extent permitted by law, in such 47 --------------------------------------------------------------------------------   Federal court. Each Borrower (other than Altria) hereby agrees that service of process in any such action or proceeding brought in any such New York state court or in such Federal court may be made upon Altria at its offices at 120 Park Avenue, New York, New York 10017, Attention: Secretary (the “Process Agent”) and each Designated Subsidiary hereby irrevocably appoints the Process Agent its authorized agent to accept such service of process, and agrees that the failure of the Process Agent to give any notice of any such service shall not impair or affect the validity of such service or of any judgment rendered in any action or proceeding based thereon. Each Borrower hereby further irrevocably consents to the service of process in any action or proceeding in such courts by the mailing thereof by any parties hereto by registered or certified mail, postage prepaid, to such Borrower at its address specified pursuant to Section 9.02. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to serve legal process in any other manner permitted by law or to bring any action or proceeding relating to this Agreement or the Notes in the courts of any jurisdiction.      (b) Altria as Process Agent. Altria hereby accepts its appointment as Process Agent and agrees that (i) it will maintain an office in New York, New York through the Termination Date and will give JPMorgan Chase, as Administrative Agent, prompt notice of any change of its address, (ii) it will perform its duties as Process Agent to receive on behalf of each Designated Subsidiary and its property service of copies of the summons and complaint and any other process which may be served in any action or proceeding in any New York State or Federal court sitting in New York City arising out of or relating to this Agreement and (iii) it will forward forthwith to each Designated Subsidiary at its then current address copies of any summons, complaint and other process which Altria receives in connection with its appointment as Process Agent.      (c) Waivers. Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the Notes in any New York state or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.           Section 9.12. Confidentiality. None of the Agents nor any Lender shall disclose any confidential information relating to Altria or any Borrower to any other Person without the consent of Altria, other than (a) to such Agent’s or such Lender’s affiliates and their officers, directors, employees, agents and advisors and, as contemplated by Section 9.07(f), to actual or prospective assignees and participants, and then, in each such case, only on a confidential basis; provided, however, that such actual or prospective assignee or participant shall have been made aware of this Section 9.12 and shall have agreed to be bound by its provisions as if it were a party to this Agreement, (b) as required by any law, rule or regulation or judicial process, and (c) as requested or required by any state, federal or foreign authority or examiner regulating banks or banking or other financial institutions.           Section 9.13. Integration. This Agreement and the Notes represent the agreement of Altria, the other Borrowers, the Administrative Agents and the Lenders with 48 --------------------------------------------------------------------------------   respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agents, Altria, the other Borrowers or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the Notes other than the matters referred to in Sections 2.09(b) and 9.04(a) and except for Confidentiality Agreements entered into by each Lender in connection with this Agreement.           Section 9.14. USA Patriot Act Notice. Each Administrative Agent and each Lender hereby notifies the Borrowers that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies the Borrowers, which information includes the name and address of each Borrower and other information that will allow such Lender to identify such Borrower in accordance with the Patriot Act. 49 --------------------------------------------------------------------------------   [Signature Pages Intentionally Omitted] --------------------------------------------------------------------------------   EXHIBIT A-1 — FORM OF PRO RATA NOTE Dated:                                         , 200_ U.S.$                                               FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a                      corporation (the “Borrower”), HEREBY PROMISES TO PAY to the order of                      (the “Lender”) for the account of its Applicable Lending Office on the Termination Date (each as defined in the Credit Agreement referred to below) the principal sum of U.S.$[amount of the Lender’s Commitment in figures] or, if less, the aggregate principal amount of the Pro Rata Advances outstanding on the Termination Date made by the Lender to the Borrower pursuant to the 364-Day Revolving Credit Agreement, dated as of March 31, 2006 among Altria Group, Inc., [certain other Borrowers party thereto,] the Lender and certain other lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Administrative Agent, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., as Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas, HSBC Bank USA, National Association and UBS Loan Finance LLC, as Arrangers and Documentation Agents for the Lender and such other lenders (as amended or modified from time to time, the “Credit Agreement;” the terms defined therein being used herein as therein defined).      The Borrower promises to pay interest on the unpaid principal amount of each Pro Rata Advance from the date of such Pro Rata Advance until such principal amount is paid in full, at such interest rate, and payable at such times, as are specified in the Credit Agreement.      Both principal and interest in respect of each Pro Rata Advance are payable in Dollars to JPMorgan Chase, as Administrative Agent, for the account of the Lender at the office of JPMorgan Chase, located at 270 Park Avenue, New York, New York 10017, in same day funds. Each Pro Rata Advance owing to the Lender by the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note.      This Promissory Note is one of the Pro Rata Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of Pro Rata Advances by the Lender to the Borrower from time to time in an aggregate amount not to exceed at any time outstanding the Dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Pro Rata Advance being evidenced by this Promissory Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified.   --------------------------------------------------------------------------------        This Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York.                   [NAME OF BORROWER]                       By                               Name:             Title:     2 --------------------------------------------------------------------------------   LOANS AND PAYMENTS OF PRINCIPAL                                           Amount of                         Principal   Unpaid         Type of   Amount of   Interest   Paid   Principal   Notation Date   Advance   Advance   Rate   or Prepaid   Balance   Made By                                                     3 --------------------------------------------------------------------------------   EXHIBIT A-2 — FORM OF COMPETITIVE BID NOTE Dated:                                         , 200_ U.S.$                                               FOR VALUE RECEIVED, the undersigned, [NAME OF BORROWER], a                                          corporation (the “Borrower”), HEREBY PROMISES TO PAY to the order of                                          (the “Lender”) for the account of its Applicable Lending Office (as defined in the 364-Day Revolving Credit Agreement, dated as of March 31, 2006 among Altria Group, Inc., [certain other Borrowers party thereto,] the Lender and certain other lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Administrative Agent, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., as Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas, HSBC Bank USA, National Association and UBS Loan Finance LLC, as Arrangers and Documentation Agents for the Lender and such other lenders (as amended or modified from time to time, the “Credit Agreement;” the terms defined therein being used herein as therein defined)), on                     , 200_, the principal amount of U.S.$[                    ].      The Borrower promises to pay interest on the unpaid principal amount hereof from the date hereof until such principal amount is paid in full, at the interest rate and payable on the interest payment date or dates provided below:      Interest Rate Basis:                                         .      Day Count Convention:                                         .      Interest Payment Date(s):                                         .      Both principal and interest are payable in Dollars to JPMorgan Chase, as Administrative Agent, for the account of the Lender at the office of JPMorgan Chase, located at 270 Park Avenue, New York, New York 10017, in same day funds.      This Promissory Note is one of the Competitive Bid Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events.      The Borrower hereby waives presentment, demand, protest and notice of any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights.      This Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York.                   [NAME OF BORROWER]                       By                               Name:             Title:       --------------------------------------------------------------------------------   EXHIBIT B-1 — FORM OF NOTICE OF PRO RATA BORROWING [Date] JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders party to the Credit Agreement referred to below      Attention:                                          Ladies and Gentlemen:      [NAME OF BORROWER], refers to the 364-Day Revolving Credit Agreement, dated as of March 31, 2006 (as amended or modified from time to time, the “Credit Agreement,” the terms defined therein being used herein as therein defined), among Altria Group, Inc., [certain other Borrowers party thereto,] the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Administrative Agent, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., as Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas, HSBC Bank USA, National Association and UBS Loan Finance LLC, as Arrangers and Documentation Agents for such Lenders, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Pro Rata Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Pro Rata Borrowing (the “Proposed Pro Rata Borrowing”) as required by Section 2.02(a) of the Credit Agreement:      (i) The date of the Proposed Pro Rata Borrowing is                     , 200     .      (ii) The Type of Advances comprising the Proposed Pro Rata Borrowing is [Base Rate Advances] [LIBO Rate Advances].      (iii) The aggregate amount of the Proposed Pro Rata Borrowing is U.S.$[                      ].      [(iv) The initial Interest Period for each LIBO Rate Advance made as part of the Proposed Pro Rata Borrowing is ___month(s).]      The undersigned, as applicable, hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Pro Rata Borrowing:      (A) the representations and warranties contained in Section 4.01 of the Credit Agreement (except the representations set forth in the last sentence of subsection (e) thereof and in subsection (f) thereof (other than clause (i) thereof)) are correct, before and after giving effect to the Proposed Pro Rata Borrowing and to the application of the proceeds therefrom, as though made on and as of such date;   --------------------------------------------------------------------------------        [if the Borrower is a Designated Subsidiary: the representations and warranties of such Designated Subsidiary contained in its Designation Agreement are correct, before and after giving effect to the Proposed Pro Rata Borrowing and to the application of the proceeds therefrom, as though made on and as of such date;]      (B) after giving effect to the application of the proceeds of all Borrowings on the date of such Pro Rata Borrowing (together with any other resources of the Borrower applied together therewith), no event has occurred and is continuing, or would result from such Pro Rata Borrowing, that constitutes a Default or Event of Default;      (C) if such Proposed Pro Rata Borrowing is in an aggregate principal amount equal to or greater than $500,000,000 and is being made in connection with any purchase of shares of the Borrower’s capital stock or the capital stock of any other Person, or any purchase of all or substantially all of the assets of any Person (whether in one transaction or a series of transactions) or any transaction of the type referred to in Section 5.02(b) of the Credit Agreement, the statement in clause (B) above will be true on a pro forma basis as if such transaction or purchase shall have been completed; and      (D) the aggregate principal amount of the Proposed Pro Rata Borrowing and all other Borrowings to be made on the same day under the Credit Agreement is within the aggregate unused Commitments of the Lenders.                   Very truly yours,                       ALTRIA GROUP, INC.                       By                               Name:             Title:                       [NAME OF BORROWER]                       By                               Name:             Title:     2 --------------------------------------------------------------------------------   EXHIBIT B-2 — FORM OF NOTICE OF COMPETITIVE BID BORROWING [Date] JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders party to the Credit Agreement referred to below      Attention:                                          Ladies and Gentlemen:      [NAME OF BORROWER], refers to the 364-Day Revolving Credit Agreement, dated as of March 31, 2006 (as amended or modified from time to time, the “Credit Agreement,” the terms defined therein being used herein as therein defined), among Altria Group, Inc., [certain other Borrowers party thereto,] the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Administrative Agent, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., as Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas, HSBC Bank USA, National Association and UBS Loan Finance LLC, as Arrangers and Documentation Agents for such Lenders, and hereby gives you notice, irrevocably, pursuant to Section 2.07(b) of the Credit Agreement that the undersigned hereby requests a Competitive Bid Borrowing under the Credit Agreement, and in that connection sets forth the terms on which such Competitive Bid Borrowing (the “Proposed Competitive Bid Borrowing”) is requested to be made:   (A)   Date of Competitive Bid Borrowing;     (B)   Amount of Competitive Bid Borrowing;     (C)   Interest rate basis;     (D)   Day count convention;     (E)   [Interest Period] [Maturity date];     (F)   Interest payment date(s);     (G)   Borrower’s account location;     (H)   [other terms (if any)].      The undersigned, as applicable, hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Competitive Bid Borrowing:      (a) the representations and warranties contained in Section 4.01 of the Credit Agreement are correct, before and after giving effect to the Proposed Competitive Bid   --------------------------------------------------------------------------------   Borrowing and to the application of the proceeds therefrom, as though made on and as of such date;      [if the Borrower is a Designated Subsidiary: the representations and warranties of such Designated Subsidiary contained in its Designation Agreement are correct, before and after giving effect to the Proposed Competitive Bid Borrowing and to the application of the proceeds therefrom, as though made on and as of such date;]      (b) after giving effect to the application of the proceeds of all Borrowings on the date of such Competitive Bid Borrowing (together with any other resources of the Borrower applied together therewith), no event has occurred and is continuing, or would result from such Proposed Competitive Bid Borrowing, that constitutes a Default or Event of Default; and      (c) the aggregate principal amount of the Proposed Competitive Bid Borrowing and all other Borrowings to be made on the same day under the Credit Agreement is within the aggregate unused Commitments of the Lenders.      The undersigned hereby confirms that the Proposed Competitive Bid Borrowing is to be made available to it in accordance with Section 2.07(e) of the Credit Agreement.                   Very truly yours,                       ALTRIA GROUP, INC.                       By                               Name:             Title:                       [NAME OF BORROWER]                       By                               Name:             Title:     2 --------------------------------------------------------------------------------   EXHIBIT C — FORM OF ASSIGNMENT AND ACCEPTANCE      Reference is made to the 364-Day Revolving Credit Agreement, dated as of March 31, 2006 (as amended or modified from time to time, the “Credit Agreement,” the terms defined therein being used herein as therein defined), among Altria Group, Inc., a Virginia corporation, [certain other Borrowers party thereto,] the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Administrative Agent, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., as Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas, HSBC Bank USA, National Association and UBS Loan Finance LLC, as Arrangers and Documentation Agents for such Lenders.      The “Assignor” and the “Assignee” referred to on Schedule 1 hereto agree as follows:           1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor’s rights and obligations under the Credit Agreement as of the date hereof (other than in respect of Competitive Bid Advances and Competitive Bid Notes) equal to the percentage interest specified on Schedule 1 hereto of all outstanding rights and obligations under the Credit Agreement (other than in respect of Competitive Bid Advances and Competitive Bid Notes). After giving effect to such sale and assignment, the Assignee’s Commitment and the amount of the Pro Rata Advances owing to the Assignee will be as set forth on Schedule 1 hereto. Each of the Assignor and the Assignee represents and warrants that it is authorized to execute and deliver this Assignment and Acceptance.           2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; and (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower or Altria or the performance or observance by any Borrower or Altria of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto.           3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon JPMorgan Chase, as Administrative Agent, any other Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv) represents that (A) the source of any funds it is using to acquire the Assignor’s interest or to make any Advance is not and will not be plan assets as defined under the regulations of the Department of Labor of any Plan subject to Title I of ERISA or Section 4975 of the Code or (B) the assignment or Advance is not and will be not be a non-exempt prohibited transaction as   --------------------------------------------------------------------------------   defined in Section 406 of ERISA; (v) appoints and authorizes JPMorgan Chase, as Administrative Agent, to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement as are delegated to JPMorgan Chase, as Administrative Agent, by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; and (vi) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Credit Agreement are required to be performed by it as a Lender.           4. This Assignment and Acceptance will be delivered to JPMorgan Chase, as Administrative Agent, for acceptance and recording by JPMorgan Chase, as Administrative Agent, following its execution. The effective date for this Assignment and Acceptance (the “Effective Date”) shall be the date of acceptance hereof by JPMorgan Chase, as Administrative Agent, unless otherwise specified on Schedule 1 hereto.           5. Upon such acceptance and recording by JPMorgan Chase, as Administrative Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement.           6. Upon such acceptance and recording by JPMorgan Chase, as Administrative Agent, from and after the Effective Date, JPMorgan Chase, as Administrative Agent, shall make all payments under the Credit Agreement in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and facility fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement for periods prior to the Effective Date directly between themselves.           7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York.           8. This Assignment and Acceptance may be executed in any number of counterparts and by different 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. Delivery of an executed counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance.      IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon. 2 --------------------------------------------------------------------------------   Schedule 1 to Assignment and Acceptance Percentage interest assigned:                     % Assignee’s Commitment:       U.S.$                     Aggregate outstanding principal amount of Pro Rata Advances assigned: U.S.$                     Effective Date1:                                              , 200_                       [NAME OF ASSIGNOR], as Assignor                       By                   Title:                           Dated:                                         , 200_                           [NAME OF ASSIGNEE], as Assignee                       By                               Title:                           Dated:                                         , 200_                       Domestic Lending Office:             [Address]     Accepted this                      day of                                         , 200_ JPMORGAN CHASE BANK, N.A., as Administrative Agent           By               Title:     [Approved this                      day of                                         , 200_]           [NAME OF BORROWER]2     By               Title:       1   This date should be no earlier than five Business Days after the delivery of this Assignment and Acceptance to JPMorgan Chase, as Administrative Agent.   2   Required if the Assignee is an Eligible Assignee solely by reason of clause (viii) of the definition of “Eligible Assignee.” --------------------------------------------------------------------------------   EXHIBIT D — FORM OF DESIGNATION AGREEMENT           [Date]1 JPMorgan Chase Bank, N.A., as Administrative Agent    for the Lenders party to the Credit Agreement   referred to below Ladies and Gentlemen:      Reference is made to the 364-Day Revolving Credit Agreement, dated as March 31, 2006 (as amended or modified from time to time, the “Credit Agreement,” the terms defined therein being used herein as therein defined), among Altria Group, Inc., [certain other Borrowers party thereto,] the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Administrative Agent, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., as Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas, HSBC Bank USA, National Association and UBS Loan Finance LLC, as Arrangers and Documentation Agents for such Lenders.      Please be advised that Altria hereby designates its undersigned wholly-owned Subsidiary, ____________(“Designated Subsidiary”), as a “Designated Subsidiary” under and for all purposes of the Credit Agreement.      The Designated Subsidiary, in consideration of each Lender’s agreement to extend credit to it under and on the terms and conditions set forth in the Credit Agreement, does hereby assume each of the obligations imposed upon a “Designated Subsidiary” and a “Borrower” under the Credit Agreement and agrees to be bound by the terms and conditions of the Credit Agreement. In furtherance of the foregoing, the Designated Subsidiary hereby represents and warrants to each Lender as follows:      (a) The Designated Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of ____________.      (b) The execution, delivery and performance by the Designated Subsidiary of this Designation Agreement, the Credit Agreement and the Notes to be delivered by it are within the Designated Subsidiary’s corporate powers, have been duly authorized by all necessary corporate action and do not contravene (i) the Designated Subsidiary’s charter or by-laws or (ii) in any material respect, any law, rule, regulation or order of any court or governmental agency or contractual restriction binding on or affecting it.   1   For Subsidiaries that are not listed on Schedule II, date must be at least (i) three Business Days for a Designated Subsidiary organized in the United States or any political subdivision thereof and (ii) five Business Days for a Designated Subsidiary organized outside the United States, in each case, prior to the date of the initial Pro Rata Advance to such Designated Subsidiary.   --------------------------------------------------------------------------------        (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Designated Subsidiary of this Designation Agreement, the Credit Agreement or the Notes to be delivered by it.      (d) This Designation Agreement is, and the Notes to be delivered by the Designated Subsidiary when delivered will be, legal, valid and binding obligations of the Designated Subsidiary enforceable against the Designated Subsidiary in accordance with their respective terms, subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws affecting creditors’ rights generally and to the effect of general principles of equity (regardless of whether such enforceability is sought in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.      (e) There is no pending or threatened action or proceeding affecting the Designated Subsidiary or any of its Subsidiaries before any court, governmental agency or arbitrator that purports to affect the legality, validity or enforceability of this Designation Agreement, the Credit Agreement or any Note of the Designated Subsidiary.      (f) The registered address; name, telephone number, facsimile number and email address of contact person; and internet address, if available, of the Designated Subsidiary are ___.]2      (g) [The Federal employer identification number of the Designated Subsidiary is ___.]2,3                   Very truly yours,                       ALTRIA GROUP, INC.                       By                               Name:             Title:                       [DESIGNATED SUBSIDIARY]                       By                               Name:             Title:       2   Does not apply to Subsidiaries listed on Schedule II.   3   Does not apply to Designated Subsidiaries organized outside the United States. 2 --------------------------------------------------------------------------------   EXHIBIT E-1 — FORM OF OPINION OF COUNSEL FOR ALTRIA       [Letterhead of Hunton & Williams LLP]           [Effective Date]     To each of the Lenders party   to the Credit Agreement referred to below Altria Group, Inc. Ladies and Gentlemen:      This opinion is furnished to you pursuant to Section 3.01(e)(iii) of the 364-Day Revolving Credit Agreement, dated as of March 31, 2006 (the “Credit Agreement”), among Altria Group, Inc., the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Administrative Agent, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., as Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas, HSBC Bank USA, National Association and UBS Loan Finance LLC, as Arrangers and Documentation Agents for such Lenders. Terms defined in the Credit Agreement are used herein as therein defined.      We have acted as counsel for Altria in connection with the preparation, execution and delivery of the Credit Agreement.      In that connection, we have examined the following documents:      (1) The Credit Agreement.      (2) The documents furnished by Altria pursuant to Article III of the Credit Agreement.      (3) The Articles of Incorporation of Altria and all amendments thereto (the “Charter”).      (4) The by-laws of Altria and all amendments thereto (the “By-laws”).      We have also examined the originals, or copies certified to our satisfaction, of such corporate records of Altria, certificates of public officials and of officers of Altria, and agreements, instruments and other documents, as we have deemed relevant and necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, we have, when relevant facts were not independently established by us, relied upon the representations of Altria set forth in the Credit Agreement and upon certificates of Altria or its officers or of public officials. Whenever the phrase “to our knowledge” is used herein, it refers to the actual knowledge of the attorneys of the firm involved in the representation of Altria in connection with the Credit Agreement, without independent investigation. We have assumed the due execution and delivery, pursuant to due authorization, of the Credit Agreement by the Initial   --------------------------------------------------------------------------------   Lenders and JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N. A., as Administrative Agent, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., as Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas, HSBC Bank USA, National Association and UBS Loan Finance LLC, as Arrangers and Documentation Agents.      Our opinions expressed below are limited to the law of the State of New York, the Commonwealth of Virginia and the Federal law of the United States.      Based upon the foregoing and upon such investigation as we have deemed necessary, we are of the following opinion:      1. Altria is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia.      2. The execution, delivery and performance by Altria of the Credit Agreement and the Notes, and the consummation of the transactions contemplated thereby, are within Altria’s corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Charter or the By-laws or (ii) any law, rule or regulation applicable to Altria (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System) or (iii) to our knowledge, any contractual restriction binding on or affecting Altria. The Credit Agreement and any Notes delivered on the date hereof have been duly executed and delivered on behalf of Altria.      3. No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery and performance by Altria of the Credit Agreement and the Notes.      4. The Credit Agreement is the legal, valid and binding obligation of Altria enforceable against Altria in accordance with its terms. The Notes issued on the date hereof, if any, are the legal, valid and binding obligations of Altria, enforceable against Altria in accordance with their respective terms.      The opinion set forth in paragraph 4 above is subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws affecting creditors’ rights generally and to the effect of general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.      We express no opinion with respect to:           (A) The effect of any provision of the Credit Agreement which is intended to permit modification thereof only by means of an agreement in writing by the parties thereto;           (B) The effect of any provision of the Credit Agreement insofar as it provides that any Person purchasing a participation from a Lender or other Person may exercise set-off or 2 --------------------------------------------------------------------------------   similar rights with respect to such participation or that any Lender or other Person may exercise set-off or similar rights other than in accordance with applicable law;           (C) The effect of any provision of the Credit Agreement imposing penalties or forfeitures;           (D) The enforceability of any provision of the Credit Agreement to the extent that such provision constitutes a waiver of illegality as a defense to performance of contract obligations; or           (E) The effect of any provision of the Credit Agreement relating to indemnification or exculpation in connection with violations of any securities laws or relating to indemnification, contribution or exculpation in connection with willful, reckless or criminal acts or gross negligence of the indemnified or exculpated Person or the Person receiving contribution.           In connection with the provisions of the Credit Agreement which relate to forum selection (including, without limitation, any waiver of any objection to venue or any objection that a court is an inconvenient forum), we note that, under NYCPLR § 510, a New York State court may have discretion to transfer the place of trial, and, under 28 U.S.C. § 1404(a), a United States District Court has discretion to transfer an action from one Federal court to another.      This opinion is being furnished to you pursuant to Section 3.01(e)(iii) of the Credit Agreement, is solely for the benefit of you and your counsel, and is not intended for, and may not be relied upon by, any other person or entity without our prior written consent. We undertake no duty to inform you of events occurring subsequent to the date hereof.           Very truly yours, 3 --------------------------------------------------------------------------------   EXHIBIT E-2 — FORM OF OPINION OF COUNSEL FOR ALTRIA           [Effective Date] To each of the Lenders party   to the Credit Agreement referred to below Altria Group, Inc. Ladies and Gentlemen:      This opinion is furnished to you pursuant to Section 3.01(e)(iii) of the 364-Day Revolving Credit Agreement, dated as of March 31, 2006 (the “Credit Agreement”), among Altria Group, Inc. (“Altria”), the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Administrative Agent, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., as Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas, HSBC Bank USA, National Association and UBS Loan Finance LLC, as Arrangers and Documentation Agents for such Lenders. Terms defined in the Credit Agreement are used herein as therein defined.      I have acted as counsel for Altria in connection with the preparation, execution and delivery of the Credit Agreement.      In that connection, I have examined originals, or copies certified to my satisfaction, of such corporate records of Altria, certificates of public officials and of officers of Altria, and agreements, instruments and other documents, as I have deemed relevant and necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, I have, when relevant facts were not independently established by me, relied upon certificates of Altria or its officers or of public officials.      Based upon the foregoing and upon such investigation as I have deemed necessary, I am of the opinion that, to the best of my knowledge, (i) there is no pending or threatened action or proceeding against Altria or any of its Subsidiaries before any court, governmental agency or arbitrator (a “Proceeding”) that purports to affect the legality, validity, binding effect or enforceability of the Credit Agreement or the Notes, if any, or the consummation of the transactions contemplated thereby, and (ii) except for Proceedings disclosed in the Annual Report on Form 10-K of Altria for the fiscal year ended December 31, 2005, and any Current Reports on Form 8-K filed subsequent to December 31, 2005 but prior to March 31, 2006, or, with respect to Proceedings commenced after the date of the most recent such document but prior to March 31, 2006, a certificate delivered to the Lenders and attached hereto, there are no Proceedings that are likely to have a materially adverse effect upon the financial position or results of operations of Altria and its Subsidiaries taken as a whole.           Very truly yours,   --------------------------------------------------------------------------------   EXHIBIT F — FORM OF OPINION OF COUNSEL FOR DESIGNATED SUBSIDIARY           [Effective Date] To each of the Lenders party   to the Credit Agreement referred to below Altria Group, Inc. Ladies and Gentlemen:      This opinion is furnished to you pursuant to Section 3.02(e) of the 364-Day Revolving Credit Agreement, dated as of March 31, 2006 (the “Credit Agreement”), among Altria Group, Inc. (“Altria”), [certain other Borrowers party thereto,] the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Administrative Agent, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., as Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas, HSBC Bank USA, National Association and UBS Loan Finance LLC, as Arrangers and Documentation Agents for such Lenders. Terms defined in the Credit Agreement are used herein as therein defined.      We have acted as counsel for ___(the “Designated Subsidiary”) in connection with the preparation, execution and delivery of the Designation Agreement.      In that connection, we have examined the following documents:      (1) The Designation Agreement.      (2) The Credit Agreement.      (3) The documents furnished by the Designated Subsidiary pursuant to Article III of the Credit Agreement.      (4) The [Articles] [Certificate] of Incorporation of the Designated Subsidiary and all amendments thereto (the “Charter”).      (5) The by-laws of the Designated Subsidiary and all amendments thereto (the “By-laws”).      We have also examined the originals, or copies certified to our satisfaction, of such corporate records of the Designated Subsidiary, certificates of public officials and of officers of the Designated Subsidiary, and agreements, instruments and other documents, as we have deemed relevant and necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, we have, when relevant facts were not independently established by us, relied upon certificates of the Designated Subsidiary or its officers or of public officials. We have assumed the due execution and delivery, pursuant to due authorization, of the Credit Agreement by the Initial Lenders and JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Administrative Agent, Credit Suisse Securities (USA) LLC and Deutsche   --------------------------------------------------------------------------------   Bank Securities Inc., as Syndication Agents, and ABN AMRO Bank N.V., BNP Paribas, HSBC Bank USA, National Association and UBS Loan Finance LLC, as Arrangers and Documentation Agents.      Based upon the foregoing and upon such investigation as we have deemed necessary, we are of the following opinion:      1. The Designated Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of ___.      2. The execution, delivery and performance by the Designated Subsidiary of the Designation Agreement, the Credit Agreement and the Notes to be delivered by it, and the consummation of the transactions contemplated thereby, are within the Designated Subsidiary’s corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Charter or the By-laws or (ii) any law, rule or regulation applicable to the Designated Subsidiary (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System) or (iii) to our knowledge, any contractual restriction binding on or affecting the Designated Subsidiary. The Designation Agreement, the Credit Agreement and the Notes delivered by the Designated Subsidiary on the date hereof have been duly executed and delivered on behalf of the Designated Subsidiary.      3. No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery and performance by the Designated Subsidiary of the Designation Agreement, the Credit Agreement and the Notes delivered by the Designated Subsidiary.      4. The Designation Agreement and the Credit Agreement are the legal, valid and binding obligations of the Designated Subsidiary enforceable against the Designated Subsidiary in accordance with their respective terms. The Notes issued on the date hereof, if any, by the Designated Subsidiary are the legal, valid and binding obligations of the Designated Subsidiary, enforceable against the Designated Subsidiary in accordance with their respective terms.      5. There is, to the best of my knowledge, no pending or threatened action or proceeding against the Designated Subsidiary or any of its Subsidiaries before any court, governmental agency or arbitrator that purport to affect the legality, validity, binding effect or enforceability of the Designation Agreement, the Credit Agreement or any of the Notes delivered by the Designated Subsidiary or the consummation of the transactions contemplated thereby. 2 --------------------------------------------------------------------------------        The opinion set forth in paragraph 4 above is subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws affecting creditors’ rights generally and to the effect of general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.           Very truly yours, 3 --------------------------------------------------------------------------------   EXHIBIT G FORM OF OPINION OF COUNSEL FOR JPMORGAN CHASE, AS ADMINISTRATIVE AGENT       [Letterhead of Simpson Thacher & Bartlett LLP]           [Effective Date]     JPMorgan Chase Bank, N.A. and Citibank, N.A., as Adminstrative Agents  The Lenders listed on Schedule I hereto   which are parties to the Credit Agreement   on the date hereof       Re:   364-Day Revolving Credit Agreement dated as     of March 31, 2006 (the “Credit Agreement”)     among Altria Group, Inc. (the “Company”),     and Credit Suisse Securities (USA) LLC and     Deutsche Bank Securities Inc., as Syndication     Agents, and ABN AMRO Bank N.V., BNP     Paribas, HSBC Bank USA, National     Association and UBS Loan Finance LLC,     as Arrangers and Documentation Agents Ladies and Gentlemen:      We have acted as counsel to JPMorgan Chase Bank, N.A., as Administrative Agent, in connection with the preparation, execution and delivery of the Credit Agreement.      This opinion is delivered to you pursuant to Section 3.01(e)(iv) of the Credit Agreement. Terms used herein which are defined in the Credit Agreement shall have the respective meanings set forth in the Credit Agreement, unless otherwise defined herein.      In connection with this opinion, we have examined a copy of the Credit Agreement signed by the Company and by the Administrative Agents and the Lenders.      We also have examined the originals, or duplicates or certified or conformed copies, of such records, agreements, instruments and other documents and have made such other investigations as we have deemed relevant and necessary in connection with the opinions expressed herein. As to questions of fact material to this opinion, we have relied upon certificates of public officials and of officers and representatives of the Company. In addition,   --------------------------------------------------------------------------------   we have examined, and have relied as to matters of fact upon, the representations made in the Credit Agreement.      In rendering the opinion set forth below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as duplicates or certified or conformed copies, and the authenticity of the originals of such latter documents.      In rendering the opinion set forth below we have assumed that (1) the Credit Agreement is a valid and legally binding obligation of each of the Lenders party thereto, (2) the Company is duly organized and validly existing and in good standing under the laws of the jurisdiction in which it is organized and of each other jurisdiction in which the conduct of its business or ownership of its property makes such qualification necessary, has the corporate power and authority to execute, deliver and perform its obligations under the Credit Agreement and has duly authorized, executed and delivered the Credit Agreement in accordance with its Articles of Incorporation and By-laws or other similar organizational documents, and (3)(a) execution, delivery and performance by the Company of the Credit Agreement do not contravene its Articles of Incorporation or By-laws or other similar organizational documents, (b) execution, delivery and performance by the Company of the Credit Agreement do not violate, or require any consent not obtained under, the laws of the jurisdiction in which it is organized or any other applicable laws or regulations or any order, writ, injunction or decree of any court or other governmental authority binding on the Company, and (c) execution, delivery and performance by the Company of the Credit Agreement do not constitute a breach or violation of, or require any consent not obtained under, any agreement or instrument which is binding upon the Company.      Based upon and subject to the foregoing, and subject to the qualifications and limitations set forth herein, we are of the opinion that the Credit Agreement constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms.      Our opinion set forth above is subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or at law) and (iii) an implied covenant of good faith and fair dealing.      We express no opinion with respect to:           (A) the effect of any provision of the Credit Agreement which is intended to permit modification thereof only by means of an agreement in writing by the parties thereto;           (B) the effect of any provision of the Credit Agreement insofar as it provides that any Person purchasing a participation from a Lender or other Person may exercise set-off or similar rights with respect to such participation or that any Lender or other Person may exercise set-off or similar rights other than in accordance with applicable law;           (C) the effect of any provision of the Credit Agreement imposing penalties or forfeitures; 2 --------------------------------------------------------------------------------             (D) the enforceability of any provision of the Credit Agreement to the extent that such provision constitutes a waiver of illegality as a defense to performance of contract obligations; or           (E) the effect of any provision of the Credit Agreement relating to indemnification or exculpation in connection with violations of any securities laws or relating to indemnification, contribution or exculpation in connection with willful, reckless or criminal acts or gross negligence of the indemnified or exculpated Person or the Person receiving contribution.           In connection with the provisions of the Credit Agreement which relate to forum selection (including, without limitation, any waiver of any objection to venue or any objection that a court is an inconvenient forum), we note that under NYCPLR § 510, a New York State court may have discretion to transfer the place of trial, and under 28 U.S.C. § 1404(a), a United States District Court has discretion to transfer an action from one Federal court to another.           We are members of the Bar of the State of New York, and we do not express any opinion herein concerning any law other than the law of the State of New York and the Federal law of the United States.           This opinion letter is rendered to you in connection with the above-described transaction. This opinion letter may not be relied upon by you for any other purpose, or relied upon by, or furnished to, any other person, firm or corporation without our prior written consent. This opinion letter may be furnished to, but may not be relied upon by, a regulatory authority entitled to receive it.           Very truly yours, 3

Exhibit 10.5   Execution Copy   SECOND AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT   THIS AMENDMENT is made on May 8, 2006 by and between MOTHERS WORK, INC. (the “Company”) and REBECCA C. MATTHIAS (“Executive”).   WHEREAS, the Company and Executive are parties to an Amended and Restated Employment Agreement dated as of April 28, 2005, as amended effective December 29, 2005 (the “Employment Agreement”); and   WHEREAS, Section 17 of the Employment Agreement provides that the Company and Executive may amend the Employment Agreement by agreement in writing; and   WHEREAS, the Company has requested that Executive agree to certain changes with respect to the vesting of stock options awarded annually to Executive, if any.   NOW, THEREFORE, in consideration of these premises and intending to be legally bound hereby, the Employment Agreement is amended as follows, effective as of the date first above written:   1.             The last sentence of Section 5.3 is revised in its entirety to read as follows:   “Such Options shall be exercisable at the closing price of the Common Stock as reported by NASDAQ on the date of grant and shall vest immediately; provided, however, that with respect to the 2006 fiscal year Option Compensation, that Option shall vest on the first anniversary of the date of grant, provided that Employee remains in continuous service with the Company through such date (and subject to accelerated vesting in accordance with this Agreement and the applicable plan under which that Option is issued).”   2.             The Employment Agreement, as amended by the foregoing changes, is hereby ratified and confirmed in all respects.   [signature page follows]   --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized officer and Executive has executed this Amendment, in each case on the date first written above.       MOTHERS WORK, INC.               By:  /s/ EDWARD M. KRELL           Name & Title: Edward M. Krell, Executive Vice President – Chief Financial Officer               REBECCA C. MATTHIAS               /s/ REBECCA C. MATTHIAS     --------------------------------------------------------------------------------

Exhibit 10.1 LOGO [g66103img1.jpg] 2000 STOCK BONUS PLAN As amended through June 14, 2006 1. PURPOSE. The purpose of the Plan is to promote the interests of Ampex Corporation, a Delaware corporation (the “Corporation”), by providing eligible individuals with the opportunity to acquire, through stock bonus or direct stock purchase, a proprietary interest, or otherwise increase their existing proprietary interest, in the Corporation, as an incentive for them to perform services for the benefit of the Corporation (or any Parent or Subsidiary as defined below). 2. DEFINITIONS. For purposes of the Plan: 2.1 “Board” shall mean the Corporation’s Board of Directors. 2.2 “Change in Capitalization” shall mean any increase or reduction in the number of outstanding shares of Common Stock, or any change (including, but not limited to, a change in par value) in the shares of Common Stock or exchange of shares of Common Stock for a different number or kind of shares or other securities of the Corporation, by reason of a reclassification, recapitalization, merger, consolidation, reorganization, spin-off, split-up, issuance of warrants or rights or debentures, stock dividend, stock split or reverse stock split, cash dividend, property dividend, combination or exchange of shares, repurchase of shares, change in corporate structure or otherwise. 2.3 “Change of Control” shall mean a change in ownership or control of the Corporation effected through any of the following: (a) a merger, consolidation or reorganization approved by the Corporation’s stockholders, unless securities representing more than fifty percent (50%) of the total combined voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly, and in substantially the same proportion, by the persons who beneficially owned the Corporation’s outstanding voting securities immediately prior to such transaction (b) any stockholder-approved sale or other transfer of all or substantially all the Corporation’s assets as an entirety; (c) the acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a person that as of the Plan Effective Date, directly or indirectly controls, is controlled by or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 under the 1934 Act) of securities possessing more than fifty (50%) of the total combined voting power of the Corporation’s outstanding voting securities pursuant to a tender or exchange offer or otherwise; or   Page 1 of 9 -------------------------------------------------------------------------------- (d) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination. 2.4 “Code” shall mean the Internal Revenue Code of 1986, as amended. 2.5 “Committee” shall mean a committee as described in Section 3.1 hereof, consisting of at least two (2) nonemployee directors (within the meaning of Rule 16b-3 under the 1934 Act) of the Corporation appointed by the Board to administer the Plan and to perform the functions set forth herein. 2.6 “Common Stock” shall mean the Corporation’s Class A Common Stock, par value $0.01 per share. 2.7 “Corporation” shall have the meaning set forth in Section 1 hereof. 2.8 “Eligible Individual” shall mean any of the following who provide services to the Corporation (or any Parent or Subsidiary), and who are designated by the Committee, in its sole discretion, as eligible to receive Stock Awards under the Plan, subject to the conditions set forth herein: (i) officers (including officers who serve as directors), (ii) employees, (iii) non-employee directors, or (iv) consultants or advisors, provided that with respect to such consultants or advisors (x) they are natural persons, (y) they provide bona fide services to the Corporation (or such Parent or Subsidiary) and (z) the services for which a Stock Award is made hereunder are not in connection with the offer or sale of securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the Corporation’s securities. 2.9 “Fair Market Value” on any date shall mean the closing price of the Common Stock on the last trading day immediately prior to such date on the principal national securities exchange on which such Common Stock is listed or admitted to trading, or, if such Common Stock is not so listed or admitted to trading, the arithmetic mean of the per share closing bid price and per share closing asked price of the Common Stock on the last trading day immediately prior to such date as quoted on the National Association of Securities Dealers Automated Quotation System or such other market in which such prices are regularly quoted, or, if there have been no published bid or asked quotations with respect to the Common Stock on such date, the Fair Market Value shall be the value established by the Board in good faith and in compliance with the requirements of Section 409A of the Code. 2.10 “Grantee” shall mean a person to whom a Stock Award has been granted under the Plan. 2.11 “1934 Act” shall mean the Securities Exchange Act of 1934, as amended.   Page 2 of 9 -------------------------------------------------------------------------------- 2.12 “Parent” shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation if each of the corporations other than the Corporation owns stock possessing 50% or more of the combined voting power of all classes of stock in one of the other corporations in such chain. The Committee shall have authority, at its discretion, to determine that an unincorporated entity which holds, directly or indirectly, at least a 50% voting interest in one of the other corporation in the chain, shall be treated as a corporation for purposes of this definition. 2.13 “Plan” shall mean the Corporation’s 2000 Stock Bonus Plan. 2.14 “Plan Effective Date” shall mean June 9 2000, the date on which the Plan was approved by the affirmative vote of the holders of a majority of the securities of the Corporation present, or represented by proxy, and entitled to vote at a meeting of stockholders duly held in accordance with the applicable laws of the State of Delaware. 2.15 “Stock Award” shall mean shares of Common Stock or rights to acquire shares of Common Stock awarded to an Eligible Individual pursuant to Section 5 hereof. 2.16 “Subsidiary” shall mean any corporation in an unbroken chain of corporations beginning with the Corporation if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the combined voting power of all classes of stock in one of the other corporations in such chain. The Committee shall have authority, at its discretion, to determine that an unincorporated entity in which the Corporation holds, directly or indirectly, at least a 50% voting interest, shall be treated as a corporation for purposes of this definition. 2.17 “Withholding Taxes” shall mean the Federal, state and local income and employment withholding tax liabilities and any other tax which the Corporation is required by any law or regulation of any governmental authority to withhold in connection with the shares of Common Stock granted hereunder. 3. ADMINISTRATION. 3.1 The Plan shall be administered by the Committee, which shall hold meetings at such times as may be necessary for the proper administration of the Plan. The Committee shall keep minutes of its meetings. A quorum shall consist of not less than two (2) members of the Committee and a majority of a quorum may authorize any action. Any decision or determination reduced to writing and signed by a majority of all of the members of the Committee shall be as fully effective as if made by a majority vote at a meeting duly called and held. Each member of the Committee shall be a nonemployee director within the meaning of Rule 16b-3 promulgated under the 1934 Act. Such Committee members shall also be “outside directors” within the meaning of Section 162(m)(4)(C) of the Code and the regulations thereunder. No member of the Committee shall be liable for any action, failure to act, determination or interpretation made in good faith with respect to this Plan or any transaction hereunder, except for liability arising from his or her own willful misfeasance, gross negligence or reckless disregard of his or her duties. The Corporation hereby agrees to indemnify each member of the Committee for all costs and expenses and, to the extent permitted by applicable law, any liability incurred in connection with   Page 3 of 9 -------------------------------------------------------------------------------- defending against, responding to, negotiating for the settlement of or otherwise dealing with any claim, cause of action or dispute of any kind arising in connection with any actions in administering this Plan or in authorizing or denying authorization to any transaction hereunder. 3.2 Subject to the express terms and conditions set forth herein, the Committee shall have the power from time to time to select, upon recommendation by the Corporation’s management, those Eligible Individuals to whom Stock Awards shall be granted under the Plan and to determine the number of shares of Common Stock to be granted pursuant to each Stock Award, the consideration therefor, and the terms and conditions of each Stock Award, including the restrictions, performance criteria or vesting schedule, if any, relating to such shares of Common Stock; PROVIDED, HOWEVER, that: (i) the Committee shall have the power to fix the purchase price per share of Common Stock subject to direct stock purchase, which may not be less than the Fair Market Value per share at the date of issuance; and (ii) any Stock Award to be granted as a bonus, rather than pursuant to a direct stock purchase, shall not be valued by the Committee at less than Fair Market Value. The purchase price for shares of Common Stock sold to a Grantee shall be payable by or on behalf of such Grantee to the Corporation in cash or by check. 3.3 Subject to the express terms and conditions set forth herein, the Committee shall have the power from time to time: (a) to construe and interpret the Plan and the Stock Awards granted hereunder and to establish, amend and revoke rules and regulations for the administration of the Plan, including, but not limited to, correcting any defect or supplying any omission, or reconciling any inconsistency in the Plan, in the manner and to the extent it shall deem necessary or advisable to make the Plan fully effective and comply with applicable law, including Rule 16b- 3 under the Exchange Act and the Code, to the extent applicable. All decisions and determinations by the Committee in the exercise of this power shall be final, binding and conclusive upon the Corporation, its Parent and Subsidiaries and Grantees, and all other persons having any interest therein; (b) to determine the duration and purposes for leaves of absence which may be granted to a Grantee on an individual basis without constituting a termination of service for purposes of the Plan; (c) to amend, modify or cancel any outstanding Stock Award with the consent of the Grantee, or to accelerate the vesting of any Stock Award or waive the Grantee’s obligations to surrender shares or the Corporation’s repurchase rights with respect to any Stock Award;4 (d) to exercise its discretion with respect to the powers and rights granted to it as set forth in the Plan; (e) generally, to exercise such powers and to perform such acts as are deemed necessary or advisable to promote the best interests of the Corporation with respect to the Plan; and   Page 4 of 9 -------------------------------------------------------------------------------- (f) to provide for the limited transferability of Stock Awards to certain family members, family trusts or family partnerships of Grantees. 4. STOCK SUBJECT TO THE PLAN. 4.1 The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Corporation on the open market. The maximum number of shares of Common Stock initially reserved for issuance over the term of the Plan shall not exceed 125,000 (as adjusted). 4.2 Except for a person who prior to the time of grant of a Stock Award has not been an Eligible Individual, no one person participating in the Plan may receive Stock Awards for more than 12,500 shares of Common Stock in the aggregate per calendar year, beginning with the 2000 calendar year. 4.3 Upon the granting of a Stock Award, the number of shares of Common Stock available under Section 4.1 hereof for the granting of further Stock Awards shall be reduced by the number of shares of Common Stock in respect of which the Stock Award is granted. Unvested shares issued under the Plan and subsequently surrendered to the Corporation, or repurchased by the Corporation at the original issue price paid per share pursuant to the Corporation’s repurchase rights under the Plan, shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and accordingly be available for re-issuance under the Plan. 4.4 In the event of a Change in Capitalization, the Committee shall, in its sole discretion, conclusively determine the appropriate adjustments, if any, to the maximum number and class of shares of Common Stock or other stock or securities with respect to which Stock Awards may be granted under the Plan. The adjustments, if any, determined by the Committee shall be binding and conclusive. 5. STOCK AWARDS. 5.1 The Committee may grant Stock Awards to Eligible Individuals. Subject to Section 3.2 above, Stock Awards may be granted (i) as a bonus for past services rendered to the Corporation (or any Parent or Subsidiary), (ii) as an incentive for future services to be rendered to the Corporation (or any Parent or Subsidiary), or (iii) as an inducement for the recipient’s entering into an employment or consulting agreement with the Corporation (or any Parent or Subsidiary). 5.2 Subject to Section 3.2 above, the Committee may issue shares of Common Stock in fulfillment of Stock Awards which are fully and immediately vested upon grant, or which are to vest in one or more installments over the Grantee’s period of service or earlier upon attainment of designated performance goals established by the Committee, and may grant Stock Awards that provide for future issuance of a specified number of shares of Common Stock upon the attainment of service requirements or earlier upon attainment of one or more performance goals established by the Committee.   Page 5 of 9 -------------------------------------------------------------------------------- 5.3 Upon the issuance of shares of Common Stock in fulfillment of a Stock Award, whether or not the Grantee’s interest in the shares shall have fully vested at the time of issuance, the Grantee shall have all of the rights of a stockholder with respect to the shares issued, including the right to vote the shares and to receive all dividends or other distributions paid or made with respect to such shares, subject, however, to the Grantee’s obligations to surrender, and the Corporation’s rights to repurchase, unvested shares pursuant to this Plan and to any restrictions on transferability established by the Committee with respect to such shares at the time of grant. No Stock Award granted under this Plan that is subject to any Grantee’s obligation to surrender shares, the Corporation’s repurchase rights or any other restrictions pursuant to this Plan or any Stock Award may be transferred by a Grantee, except by will or the laws of descent and distribution; PROVIDED, HOWEVER, that any Stock Awards transferred shall remain subject to all such obligations, rights and restrictions. 5.4 Any new, substituted or additional securities or other property (including money paid other than as a regular cash dividend) which the Grantee may have the right to receive with respect to the Grantee’s unvested shares of Common Stock by reason or any Change in Capitalization shall be issued subject to (i) the same vesting requirements, if any, applicable to the Grantee’s unvested shares and (ii) such escrow arrangements as the Committee shall deem appropriate. 5.5 Should the Grantee cease to remain in the service of the Corporation (or any Parent or Subsidiary) while holding one or more unvested shares of Common Stock, then those shares shall be immediately surrendered to the Corporation for cancellation, and the Grantee shall have no further stockholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Grantee for consideration paid in cash or cash equivalent, the Corporation shall repay to the Grantee the cash consideration paid for the surrendered shares. Notwithstanding the foregoing or any other provision of this Plan to the contrary, in the event of any such cessation of service by reason of death, disability, normal retirement, early retirement with the consent of the Corporation, termination of employment or consulting services to enter public or military service with the consent of the Corporation or leave of absence approved by the Corporation, or in the event of an unforeseeable emergency (within the meaning of Section 409A of the Code), of a Grantee who holds a Stock Award with respect to unvested shares that are subject to a Grantee’s obligations to surrender the shares, the Corporation’s rights to repurchase the shares, or any restrictions on transfer, the Committee may take any action that it deems to be equitable under the circumstances or in the best interests of the Corporation, including without limitation waiving or modifying any limitation, requirement or restriction with respect to any Stock Award under this Plan. 5.6 Outstanding Stock Awards that provide for future issuance of Common Stock shall automatically terminate, and no shares of Common Stock shall actually be issued in fulfilment of those Stock Awards, if the service requirements established for such Awards are not attained. The Committee, however, shall have the authority to issue shares of Common Stock in fulfilment of one or more unattained Stock Awards in its discretion. 5.7 In the event of a Change of Control, the obligations of each Grantee to surrender unvested shares and the Corporation’s repurchase rights with respect to such shares shall terminate automatically, and all of such unvested shares shall immediately vest in full, except to   Page 6 of 9 -------------------------------------------------------------------------------- the extent (i) such repurchase rights and the benefit of such obligations are assigned to the successor corporation (or parent thereof) or otherwise continue in full force and effect pursuant to the terms of the Change of Control, or (ii) such accelerated vesting is precluded by other limitations imposed by the Committee at the time the Stock Award is granted; PROVIDED, HOWEVER, that such unvested shares shall not vest if and to the extent that (i) such vesting would cause the disallowance to the Corporation under the “excess parachute payment” rules under Section 280G of the Code of a deduction with respect to such shares, or (ii) such Change of Control would not constitute a change in the ownership or effective control of the Corporation or a change in the ownership of a substantial portion of the assets of the Corporation (within the meaning of section 409A of the Code). 5.8 Shares of Common Stock which have been issued but have not yet fully vested may, in the Committee’s discretion, be held in escrow by the Corporation until the Grantee’s interest in such shares vests, or may be issued directly to the Grantee with restrictive legends on the certificates representing the unvested shares, evidencing the Grantee’s obligations to surrender, and, if applicable, the Corporation’s right to repurchase those shares pursuant to the Plan. 6. FINANCING. The payment of all or a portion of the purchase price of shares issued under the Plan by delivery of a promissory note or other credit instrument shall not be permitted. 7. TAX WITHHOLDING. The Corporation’s obligation to deliver shares of Common Stock in connection with the granting or vesting of a Stock Award under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements. If a Grantee is to experience a taxable event in connection with any Stock Award under the Plan, the Grantee must make arrangements satisfactory to the Corporation to provide for the timely payment of all applicable Withholding Taxes upon such taxable event. The Committee may, in its sole discretion, authorize the Corporation to permit a Grantee to satisfy the obligation to pay all or a portion of any such Withholding Taxes by having the Corporation withhold a portion of the shares of Common Stock otherwise issuable, deliverable or released from escrow to the Grantee having an aggregate Fair Market Value, on the date of issuance, delivery or release, as applicable, equal to the amount of such Withholding Taxes designated by the Grantee and approved by the Committee. 8. EFFECTIVE DATE AND TERM OF THE PLAN. 8.1 The Plan shall become effective immediately upon the Plan Effective Date. 8.2 The Plan shall terminate upon the earliest of (i) the close of business on June 8, 2010, the day immediately preceding the tenth anniversary of the Plan Effective Date, or (ii) the date on which all shares of Common Stock available for issuance under the Plan shall have been issued, and no Stock Award may be granted thereafter; PROVIDED, HOWEVER, that the Board, in its sole discretion, may sooner terminate the Plan.   Page 7 of 9 -------------------------------------------------------------------------------- 9. AMENDMENT OF THE PLAN. The Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects. However, no such amendment or modification shall adversely affect the rights and obligations with respect to unvested stock issuances at the time outstanding under the Plan unless the Grantee consents to such amendment or modification. To the extent necessary under Section 16(b) of the 1934 Act and the rules and regulations promulgated thereunder or under applicable laws or securities exchange rules, no amendment to the Plan shall be effective unless approved by the stockholders of the Corporation in accordance with applicable laws and regulations. 10. REGULATORY APPROVALS. 10.1 The implementation of the Plan and the issuance of any shares of Common Stock under the Plan shall be subject to the Corporation’s procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan and the shares of Common Stock issued pursuant to it. 10.2 No shares of Common Stock or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any stock exchange on which the Common Stock is then listed for trading. 11. NON-EXCLUSIVITY OF THE PLAN. The adoption of the Plan by the Board shall not be construed as amending, modifying, or rescinding any previously approved incentive arrangement, or as creating any limitations on the power of the Board to adopt such other incentive arrangement as it may deem desirable, including, without limitation, the granting of stock awards otherwise than under the Plan. 12. LIMITATION OF LIABILITY. As illustrative of the limitations of liability of the Corporation, but not intended to be exhaustive thereof, nothing in the Plan shall be construed to: (a) give any person any right to be granted a Stock Award other than at the sole discretion of the Committee; (b) give any person any rights whatsoever with respect to shares of Common Stock except as specifically provided in the Plan; (c) limit in any way the right of the Corporation, or any Parent or Subsidiary, as the case may be, to terminate the employment of any person at any time; or   Page 8 of 9 -------------------------------------------------------------------------------- (d) be evidence of any agreement or understanding, expressed or implied, that the Corporation, or its parent or subsidiary corporations, as the case may be, will employ any person at any particular rate of compensation or for any particular period of time. 13. MULTIPLE AWARDS. The terms of each Stock Award may differ from other Stock Awards granted under the Plan at the same time, or at some other time. The Committee may also grant more than one Stock Award per year to a given Grantee during the term of the Plan. 14. GOVERNING LAW. Except as to matters of federal law, this Plan and the rights of all persons claiming hereunder shall be construed and determined in accordance with the laws of the State of Delaware without giving effect to conflicts of law principles thereof.   Page 9 of 9

Exhibit 10.1 CATHAY GENERAL BANCORP 2005 INCENTIVE PLAN RESTRICTED STOCK AWARD AGREEMENT           THIS RESTRICTED STOCK AWARD AGREEMENT (the “Agreement”), dated _________between Cathay General Bancorp, a Delaware corporation (the “Company”), and ____________(the “Executive”), is entered into as follows: WITNESSETH:           WHEREAS, the continued employment of the Executive is considered by the Company to be important for the Company’s continued growth; and           WHEREAS, in order to give the Executive an incentive to continue in the employ of the Company and to assure his or her continued commitment to the success of the Company, the Executive Compensation Committee of the Board of Directors of the Company (the “Committee”) has determined that the Executive shall be granted a stock award (“Stock Award”) covering shares of the Company’s common stock (the “Shares”), subject to the restrictions stated below and in accordance with the terms and conditions of the 2005 Incentive Plan (the “Plan”).  Capitalized terms used but not defined in this Agreement have the meanings assigned to them in the Plan.           THEREFORE, the parties agree as follows: 1.        Grant of Stock Award.  Subject to the terms and conditions of this Agreement and of the Plan, the Company hereby grants to the Executive the Stock Award covering _________ Shares and hereby issues such Shares to the Executive. 2.        Vesting Schedule.  Subject to Executive not experiencing a Termination of Employment during the following vesting term, the interest of the Executive in the Shares shall vest as follows:  _________________. 3.        Termination.  In the event of the Termination of Employment of the Executive, all of the Shares held by the Executive which have not vested and which remain forfeitable as of the date of Termination of Employment shall be forfeited to the Company as of such date, without payment by the Company of any amount with respect thereto.  Any forfeiture will be effected by the Company in such manner and to such degree as the Administrator, in its sole discretion, determines, and will in all events (including as to the provisions of this Section 3) be subject to Applicable Laws.  To enforce any restrictions on the Shares, the Administrator may require the Executive to deposit the certificates representing the Shares, with stock powers or other transfer instruments approved by the Administrator endorsed in blank, with the Company or an agent of the Company to hold in escrow until the restrictions have lapsed or terminated.  The Administrator may also cause a legend or legends referencing the restrictions be placed on the certificates. -------------------------------------------------------------------------------- 4.        Transfer Restrictions.  Except as otherwise provided for in this Agreement, the Shares or rights granted hereunder may not be sold, pledged or otherwise transferred until the Shares become vested and nonforfeitable in accordance with Sections 2 and 3.  5.        Stockholder Rights.  The Executive shall be entitled to all of the rights and benefits generally accorded to stockholders with respect to the Shares.  All dividends on Shares that are subject to any restrictions, including vesting, shall be subject to the same restrictions, including those set forth in Section 2, as the Shares on which the dividends were paid. 6.        Taxes.           (a)          The Executive shall be liable for any and all taxes, including withholding taxes, arising out of this grant or the vesting of Shares hereunder.  In the event that the Company or the Employer (as defined below) is required to withhold taxes as a result of the grant or vesting of the Shares, or subsequent sale of the Shares, the Executive shall surrender a sufficient number of whole Shares or make a cash payment as necessary to cover all applicable required withholding taxes and required social security insurance contributions at the time the restrictions on the Shares lapse (or at such other time as required by Applicable Law), unless alternative procedures for such payment are established by the Company.  The Executive will receive a cash refund for any fraction of a surrendered Share not necessary for required withholding taxes and required social security insurance contributions.  To the extent that any surrender of Shares or payment of cash or alternative procedure for such payment is insufficient, the Executive authorizes the Company, its Affiliates and Subsidiaries, which are qualified to deduct tax at source, to deduct all applicable required withholding taxes and social security insurance contributions from the Executive’s compensation.  The Executive agrees to pay any amounts that cannot be satisfied from wages or other cash compensation, to the extent permitted by law.           (b)          The Executive understands that Section 83(a) of the Internal Revenue Code of 1986, as amended (the “Code”), taxes as ordinary income the difference between the amount paid for the Shares and the fair market value of the Shares as of the date any forfeiture restrictions on the Shares lapse.  In this context, “restrictions” mean the forfeiture obligation in the event of the Termination of Employment of the Executive as set forth in Section 3 of this Agreement and the restriction on transferability as set forth in Section 4 of this Agreement.  The Executive understands that the Executive may elect to be taxed at the time the Shares are issued, based on the value of the Shares at the issuance date rather than when and as the forfeiture restrictions lapse (on the vesting dates), by filing an election under Section 83(b) (an “83(b) Election”) of the Code with the Internal Revenue Service within 30 days from the date of issuance.  The Executive acknowledges that the foregoing is only a summary of the effect of United States federal income taxation with respect to issuance and vesting of the Shares hereunder, and does not purport to be complete.  The Company has directed the Executive to seek independent advice regarding the applicable provisions of the Code, the income tax laws of any municipality, state or foreign country in which Executive may reside, the tax consequences of the Executive’s death, and the decision as to whether or not to file an 83(b) Election (as well as appropriate advice and assistance with the actual filing of any such 83(b) Election) in connection with the issuance of the Shares. --------------------------------------------------------------------------------           (c)          Regardless of any action the Company or the Executive’s employer (the “Employer”) takes with respect to any or all income tax, social security insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), the Executive acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by him or her is and remains the Executive’s responsibility and that the Company and/or the Employer (i) make no representations nor undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this issuance of Shares, including the vesting of the Shares or the subsequent sale of the Shares; and (ii) do not commit to structure the terms or any aspect of this issuance of Shares to reduce or eliminate the Executive’s liability for Tax-Related Items.  Prior to the vesting of the Shares, the Executive shall pay the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of the Executive’s participation in the Plan or the Executive’s receipt of Shares that cannot be satisfied by the means previously described.  The Company may refuse to deliver the Shares if the Executive fails to comply with the Executive’s obligations in connection with the Tax-Related Items. 7.        Data Privacy Consent.  The Executive hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Executive’s personal data as described in this document by and among, as applicable, the Employer, and the Company and its Subsidiaries and Affiliates for the exclusive purpose of implementing, administering and managing the Executive’s participation in the Plan.  The Executive understands that the Company, its Affiliates, its Subsidiaries and the Employer hold certain personal information about the Executive, including, but not limited to, name, home address and telephone number, date of birth, social security or insurance number or other identification number, salary, nationality, job title, any Shares of stock or directorships held in the Company, details of all options or any other entitlement to Shares of stock awarded, canceled, purchased, exercised, vested, unvested or outstanding in the Executive’s favor for the purpose of implementing, managing and administering the Plan (“Data”).  The Executive understands that the Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the Executive’s country or elsewhere and that the recipient country may have different data privacy laws and protections than the Executive’s country.  The Executive understands that he or she may request a list with the names and addresses of any potential recipients of the Data by contacting _______.  The Executive authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Executive’s participation in the Plan, including any requisite transfer of such Data, as may be required to a broker or other third party with whom the Executive may elect to deposit any Shares acquired under the Plan.  The Executive understands that Data will be held only as long as is necessary to implement, administer and manage participation in the Plan.  The Executive understands that he or she may, at any time, view Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data or refuse or withdraw the consents herein, in any case without cost, by contacting ____________, in writing.  The Executive understands that refusing or withdrawing consent may affect the Executive’s ability to participate in the Plan.  For more information on the consequences of refusing to consent or withdrawing consent, the Executive understands that he or she may contact ______________. 8.        Plan Information.  The Executive acknowledges that he or she has received copies of the Plan and the Plan prospectus from the Company and agrees to receive stockholder information, including copies of any annual report, proxy statement and periodic report, from the Company’s website at:  http://www.cathaybank.com, then selecting “About Us” and “Investor Information.”  The Executive acknowledges that copies of the Plan, Plan prospectus, Plan information and stockholder information are available upon written or telephonic request to ______________. -------------------------------------------------------------------------------- 9.        Acknowledgment and Waiver.  By accepting this grant of a Stock Award, the Executive acknowledges and agrees that:           (a)          the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time unless otherwise provided in the Plan or this Agreement;           (b)          the grant of Stock Awards is voluntary and occasional and does not create any contractual or other right to receive future grants of Stock Awards or Shares, even if Stock Awards or Shares have been granted repeatedly in the past;           (c)          the Executive’s participation in the Plan shall not create a right to further employment with Employer, shall not create an employment agreement between the Executive and his or her Employer and shall not interfere with the ability of Employer to terminate the Executive’s employment relationship at any time with or without cause and it is expressly agreed and understood that employment is terminable at the will of either party, insofar as permitted by law;           (d)          Stock Award grants, Shares and resulting benefits are an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or the Employer, and is outside the scope of the Executive’s employment contract, if any; and Stock Award grants, Shares and resulting benefits are not part of normal or expected compensation or salary for any purposes, including, but not limited to calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments insofar as permitted by law;           (e)          in consideration of this grant of a Stock Award, no claim or entitlement to compensation or damages shall arise from termination of this Stock Award or diminution in value of the Shares resulting from Termination of Employment by the Company or the Employer (for any reason whatsoever and whether or not in breach of local labor laws) and the Executive irrevocably releases the Company and the Executive from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by accepting the terms of this Agreement, the Executive shall be deemed irrevocably to have waived any entitlement to pursue such claim; and           (f)          notwithstanding any terms or conditions of the Plan to the contrary, in the event of involuntary Termination of Employment (whether or not in breach of local labor laws), the Executive’s right to receive benefits under this Agreement, if any, will terminate effective as of the date that the Executive is no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of involuntary Termination of Employment (whether or not in breach of local labor laws), the Executive’s right to receive benefits under this Agreement after Termination of Employment, if any, will be measured by the date of termination of the Executive’s active employment and will not be extended by any notice period mandated under local law. -------------------------------------------------------------------------------- 10.       Miscellaneous.           (a)          The Company shall not be required to treat as the owner of Shares, and associated benefits hereunder, any transferee to whom such Shares or benefits shall have been so transferred in violation of this Agreement.           (b)          The parties agree to execute such further instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.           (c)          Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon delivery to the Executive at his or her address then on file with the Company.           (d)          The Plan is incorporated herein by reference.  The Plan and this Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Executive with respect to the subject matter hereof, and may not be modified adversely to the Executive’s interest except by means of a writing signed by the Company and the Executive.  This Agreement is governed by the laws of the state of Delaware.  In the event of any conflict between the terms and provisions of the Plan and this Agreement, the Plan terms and provisions shall govern.  Certain other important terms governing this contract are contained in the Plan.           (e)          If the Executive has received this or any other document related to the Plan translated into a language other than English and if the translated version is different than the English version, the English version will control.           (f)          The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.   CATHAY GENERAL BANCORP             Accepted by Executive:       By   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------     [Officer Name]     [Title] RETAIN THIS AGREEMENT FOR YOUR RECORDS --------------------------------------------------------------------------------

  Exhibit 10.25 INDEPENDENCE COMMUNITY BANK JOB GROUP 1 CHANGE IN CONTROL SEVERANCE PLAN ADOPTED APRIL 22 ND, 2005 ARTICLE I ESTABLISHMENT OF THE PLAN      Independence Community Bank (the “Bank”) hereby establishes the Job Group 1 Change in Control Severance Plan (the “Plan”). ARTICLE II PURPOSE OF THE PLAN      The purpose of this Plan is to provide certain specified benefits to certain Officers as provided herein whose employment is terminated in connection with or subsequent to a Change in Control of the Bank’s parent corporation, Independence Community Bank Corp. (the “Corporation”) (the Bank and the Corporation are hereinafter collectively referred to as the “Employer”). ARTICLE III DEFINITIONS      3.01 Annual Compensation. An Officer’s “Annual Compensation” for purposes of this Plan shall be deemed to mean the aggregate base salary and incentive compensation (whether cash or equity based as provided herein) earned by or paid to the Officer by the Employer or any subsidiary thereof during the calendar year immediately preceding the calendar year in which the Date of Termination occurs. Notwithstanding the foregoing, for purposes of this Plan, an Officer’s Annual Compensation does not include deferred compensation earned by the Officer in a prior year but received in the calendar year immediately preceding the calendar year in which the Date of Termination occurs. In addition, for purposes of this Agreement, “incentive compensation” shall include both cash and equity-based incentive compensation; provided, however, that for purposes of this Plan equity-based incentive compensation shall only include grants of restricted share awards (“Restricted Share Incentive Awards”) resulting from incentive compensation awards under the Executive Management Incentive Compensation Plan or the Officers Incentive Compensation Plan (the “Incentive Plans”) and not options and restricted stock awards granted pursuant to the 1998 Stock Option Plan, the 1998 Recognition and Retention Plan and Trust Agreement or the 2002 and 2005 Stock Incentive Plans (collectively, the “Equity Plans”) except to the extent that any such Restricted Share Incentive Awards are granted under said Equity Plans solely as a result of incentive awards made pursuant to the terms of the Incentive Plans or any successors thereto; provided, further, that in the event that at the time of termination the equity-based portion of   --------------------------------------------------------------------------------   an incentive compensation grant has not fully vested, solely for purposes of calculating an Officer’s Annual Compensation in order to determine the amount of severance due such Officer pursuant to the terms of Section 4.01 hereof, such unvested Restricted Share Incentive Award shall be deemed to have been vested and paid as of the end of the calendar year immediately preceding the calendar year in which the Date of Termination occurs. For purposes of determining the value of the Restricted Share Incentive Award deemed vested as of the end of the calendar year immediately preceding the calendar year in which the Date of Termination occurs in order to determine the severance due an Officer hereunder, the number of shares subject to the Restricted Share Incentive Award shall be multiplied by the fair market value of a share of common stock of the Corporation, determined as of the date of the grant of the Restricted Share Incentive Award.      3.02 Cause. Termination of an Officer’s employment for “Cause” shall mean termination because of personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order. For purposes of this paragraph, no act or failure to act on the Officer’s part shall be considered “willful” unless done, or omitted to be done, by the Officer not in good faith and without reasonable belief that the Officer’s action or omission was in the best interests of the Employer.      3.03 Change in Control of the Corporation. “Change in Control of the Corporation” shall mean the occurrence of any of the following: (i) the acquisition of control of the Corporation as defined in 12 C.F.R. §574.4, unless a presumption of control is successfully rebutted or unless the transaction is exempted by 12 C.F.R. §574.3(c)(vii), or any successor to such sections; (ii) an event that would be required to be reported in response to Item 5.01 of Form 8-K or Item 6(e) of Schedule 14A of Regulation 14A pursuant to the Securities Exchange Act of 1934, as amended (“Exchange Act”), or any successor thereto, whether or not any class of securities of the Corporation is registered under the Exchange Act; (iii) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any person who on the date hereof is a director or officer of the Corporation) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation’s then outstanding securities; (iv) the stockholders of the Corporation approve (or, in the event no approval of the Corporation’s stockholders is required, the Corporation consummates) a merger, consolidation, share exchange, division or other reorganization or transaction involving the Corporation (a “Fundamental Transaction”) with any other corporation or entity, other than a Fundamental Transaction which results in both (a) the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the surviving entity immediately after such Fundamental Transaction, and (b) the members of the Board of Directors of the Corporation immediately prior thereto continuing to represent at least 50% of the members of the Board of Directors of the surviving entity; or (v) during any period of 36 consecutive months, individuals who at the beginning of such period constitute the Board of Directors of the Corporation cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by stockholders, of each new director was approved by a vote of   --------------------------------------------------------------------------------   at least two-thirds of the directors then still in office who were directors at the beginning of the period.      3.04 Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.      3.05 Committee. “Committee” means a committee of two or more directors appointed by the Board pursuant to Article VII hereof.      3.06 Date of Termination. “Date of Termination” shall mean (i) if an Officer’s employment is terminated for Cause, the date on which the Notice of Termination is given, and (ii) if an Officer’s employment is terminated for any other reason, the date specified in the Notice of Termination.      3.07 Disability. Termination by the Employer of an Officer’s employment based on “Disability” shall mean termination because of any physical or mental impairment which qualifies the Officer for disability benefits under the applicable long-term disability plan maintained by the Employer or any subsidiary or, if no such plan applies, which would qualify the Officer for disability benefits under the Federal Social Security System.      3.08 Employee. “Employee” shall mean any person, including an Officer, employed by the Employer on a salaried basis. A person employed by the Employer on a hourly, commission or fee basis or similar arrangement shall not be considered an Employee for purposes of this Plan.      3.09 Good Reason. Termination by an Officer of the Officer’s employment for “Good Reason” shall mean termination by the Officer within twelve months following a Change in Control of the Corporation based on:   (i)   Without the Officer’s express written consent, a reduction in the Officer’s base salary as in effect immediately prior to the date of the Change in Control of the Corporation or as the same may be increased from time to time thereafter;     (ii)   Without the Officer’s express written consent, the assignment of any duties or responsibilities which are substantially diminished as compared with the Officer’s duties and responsibilities immediately prior to a Change in Control of the Corporation or any removal of the Officer from or any failure to re-elect the Officer to any of such responsibilities except in connection with the termination of the Officer’s employment for Cause, Disability or Retirement or as a result of the Officer’s death or by the Officer other than for Good Reason;     (iii)   Any relocation of the Officer’s principal site of employment to a location more than fifty (50) miles from the business location of the Officer as of the date of the Change in Control; or     (iv)   Any purported termination of the Officer’s employment for Disability or Retirement which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3.11 below.      3.10 IRS. “IRS” shall mean the Internal Revenue Service.   --------------------------------------------------------------------------------        3.11 Notice of Termination. Any purported termination of an Officer’s employment by the Employer for any reason or by an Officer for any reason, including without limitation for Good Reason, shall be communicated by written “Notice of Termination” to the other party hereto. For purposes of this Plan, a “Notice of Termination” shall mean a dated notice which (i) indicates the specific termination provision in this Plan relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Officer’s employment under the provision so indicated, (iii) specifies a Date of Termination, which shall be not less than thirty (30) nor more than ninety (90) days after such Notice of Termination is given, except in the case of the Employers’ termination of the Officer’s employment for Cause, which shall be effective immediately; and (iv) is given in the manner specified in Article VIII hereof.      3.12 Officer. “Officer” shall mean any Employee of the Employer at the Job Group 1 officer level who is not a party to a severance or employment agreement with the Employer that is in effect as of the date of the Notice of Termination.      3.13 Officer’s Severance Period. “Officer’s Severance Period” shall mean the three-year period of time, subject to reduction as provided in subsections 4.01(b) and 4.01(c), for which severance benefits are payable to an Officer.      3.14 Retirement. “Retirement” shall mean voluntary termination by the Officer in accordance with the Employer’s retirement policies, including early retirement, generally applicable to their salaried employees. ARTICLE IV BENEFITS 4.01 Payments and Benefits Upon Termination.                     If the Officer’s employment is terminated subsequent to a Change in Control of the Corporation by (i) the Employer for other than Cause, Disability, Retirement or the Officer’s death or (ii) the Officer for Good Reason, then the Employer shall:      (a) Pay to the Officer a cash severance amount equal to the aggregate of (i) three (3) times the Officer’s Annual Compensation and (ii) the present value of the cost to the Corporation of providing the Officer during the Severance Period, participation in the Bank’s medical and dental insurance plans (“Cash Severance Payment”). Such Cash Severance Payment shall be subject to reduction as provided in subsections 4.01 (b) and (c) hereof;      (b) Notwithstanding anything to the contrary herein, the amount of Cash Severance Payment due an Officer pursuant to the provisions of Section 4.01(a) shall be reduced in accordance with the number of whole months that the Officer continues to be employed by the Employer or the successor thereto subsequent to a Change in Control of the Corporation.      For example, should an Officers Date of Termination occur six months subsequent to a Change in Control of the Corporation, then his or her Cash Severance Payment shall be equal to two and one-half years (30 months) Annual   --------------------------------------------------------------------------------   Compensation, medical and dental benefits rather than three years (36 months).      (c) If the payment pursuant to Sections 4.01 (a) and (b) hereof, either alone or together with other payments and benefits which the Officer has the right to receive from the Employer, would constitute a “parachute payment” under Section 280G of the Code, the payment by the Bank pursuant to Section 4.01 hereof shall be further reduced, by the amount, if any, which is the minimum necessary to result in no portion of the payments and benefits payable by the Bank under Section 4.01 being non-deductible to the Bank pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code. The determination of any reduction in the payment to be made pursuant to this Section 4.01 shall be based upon the opinion of independent counsel selected by the Bank’s independent public accountants and paid by the Bank. Such counsel shall be reasonably acceptable to the Bank and the Officer; shall promptly prepare the foregoing opinion, but in no event later than thirty (30) days from the Date of Termination; and may use such actuaries as such counsel deems necessary or advisable for the purpose.      (d) Nothing contained herein shall result in a reduction of any payments or benefits to which the Officer may be entitled upon termination of employment under any circumstances other than as specified in Sections 4.01(b) and 4.01(c) set forth above, or a reduction in the payments and benefits specified in this Section 4.01 below zero.      4.02 Mitigation; Exclusivity of Benefits.      (a) An Officer shall not be required to mitigate the amount of any benefits hereunder by seeking other employment or otherwise, nor shall the amount of any such benefits be reduced by any compensation earned by the Officer as a result of employment by another employer after the Date of Termination or otherwise.      (b) The specific arrangements referred to herein are not intended to exclude any other benefits which may be available to an Officer upon a termination of employment with the Employer pursuant to employee benefit plans of the Employer or otherwise.      4.03 Withholding. All payments required to be made by the Employer hereunder to the Officer shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Employer may reasonably determine should be withheld pursuant to any applicable law or regulation. ARTICLE V ASSIGNMENT      The Employer may assign this Plan and its rights and obligations hereunder in whole, but not in part, to any corporation, bank or other entity with or into which the Bank or the Corporation may hereafter merge or consolidate or to which the Bank or the Corporation may transfer all or substantially all of its respective assets, if in any such case said corporation, bank or other entity shall by operation of law or expressly in writing assume all obligations of the Employer hereunder as fully as if it   --------------------------------------------------------------------------------   had been originally made a party hereto, but may not otherwise assign this Plan or their rights and obligations hereunder. An Officer may not assign or transfer any rights or benefits due hereunder. ARTICLE VI DURATION AND EFFECTIVE DATE OF PLAN      6.01 Duration. Except in the event of a Change in Control of the Corporation, this Plan is subject to change or termination, in whole or in part, at any time without notice, in the Board’s sole discretion. In the event of a Change in Control of the Corporation, this Plan may not be terminated or amended to reduce the benefits provided hereunder for a period of one (1) year from the date of the Change in Control of the Corporation.      6.02 Effective Date. This Plan shall be effective as April 22nd, 2005. ARTICLE VII ADMINISTRATION      7.01 Duties of the Committee. The Plan shall be administered and interpreted by the Committee, as appointed from time to time by the Board of Directors of the Bank pursuant to Section 7.02. The Committee shall have the authority to adopt, amend and rescind such rules, regulations and procedures as, in its opinion, may be advisable in the administration of the Plan, including, without limitation, rules, regulations and procedures with respect to the operation of the Plan. The interpretation and construction by the Committee of any provisions of the Plan, any rule, regulation or procedure adopted by it pursuant thereto shall be final and binding in the absence of action by the Board of Directors of the Bank.      7.02 Appointment and Operation of the Committee. The members of the Committee shall be appointed by, and will serve at the pleasure of, the Board of Directors of the Bank. The Board from time to time may remove members from, or add members to, the Committee, provided the Committee shall continue to consist of two or more members of the Board. The Committee shall act by vote or written consent of a majority of its members. Subject to the express provisions and limitations of the Plan, the Committee may adopt such rules, regulations and procedures as it deems appropriate for the conduct of its affairs. It may appoint one of its members to be chairman and any person, whether or not a member, to be its secretary or agent. The Committee shall report its actions and decisions to the Board at appropriate times but in no event less than one time per calendar year.      7.03 Limitation on Liability. Neither the members of the Board of Directors of the Bank nor any member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any rule, regulation or procedure adopted by it pursuant thereto. If a member of the Board or the Committee is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of anything done or not done by him in such capacity under or with respect to the Plan, the Bank shall, subject to the requirements of applicable laws and   --------------------------------------------------------------------------------   regulations, indemnify such member against all liabilities and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in the best interests of the Bank and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. ARTICLE VIII MISCELLANEOUS      8.01 Notice. For the purposes of this Plan, notices and all other communications provided for in this Plan shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed, with respect to the Bank, Secretary, Independence Community Bank, 195 Montague Street, 12th Floor, Brooklyn, New York 11201, and with respect to an Officer, to the home address thereof set forth in the records of the Bank at the date of any such notice.      8.02 Governing Law. The validity, interpretation, construction and performance of this Plan shall be governed by the laws of the United States where applicable and otherwise by the substantive laws of the State of New York.      8.03 Nature of Employment and Obligations.      (a) Nothing contained herein shall be deemed to create other than a terminable at will employment relationship between the Employer and an Officer, and the Employer may terminate the Officer’s employment at any time, subject to providing any of the benefits specified herein in accordance with the terms hereof.      (b) Nothing contained herein shall create or require the Employer to create a trust of any kind to fund any benefits which may be payable hereunder, and to the extent that the Officer acquires a right to receive benefits from the Employer hereunder, such right shall be no greater than the right of any unsecured general creditor of the Employer.      8.04 Headings. The section headings contained in this Plan are for reference purposes only and shall not affect in any way the meaning or interpretation of this Plan.      8.05 Validity. The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provisions of this Plan, which shall remain in full force and effect.      8.06 Regulatory Prohibition. Notwithstanding any other provision of this Plan to the contrary, any payments made to an Officer pursuant to this Plan, or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. §1828(k)) and the regulations promulgated thereunder, including 12 C.F.R. Part 359.  

Exhibit 10.7 Execution Copy REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of November 2, 2006, by and between VIASPACE INC., a Nevada corporation (the “Company”), and CORNELL CAPITAL PARTNERS, LP, a Delaware limited partnership (the “Investor”). WHEREAS: A. In connection with the Standby Equity Distribution Agreement by and between the parties hereto of even date herewith (the “Standby Equity Distribution Agreement”), the Company has agreed, upon the terms and subject to the conditions of the Standby Equity Distribution Agreement, to issue and sell to the Investor that number of shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), which can be purchased pursuant to the terms of the Standby Equity Distribution Agreement for an aggregate purchase price of up to Twenty Million Dollars ($20,000,000). Capitalized terms not defined herein shall have the meaning ascribed to them in the Standby Equity Distribution Agreement. B. To induce the Investor to execute and deliver the Standby Equity Distribution Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “Securities Act”), and applicable state securities laws. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investor hereby agree as follows: 1. DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings: a. “Person” means a corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency. b. “Register,” “registered,” and “registration” refer to a registration effected by preparing and filing one or more Registration Statements (as defined below) in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous or delayed basis (“Rule 415”), and the declaration or ordering of effectiveness of such Registration Statement(s) by the United States Securities and Exchange Commission (the “SEC”). c. “Registrable Securities” means the Investor’s Shares, as defined in the Standby Equity Distribution Agreement, and shares of Common Stock issuable to Investors pursuant to the Standby Equity Distribution Agreement. d. “Registration Statement” means a registration statement under the Securities Act which covers the Registrable Securities. 2. REGISTRATION. a. Mandatory Registration. The Company shall prepare and file no later than thirty (30) days from the date hereof (the “Scheduled Filing Deadline”) with the SEC a Registration Statement on Form S-1, SB-2 or on such other form as is available. The Company shall use its best efforts (i) to have the Registration Statement declared effective by the SEC no later than sixty (60) days from the date hereof in the event that the Registration Statement is granted a “no review” by the SEC or one hundred twenty (120) days from the date hereof in the event that the SEC reviews the Registration Statement (individually referred to as the “Scheduled Effective Deadline”). The Company shall use its best efforts to cause such Registration Statement to be declared effective by the SEC prior to the first sale to the Investor of the Company’s Common Stock pursuant to the Standby Equity Distribution Agreement. The Company shall use its best efforts to cause the Registration Statement to remain effective until the full completion of the Commitment Period (as such term is defined in the Standby Equity Distribution Agreement). b. Sufficient Number of Shares Registered. In the event the number of shares available under a Registration Statement filed pursuant to Section 2(a) is insufficient to cover all of the Registrable Securities pursuant to the Standby Equity Distribution Agreement, the Company shall amend the Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover all of such Registrable Securities pursuant to the Standby Equity Distribution Agreement as soon as practicable, but in any event not later than fifteen (15) days after the necessity therefor arises. The Company shall use its best efforts to cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof. For purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed “insufficient to cover all of the Registrable Securities” if at any time the number of Registrable Securities issuable on an Advance Notice Date is greater than the number of shares available for resale under such Registration Statement. 3. RELATED OBLIGATIONS. a. The Company shall keep the Registration Statement effective pursuant to Rule 415 at all times until the completion of the Commitment Period (as such term is defined in the Standby Equity Distribution Agreement) (the “Registration Period”), which Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any 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 in which they were made, not misleading. b. The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep such Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement. In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company’s filing a report on Form 10-KSB, Form 10-QSB or Form 8-K or any analogous report under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company shall have incorporated such report by reference into the Registration Statement, if applicable, or shall file such amendments or supplements with the SEC within three (3) business days following the day on which the Exchange Act report is filed which created the requirement for the Company to amend or supplement the Registration Statement. c. The Company shall furnish to the Investor without charge, (i) at least one copy of such Registration Statement as declared effective by the SEC and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, all exhibits and each preliminary prospectus, (ii) ten (10) copies of the final prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request) and (iii) such other documents as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by such Investor. d. The Company shall use its best efforts to (i) register and qualify the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of such jurisdictions in the United States as the Investor reasonably requests, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be reasonably necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (w) make any change to its certificate of incorporation or by-laws, (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify the Investor of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threat of any proceeding for such purpose. e. As promptly as practicable after becoming aware of such event or development, the Company shall notify the Investor in writing of the happening of any event as a result of which the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission 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 (provided that in no event shall such notice contain any material, nonpublic information), and promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission, and deliver ten (10) copies of such supplement or amendment to each Investor. The Company shall also promptly notify the Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to the Investor by facsimile or e-mail on the same day of, or the next business day following, such effectiveness), (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate. f. The Company shall use its best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction within the United States of America and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify the Investor of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose. g. At the reasonable request of the Investor, the Company shall furnish to the Investor, on the date of the effectiveness of the Registration Statement a letter, dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering. h. The Company shall make available for inspection by (i) the Investor and (ii) one firm of accountants or other agents retained by the Investor (collectively, the “Inspectors”) all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the “Records”), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request in connection with the Registration Statement. The Investor agrees that Records obtained by it as a result of such inspections which is conspicuously marked by the Company as “Confidential” (subject to the Company’s obligations with respect to material non-public information set forth in Section 8.1(a) herein) shall be deemed confidential and held in strict confidence by the Investor, unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required under the Securities Act, (b) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of this or any other agreement of which the Inspector and the Investor has knowledge. The Investor agrees that it shall, upon learning that disclosure of such 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 its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. i. The Company shall hold in confidence and not make any disclosure of information concerning the Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning the Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to the Investor and allow the Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information. j. The Company shall use its best efforts either to cause all the Registrable Securities covered by a Registration Statement (i) to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange or to secure the inclusion for quotation on the National Association of Securities Dealers, Inc. OTC Bulletin Board for such Registrable Securities. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3(j). k. The Company shall cooperate with the Investor to the extent applicable, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the Investor may reasonably request and registered in such names as the Investor may request. l. The Company shall use its best efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities. m. The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with the provisions of Rule 158 under the Securities Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following the effective date of the Registration Statement. n. The Company shall otherwise use its best efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder. o. Within two (2) business days after a Registration Statement which covers Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investor) confirmation that such Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A. p. The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Investor of Registrable Securities pursuant to a Registration Statement. 4. OBLIGATIONS OF THE INVESTOR. The Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(f) or the first sentence of 3(e), the Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until the Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(e) or receipt of notice that no supplement or amendment is required. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended certificates for shares of Common Stock to a transferee of the Investor in accordance with the terms of the Standby Equity Distribution Agreement in connection with any sale of Registrable Securities with respect to which the Investor has entered into a contract for sale prior to the Investor’s receipt of a notice from the Company of the happening of any event of the kind described in Section 3(f) or the first sentence of 3(e) and for which the Investor has not yet settled. 5. EXPENSES OF REGISTRATION. All expenses incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers, legal and accounting fees shall be paid by the Company. 6. INDEMNIFICATION. With respect to Registrable Securities which are included in a Registration Statement under this Agreement: a. To the fullest extent permitted by law, the Company will, and hereby agrees to indemnify, hold harmless and defend the Investor, the directors, officers, partners, employees, agents, representatives of, and each Person, if any, who controls the Investor within the meaning of the Securities Act or the Exchange Act (each, an “Indemnified Person”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement or expenses, joint or several (collectively, “Claims”) incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) any untrue statement or alleged untrue statement of a material fact contained in any final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement (the matters in the foregoing clauses (i) through (iii) being, collectively, “Violations”). The Company shall reimburse the Investor and each such controlling person promptly as such expenses are incurred and are due and payable, for any legal fees or disbursements or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (x) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto; (y) shall not be available to the extent such Claim is based on a failure of the Investor to deliver or to cause to be delivered the then-current prospectus made available by the Company, if such prospectus was timely made available by the Company pursuant to Section 3(e); and (z) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person. b. In connection with a Registration Statement, the Investor agrees to indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers, employees, representatives or agents and each Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (each an “Indemnified Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or is based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by the Investor expressly for use in connection with such Registration Statement; and, subject to Section 6(d), the Investor will reimburse any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Investor, which consent shall not be unreasonably withheld; provided, further, however, that the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to the Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(b) with respect to any prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the prospectus was corrected and such new prospectus was delivered to the Investor prior to the Investor’s use of the prospectus to which the Claim relates. c. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses of not more than one counsel for such Indemnified Person or Indemnified Party to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential conflicts of interest between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such claim or litigation. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action. d. The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred. e. The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law. 7. CONTRIBUTION. To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities. 8. REPORTS UNDER THE EXCHANGE ACT. With a view to making available to the Investor the benefits of Rule 144 promulgated under the Securities Act or any similar rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration (“Rule 144”) the Company agrees to: a. make and keep public information available, as those terms are understood and defined in Rule 144; b. file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements (it being understood that nothing herein shall limit the Company’s obligations under Section 6.3 of the Standby Equity Distribution Agreement) and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and c. furnish to the Investor so long as the Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule 144 without registration. 9. AMENDMENT OF REGISTRATION RIGHTS. Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only by a written agreement between the Company and the Investor. Any amendment or waiver effected in accordance with this Section 9 shall be binding upon the Investor and the Company. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of this Agreement unless the same consideration also is offered to all of the parties to this Agreement. 10. MISCELLANEOUS. a. A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities. b. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one business day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:           If to the Company, to:   VIASPACE Inc.     171 N. Altadena Drive – Suite 101     Pasadena, CA 91107     Attention: Carl Kukkonen, President and Chief     Executive Officer     Telephone: (626) 768-3360     Facsimile: (626) 578-9063 With a copy to:   Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.     One Financial Center     Boston, MA 02111     Attention: Megan N. Gates, Esq.     Telephone: (617) 348-4443     Facsimile: (617) 542-2241 If to the Investor, to:   Cornell Capital Partners, LP     101 Hudson Street – Suite 3700     Jersey City, New Jersey 07302     Attention: Mark Angelo     Portfolio Manager     Telephone: (201) 985-8300     Facsimile: (201) 985-8266 With a copy to:   Cornell Capital Partners, LP     101 Hudson Street – Suite 3700     Jersey City, NJ 07302     Attention: David Gonzalez, Esq.     Telephone: (201) 985-8300     Facsimile: (201) 985-8266 Any party may change its address by providing written notice to the other parties hereto at least five days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. c. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. d. The corporate laws of the State of New Jersey shall govern all issues concerning the relative rights of the Company and the Investor under this Agreement. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New Jersey. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the Superior Courts of the State of New Jersey, sitting in Hudson County, New Jersey and the Federal District Court for the District of New Jersey sitting in Newark, New Jersey, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of 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 to such party at the address for such 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. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. e. This Agreement, the Standby Equity Distribution Agreement, and the Placement Agent Agreement constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement, the Standby Equity Distribution Agreement, and the Placement Agent Agreement supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof. f. This Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto. g. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. h. This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement. i. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. j. 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. k. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 1 IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly executed as of day and year first above written.     Viaspace Inc.   By: /S/ CARL KUKKONEN     Name: Carl Kukkonen   Title: President and Chief Executive Officer   Cornell Capital Partners, LP   By: Yorkville Advisors, LLC   Its: General Partner   By: /S/ MARK ANGELO     Name: Mark Angelo   Title: Portfolio Manager 2 EXHIBIT A FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT Attention: Re: VIASPACE INC. Ladies and Gentlemen: We are counsel to VIASPACE Inc. (the “Company”), and have represented the Company in connection with that certain Standby Equity Distribution Agreement (the “Standby Equity Distribution Agreement”) entered into by and between the Company and Cornell Capital Partners, LP (the “Investor”) pursuant to which the Company issued to the Investor shares of its Common Stock, par value $0.001 per share (the “Common Stock”). Pursuant to the Standby Equity Distribution Agreement, the Company also has entered into a Registration Rights Agreement with the Investor (the “Registration Rights Agreement”) pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement) under the Securities Act of 1933, as amended (the “Securities Act”). In connection with the Company’s obligations under the Registration Rights Agreement, on            , the Company filed a Registration Statement on Form      (File No. 333-     ) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which names the Investor as a selling stockholder thereunder. In connection with the foregoing, we advise you that a member of the SEC’s staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the Securities Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the Securities Act pursuant to the Registration Statement. Very truly yours, By: cc: Cornell Capital Partners, LP 3

  Exhibit 10.24 REVOLVING CREDIT NOTE       $166,666.67   April 12, 2006      FOR VALUE RECEIVED, the undersigned, BioTime, Inc., a California corporation (Borrower”) hereby promises to pay to the order of ___(“Lender”) the principal sum of ONE HUNDRED SIXTY-SIX THOUSAND SIX HUNDRED SIXTY-SIX DOLLARS and SIXTY-SEVEN CENTS ($166,666.67) or such lesser amount as may from time to time be outstanding as the Loan pursuant to that certain Revolving Line of Credit Agreement, of even date, between Borrower and Lender (the “Credit Agreement”), together with interest on the unpaid balance of the Loan at the rate or rates hereinafter set forth. This Revolving Credit Note is the Note described in the Credit Agreement. All capitalized terms not otherwise defined in this Note shall have the meanings defined in the Credit Agreement.      1. Terms of Payment.           (a) Interest Rate. Interest shall accrue and be payable at the rate of 10% per annum on the outstanding principal balance of the Loan. Interest shall accrue from the date of each disbursement of principal pursuant to a Draw. Accrued interest shall be paid with principal. Interest will be charged on that part of outstanding principal of the Loan which has not been paid and shall be calculated on the basis of a 360-day year and a 30-day month.           (b) Payments of Principal. The outstanding principal balance of the Loan, together with accrued interest, shall be paid in full on the Maturity Date.           (c) Mandatory Prepayment of Principal. In the event that Borrower receives Earmarked Funds, Borrower shall use the Earmarked Funds to prepay principal, plus accrued interest, within two business days after such Earmarked Funds are received by Borrower, and the amount of principal so prepaid shall reduce the Maximum Loan Amount.           (d) Optional Prepayment of Principal. Borrower may prepay principal, with accrued interest, at any time and the amount of principal so prepaid shall be available for further Draws by Borrower during the Draw Period to the extent that the prepayment of principal was not required under paragraph (c) of this Section 1.           (e) Default Interest Rate. In the event that any payment of principal or interest is not paid within five (5) days from on the date on which the same is due and payable, such payment shall continue as an obligation of the Borrower, and interest thereon from the due date of such payment and interest on the entire unpaid balance of the Loan shall accrue until paid in full at the lesser of (i) fifteen percent (15%) per annum, or (ii) the highest interest rate 1 --------------------------------------------------------------------------------   permitted under applicable law (the “Default Rate”). From and after the Maturity Date or upon acceleration of the Note, the entire unpaid principal balance of the Loan with all unpaid interest accrued thereon, and any and all other fees and charges then due at such maturity, shall bear interest at the Default Rate.           (f) Date of Payment. If the date on which a payment of principal or interest on the Loan is due is a day other than a Business Day, then payment of such principal or interest need not be made on such date but may be made on the next succeeding Business Day.           (g) Application of Payments. All payments shall be applied first to costs of collection, next to late charges or other sums owing Lender, next to accrued interest, and then to principal, or in such other order or proportion as Lender, in its sole discretion, may determine.           (h) Currency. All payments shall be made in United States Dollars.      2. Events of Default. The following shall constitute Events of Default: (a) the default of Borrower in the payment of any interest or principal due under this Note or the Credit Agreement or any other Note arising under the Credit Agreement; (b) the failure of Borrower to perform or observe any other term or provision of this Note, or any other Note arising under the Credit Agreement, or any term, provision, covenant, or agreement in the Credit Agreement or any other Loan Document; (c) any act, omission, or other event that constitutes an “Event of Default” under the Credit Agreement; (d) any representation or warranty of Borrower contained in the Credit Agreement or in any other Loan Document, or in any certificate delivered by Borrower pursuant to the Credit Agreement or any other Loan Document, is false or misleading in any material respect when made or given; (e) Borrower becoming the subject of any order for relief in a proceeding under any Debtor Relief Law (as defined below); (f) Borrower making an assignment for the benefit of creditors; (g) Borrower applying for or consenting to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator, or similar officer for it or for all or any part of its property or assets; (h) the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator, or similar officer for Borrower, or for all or any part of the property or assets of Borrower, without the application or consent Borrower, if such appointment continues undischarged or unstayed for sixty (60) calendar days; (i) Borrower instituting or consenting to any proceeding under any Debtor Relief Law with respect to Borrower or all or any part of its property or assets, or the institution of any similar case or proceeding without the consent of Borrower, if such case or proceeding continues undismissed or unstayed for sixty (60) calendar days; (j) the dissolution or liquidation of Borrower, or the winding-up of the business or affairs of Borrower; (k) the taking of any action by Borrower to initiate any of the actions described in clauses (f) through (j) of this paragraph; (l) the issuance or levy of any judgment, writ, warrant of attachment or execution or similar process against all or any material part of the property or assets of Borrower if such process is not released, vacated or fully bonded within sixty (60) calendar days after its issue or levy; or (m) any breach or default by Borrower under any loan agreement, promissory note, or other instrument evidencing indebtedness payable to a third party. As used in this Note, the term “Debtor Relief Law” means 2 --------------------------------------------------------------------------------   the Bankruptcy Code of the United States of America, as amended, or any other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief law affecting the rights of creditors generally.      3. Remedies On Default. Upon the occurrence of an Event of Default, at Lender’s option, all unpaid principal and accrued interest, and all other amounts payable under this Note shall become immediately due and payable without presentment, demand, notice of non-payment, protest, or notice of non-payment. Lender also shall have all other rights, powers, and remedies available under the Credit Agreement and any other Loan Document, or accorded by law or at equity. All rights, powers, and remedies of Lender may be exercised at any time by Lender and from time to time after the occurrence of an Event of Default. All rights, powers, and remedies of Lender in connection with this Note and any other Loan Document are cumulative and not exclusive and shall be in addition to any other rights, powers, or remedies provided by law or equity.      4. Miscellaneous.           (a) Borrower and all guarantors and endorsers of this Note severally waive (i) presentment, demand, protest, notice of dishonor, and all other notices; (ii) any release or discharge arising from any extension of time, discharge of a prior party, release of any or all of the security for this Note, and (iii) any other cause of release or discharge other than actual payment in full of all indebtedness evidenced by or arising under this Note.           (b) No delay or omission of Lender to exercise any right, whether before or after an Event of Default, shall impair any such right or shall be construed to be a waiver of any right or default, and the acceptance of any past-due amount at any time by the Lender shall not be deemed to be a waiver of the right to require prompt payment when due of any other amounts then or thereafter due and payable. The Lender shall not be deemed, by any act or omission, to have waived any of Lender’s rights or remedies under this Note unless such waiver is in writing and signed by Lender and then only to the extent specifically set forth in such writing. A waiver with reference to one event shall not be construed as continuing or as a bar to or waiver of any right or remedy as to a subsequent event.           (c) Lender may accept, indorse, present for payment, and negotiate checks marked “payment in full” or with words of similar effect without waiving Lender’s right to collect from Borrower the full amount owed by Borrower. 3 --------------------------------------------------------------------------------             (d) Time is of the essence under this Note. Upon any Event of Default, the Lender may exercise all rights and remedies provided for in this Note and by law, including, but not limited to, the right to immediate payment in full of this Note.           (e) The rights and remedies of the Lender as provided in this Note, in the Credit Agreement, and in the Security Agreement and in law or equity, shall be cumulative and concurrent, and may be pursued singularly, successively, or together at the sole discretion of the Lender, and may be exercised as often as occasion therefor shall occur; and the failure to exercise any such right or remedy shall in no event be construed as a waiver or a release of any such right or remedy.           (f) It is expressly agreed that if this Note is referred to an attorney or if suit is brought to collect this Note or any amount due under this Note, or to enforce or protect any rights conferred upon Lender by this Note then Borrower promises and agrees to pay on demand all costs, including without limitation, reasonable attorneys’ fees, incurred by Lender in the enforcement of Lender’s rights and remedies under this Note, and such other agreements.           (g) The terms, covenants, and conditions contained in this Note shall be binding upon the heirs, executors, administrators, successors, and assigns of Borrower, and each of them, and shall inure to the benefit of the heirs, executors, administrators, successors and assigns of Lender.           (h) This Note shall be construed under and governed by the laws of the State of California without regard to conflicts of law.           (i) No provision of this Note shall be construed or so operate as to require the Borrower to pay interest at a greater rate than the maximum allowed by applicable state or federal law. Should any interest or other charges paid or payable by the Borrower in connection with this Note or the Loan result in the computation or earning of interest in excess of the maximum allowed by applicable state or federal law, then any and all such excess shall be and the same is hereby waived by Lender, and any and all such excess paid shall be credited automatically against and in reduction of the outstanding principal balance due of the Loan, and the portion of said excess which exceeds such principal balance shall be paid by Lender to the Borrower.             BORROWER:   BIOTIME, INC.               By                   Title                             By                   Title               4

Exhibit 10.2   December 29, 2005   Mr. Edward L. Erickson Greenlands Farm 6887 Tohickon Hill Road Pipersville, PA 18947-1415   Re: Your Employment with Immunicon Corporation   Dear Ed:   This will serve as an amendment and modification of the terms and conditions of your employment with Immunicon Corporation (“Immunicon”), including your employment letter of March 15, 1999, as amended and modified by that letter agreement effective March 20, 2003 relating to terms and conditions taking effect in the event of certain circumstances involving termination of your employment (the latter being referred to hereinafter as the “Severance Agreement”). You and Immunicon hereby agree to amend the Severance Agreement, effective January 1, 2006, as follows:   In Paragraph 1 of the Severance Agreement, the word “President” shall be stricken, and each instance of “Chief Executive Officer” shall be replaced by “Executive Chairman.”   It is understood and agreed that all of the remaining terms and conditions of your employment and of the Severance Agreement which are not amended as set forth herein shall remain unchanged and in full force and effect.   If you are in agreement with the foregoing, please so indicate by signing both copies of this letter where indicated below, and return one signed copy to me.   Sincerely,       Accepted and Agreed: IMMUNICON CORPORATION       Edward L. Erickson /s/    ZOLA P. HOROVITZ               /s/    EDWARD L. ERICKSON         Zola P. Horovitz, Ph.D.         Director and Chairman, Compensation Committee       Date of Signature: 12/29/2005 /s/    JAMES L. WILCOX                  James L. Wilcox, Esq.         Vice President, Chief Counsel and Secretary        

NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, (I) THE OBLIGATIONS EVIDENCED BY THIS THIRD AMENDED AND RESTATED REPLACEMENT PROMISSORY NOTE ARE SUBORDINATED TO THE PRIOR PAYMENT IN FULL OF THE SENIOR OBLIGATIONS (AS DEFINED IN THE SUBORDINATION AGREEMENT HEREINAFTER REFERRED TO) PURSUANT TO, AND TO THE EXTENT PROVIDED IN THE SUBORDINATION AGREEMENT, DATED AS OF DECEMBER 29, 2005 (AS AMENDED, RESTATED, SUPPLEMENTED OR MODIFIED FROM TIME TO TIME, THE "SUBORDINATION AGREEMENT") IN FAVOR OF FIFTH THIRD BANK (TOGETHER WITH ITS SUCCESSORS AND ASSIGNS, AND THE OTHER HOLDERS, IF ANY, OF THE SENIOR OBLIGATIONS IDENTIFIED THEREIN, THE "SENIOR LENDER") AND (II) THE RIGHTS OF THE HOLDER OF THIS NOTE HEREUNDER ARE SUBJECT TO THE LIMITATIONS AND PROVISIONS OF THE SUBORDINATION AGREEMENT. IN THE EVENT OF ANY CONFLICT BETWEEN THE TERMS OF THE SUBORDINATION AGREEMENT AND THE TERMS OF THIS THIRD AMENDED AND RESTATED REPLACEMENT PROMISSORY NOTE, THE TERMS OF THE SUBORDINATION AGREEMENT SHALL GOVERN. CECO Environmental Corp . THIRD AMENDED AND RESTATED REPLACEMENT PROMISSORY NOTE $1,200,000 December 28, 2006 WHEREAS, Can-Med Technology, Inc. d/b/a Green Diamond Oil Corp., an Ontario corporation ("Green Diamond") has prior to this date advanced sums to CECO Environmental Corp. (the "Company") as evidenced by a Second Amended and Restated Replacement Promissory Note dated December 29, 2005 (the "Prior Note"), which Prior Note shall be cancelled and replaced by this Third Amended and Restated Replacement Promissory Note (the "Note"). WHEREAS, Green Diamond has agreed to amend and restate the Prior Note and replace the Prior Note with this Note to extend the maturity date and increase the interest rate under the Prior Note. FOR VALUE RECEIVED, the undersigned, CECO Environmental Corp. (the "Company"), a Delaware corporation, hereby promises to pay to the order of Green Diamond Oil Corp. or registered assigns ("Holder"), the principal sum of ONE MILLION TWO HUNDRED THOUSAND AND NO/100 ($1,200,000.00) on the Maturity Date, as defined in Section 1 below. This Note is subordinate to certain bank financing of the Company further described herein and to a series of promissory notes in the original principal amount of $5,000,000 originally issued on December 2, 1999 and subsequently amended and restated (the "December 1999 Notes"). The principal amount of the December 1999 Notes has been increased in connection with an amendment and restatement. 1. Maturity. This Note shall be due and payable upon the earlier to occur of the following events (the "Maturity Date"): (i) July 1, 2008 or (ii) the closing (any such closing referred to as the "Closing") of a Sale Transaction. For purposes of this Note, a Sale Transaction shall mean (i) a merger, consolidation, corporate reorganization, or sale of shares of stock of the Company as a result of which there is a change in control and/or the shareholders of the Company on the date hereof ("Current Shareholders") own 50% or less of the outstanding shares of the Company on a fully-diluted basis immediately after the transaction and, including as outstanding for purposes of such calculation, any warrants, options or other instruments convertible or exchangeable into equity securities of the Company issued to persons other than the Current Shareholders in connection with the transaction or (ii) the sale of (A) fifty percent or more of the assets of the Company or (B) any subsidiary, division or line of business of the Company for total consideration in excess of $5 million. 2. Interest. Interest shall accrue on the unpaid principal balance hereof and on any interest payment that is not made when due at the simple compounded rate of twelve percent (12%) per annum. Accrued interest shall be due and payable on March 31 and September 30 of each year and on the Maturity Date. It shall not be a default hereunder and interest will not accrue on any portion of such interest payments deferred pursuant to the Subordination Agreement ("Deferred Interest") so long as the Deferred Interest is paid at the time and in the manner allowed by the Subordination Agreement (as defined herein). In the Event of Default (as defined herein), interest shall accrue on all unpaid amounts due hereunder including without limitation, interest, at the rate of fifteen percent (15%) per annum. If a judgment is entered against the Company on this Note, the amount of the judgment so entered shall bear interest at the highest rate authorized by law as of the date of the entry of the judgment. 3. Payments. Payments of both principal and interest shall be made at the Company's office in Toronto, Ontario, or such other place as the Holder hereof shall designate to the Company in writing, in lawful money of the United States of America. So long as no Event of Default has occurred in this Note, all payments hereunder shall first be applied to interest, then to principal. Upon the occurrence of an Event of Default in this Note, all payments hereunder shall first be applied to costs pursuant to Section 10.5, then to interest and the remainder to principal. Registered Owner . Prior to due presentation for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner and holder of such Note for the purpose of receiving payment of principal of, and interest on, this Note and for all other purposes. Prepayment . 5.1 Optional Prepayment. The Company, at its option and without any premium, may prepay in whole or in part the principal amount of this Note at any time. The Company shall, at the time of any such prepayment, pay to the holder of this Note all interest accrued and unpaid to the Prepayment Date (defined below). Notwithstanding the foregoing, once a notice of the Closing of a Sale Transaction pursuant to Section 10.4 has been sent to the Holder, the Company may not prepay this Note prior to the Closing of a Sale Transaction, or until the Sale Transaction has been formally abandoned. 5.2 Notice of Prepayment. At least five (5) but not more than fifteen (15) days prior to the date fixed for any prepayment, written notice shall be given to the holder of this Note of the election of the Company to prepay all or a specified portion of the principal amount of the Note (the "Prepayment Notice."). The Prepayment Notice shall specify the date upon ("Prepayment Date") and the place at which, payment may be obtained and shall call upon the Holder to surrender this Note to the Company in the manner and at the place designated. On the Prepayment Date, the Holder shall surrender this Note to the Company in the manner and at the place designated in the Prepayment Notice, and thereupon prepayment shall be made to Holder and this Note shall be cancelled. In the event that less than all the principal amount of this Note is prepaid, upon surrender of this Note to the Company, the Company shall execute and deliver to Holder a new Note or Notes in principal amount equal to the unpaid principal amount of this Note. 5.3 Cessation of Rights. From and after the Prepayment Date, unless there has been a default under the Prepayment Notice, all interest on the redeemed principal amount shall cease to accrue and all rights of Holder as a Holder of this Note shall cease with respect to the principal amount prepaid and, with respect to such amount, this Note thereafter shall not be deemed to be outstanding for any purpose whatsoever. By acceptance of this Note, Holder agrees to execute and deliver such documents as may be reasonably requested from time to time by the Company in order to implement the foregoing provisions of this Section. Subordination . The indebtedness evidenced by this Note shall at all times be wholly subordinate and junior in right of payment to all obligations of the Company under or in connection with the Credit Agreement dated December 29, 2005 ("Superior Debt") among the Company, CECO Group Inc., CECO Filters, Inc., New Bush Co., Inc., The Kirk & Blum Manufacturing Company, kbd/Technic, Inc., CECOAire, Inc., CECO Abatement Systems, Inc. and Fifth Third Bank, upon the terms and conditions contained in the Subordination Agreement, dated as of December 29, 2005 (as amended, restated, supplemented or modified from time to time, the "Subordination Agreement") in favor of Fifth Third Bank (together with its successors and assigns, and the other holders, if any, of the Senior Obligations identified therein). This Note also is subordinate to the December 1999 Notes, and no payments of principal or interest shall be made under this Note, if an Event of Default (as defined in the December 1999 Notes) is existing under any of the December 1999 Notes. Covenants of the Company . The Company covenants and agrees that it shall not, without the prior written approval of the Holder: 7.1 Obtain or incur any indebtedness or other monetary obligations that are senior to or on parity with this Note, other than the Superior Debt and the December 1999 Notes. Allow, suffer or cause to exist any lien, claim, security interest or encumbrance on the Company's property or assets, other than with respect to the Superior Debt and purchase money indebtedness incurred in the ordinary course of business. Enter into any arrangement or agreement involving the merger or consolidation of the Company. Use the proceeds from this Note other than in the ordinary course of its business for general corporate purposes including lending monies to any of its subsidiaries. The Company also covenants and agrees that it shall operate its business in the ordinary course. Events of Default . 8.1 Occurrences of Events of Default. Each of the following events shall constitute an "Event of Default" for purposes of this Note: if the Company fails to pay any amount payable, under this Note when due; if the Company breaches any of its representations, warranties or covenants set forth in this Note; the commencement of an involuntary case against the Company or its subsidiary or any of its subsidiaries under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or the appointing of a receiver, liquidator, assignee, custodian, trustee or similar official of the Company or for any substantial part of the Company or one of its subsidiary's property, or ordering the winding-up or liquidation of the Company or one of its subsidiary's affairs; if the Company or any of its subsidiaries shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian or similar official of the Company or its subsidiary or for any substantial part of the Company or one of its subsidiary's property, or shall make any general assignment for the benefit of creditors, or shall take any corporate action in furtherance of any of the foregoing; or if the Company's business shall fail, as determined in good faith by the Holder and evidenced by the Company's inability to pay its ongoing debts as such debts become due. 8.2 Acceleration Upon Event of Default. If any Event of Default shall have occurred and be continuing, for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or otherwise), the unpaid principal amount of, and the accrued interest on, this Note shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by the Company. Investment Representations of the Holder . With respect to the purchase of this Note, the Holder hereby represents and warrants to the Company as follows: 9.1 Experience. The Holder has substantial experience in evaluating and investing in private transactions of securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. 9.2 Status. The Holder is an "accredited investor" within the meaning of Regulation D, Section 501(a), promulgated by the Securities and Exchange Commission, and is acquiring this Note for investment for its own account, not as a nominee or agent, and not with a view to, or for resale or transfer. 9.3 Access to Data. The Holder has had an opportunity to discuss the Company's business, management and financial affairs with the Company's management and has also had an opportunity to ask questions of the Company's officers, which questions were answered to its satisfaction. Miscellaneous . Invalidity of Any Provision . If any provision or part of any provision of this Note 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 Note and this Note shall be construed as if such invalid, illegal or unenforceable provisions or part hereof had never been contained herein, but only to the extent of its invalidity, illegality or unenforceability. 10.2 Governing Law. The Note shall be governed in all respects by the laws of the State of Delaware, excluding its conflict of laws. Notices . Any notice 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 delivered personally, (ii) one (1) business day after transmission by facsimile transmission with a written confirmation copy sent by first class mail, or (iii) five (5) days after mailing if mailed by first class mail, to the following addresses: If to the Holder: Green Diamond Corp. 505 University Avenue, Suite 1400 Toronto, Ontario M5G 1X3 Canada Attention: Phillip DeZwirek If to the Company: CECO Environmental Corp. 3120 Forrer Street Cincinnati, Ohio 45209 Attention: Dennis W. Blazer 10.4 Notice of a Sale Transaction. The Company shall give the Holder of this Note notice of the Closing of a Sale Transaction at least thirty (30) days prior to such Closing. 10.5 Collection. If the indebtedness represented by this Note or any part thereof is collected at law or in equity or in bankruptcy, receivership or other judicial proceedings or if this Note is placed in the hands of attorneys for collection after the occurrence of an Event of Default, the Company agrees to pay, in addition to the outstanding principal and accrued interest payable hereon, reasonable attorneys' fees and costs incurred by the Holder, or on behalf of the Holder by a representative of the Holder. Successors and Assigns . The rights and obligations of the Company and the Holder shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties. Waivers . The Company and any endorsers, sureties, guarantors, and all others who are, or may become liable for the payment hereof severally: (a) waive presentment for payment, demand, notice of demand, notice of nonpayment or dishonor, protest and notice of protest of this Note, and all other notices in connection with the delivery, acceptance, performance, default, or enforcement of the payment of this Note, (b) consent to all extensions of time, renewals, postponements of time of payment of this Note or other modifications hereof from time to time prior to or after the maturity date hereof, whether by acceleration or in due course, without notice, consent or consideration to any of the foregoing, (c) agree to any substitution, exchange, addition, or release of any of the security for the indebtedness evidenced by this Note or the addition or release of any party or person primarily or secondarily liable hereon, (d) agree that Holder shall not be required first to institute any suit, or to exhaust its remedies against the Company or any other person or party to become liable hereunder or against the security in order to enforce the payment of this Note and (e) agree that, notwithstanding the occurrence of any of the foregoing (except by the express written release by Holder of any such person), the Company shall be and remain, directly and primarily liable for all sums due under this Note. Time . Time is of the essence in this Note. Captions . The captions of sections of this Note are for convenient reference only, and shall not affect the construction or interpretation of any of the terms and provisions set forth in this Note. Number and Gender . Whenever used in this Note, the singular number shall include the plural, and the masculine shall include the feminine and the neuter, and vice versa . Remedies . All remedies of the Holder shall be cumulative and concurrent and may be pursued singly, successively, or together at the sole discretion of the Holder and may be exercised as often as occasion therefor shall arise. No act of omission or commission of the Holder, including specifically any failure to exercise any right, remedy or recourse shall be effective unless it is set forth in a written document executed by the Holder and then only to the extent specifically recited therein. A waiver or release with reference to one event shall not be construed as continuing as a bar to or as a waiver or release of any subsequent right, remedy, or recourse as to any subsequent event. No Waiver by Holder .  The acceptance by Holder of any payment under this Note which is less than the amount then due or the acceptance of any amount after the due date thereof, shall not be deemed a waiver of any right or remedy available to Holder nor nullify the prior exercise of any such right or remedy by Holder. None of the terms or provisions of this Note may be waived, altered, modified or amended except by a written document executed by Holder and then only to the extent specifically recited therein. No course of dealing or conduct shall be effective waive, alter, modify or amend any of the terms or provisions hereof. The failure or delay to exercise any right or remedy available to Holder shall not constitute a waiver of the right of the Holder to exercise the same or any other right or remedy available to Holder at that time or at any subsequent time. Waiver of Trial by Jury . HOLDER AND BORROWER HEREBY KNOWINGLY, IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS NOTE, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION THEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR HOLDER TO MAKE THE LOAN EVIDENCED BY THIS NOTE. 10.14. This Note is issued, in part, in replacement of the Prior Note. The indebtedness evidenced by the Prior Note has not been paid; instead this Note is issued in substitution for the Prior Note and the unpaid indebtedness evidenced thereby continues to be outstanding and is intended to be evidenced hereby. [signature page follows]   CECO ENVIRONMENTAL CORP.   By: /s/ Dennis W. Blazer Dennis W. Blazer Title: Vice President-Finance and Administration and Chief Financial Officer   Can-Med Technology, Inc. d/b/a Green Diamond Oil Corp.   By: /s/ Phillip DeZwirek Its: /s/President

PEPCO HOLDINGS, INC. EXECUTIVE AND DIRECTOR DEFERRED COMPENSATION PLAN I.     INTRODUCTION            Potomac Electric Power Company ("Pepco") established the Potomac Electric Power Company Executive Deferred Compensation Plan (the "Pepco plan"), effective November 18, 1982, to enable certain executives to supplement their retirement income by deferring the receipt of compensation for services performed while the plan was in effect. The Pepco plan was amended from time to time thereafter, including amendments to make Directors eligible to participate in the plan; to recognize the merger by which Pepco and Conectiv, Inc. ("Conectiv") became wholly owned subsidiaries of Pepco Holdings, Inc. (the "Company" or "Pepco Holdings"); and to amend the Plan to conform to regulations relating to deferred compensation under the Internal Revenue Code. The Plan is restated herein and is known as the Pepco Holdings, Inc. Executive and Director Deferred Compensation Plan (the "Plan"). II.    DEFINITIONS 2.01   "Account" means the bookkeeping account maintained by the Company (i) for each participating Executive and (ii) for each participating Director, which is credited with the Executive's or the Director's Deferred Compensation, as the case may be, and with additional amounts in the nature of interest and which is debited to reflect benefit distributions. Effective as of January 1, 2005, each Account shall be divided into two (2) subaccounts. The first subaccount shall reflect the vested balance of such Account as of December 31, 2004, adjusted to reflect (i) subsequent earnings or losses attributable to the hypothetical investment options in which such subaccount is deemed invested and (ii) any distributions made from such subaccount. [image77.gif]            The second subaccount shall reflect (i) all contributions made to the account on and after January 1, 2005, (ii) any amounts which had been credited to the account prior to January 1, 2005 but which first became vested on or after January 1, 2005, (iii) all earnings or losses attributable to the hypothetical investment options in which such subaccount is deemed vested, and (iv) any distributions made from such subaccount.            2.02   "Agreement" means the Participation Agreement executed by the Company and an Executive or a Director, as the case may be, which designates the amount of the Executive's or the Director's Deferred Compensation, the time and manner of benefit distributions, and the Executive's or the Director's Beneficiary.            2.03   "Beneficiary" means any person designated by a participating Executive or a participating Director to receive benefits under the Plan in the event of the Executive's or the Director's death prior to the completion of all benefit payments under the Plan. An Executive's or a Director's Agreement, as the case may be, may designate more than one Beneficiary or may designate primary and contingent Beneficiaries.            2.04   "Board of Directors" means the Board of Directors of Pepco Holdings, Inc.            2.05   "Compensation/ Human Resources Committee" shall mean that Committee comprised of members of the Board of Directors, which governs the development of personnel policies for the Company.            2.06   "Deferred Compensation" means any remuneration which would otherwise be currently payable to the Executive or the Director, but which the Executive or the Director irrevocably agrees to receive on a deferred basis in accordance with the terms of the Plan.            2.07   "Director" means a member of the Board of Directors. - 2- [image77.gif]            2.08   "Executive" means such employee of any Pepco Holdings subsidiary as designated by the Chief Executive Officer of Pepco Holdings (the Chief Executive Officer to be designated by the Board).            2.09   "Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as amended.            2.10   "Normal Compensation" with respect to an Executive means the amount of salary that would be payable to an Executive for the twelve (12) month period commencing on the first day of any Plan Year if the Executive were not participating hereunder. "Normal Compensation" with respect to a Director means the amount of retainer/fees that would be payable to a Director for the twelve (12) month period commencing on the first day of any Plan Year if the Director were not participating hereunder.            2.11   "Plan Year" means the twelve-month period commencing on July 1 of each calendar year and ending on June 30 of the following calendar year. Notwithstanding the above, the time period between July 1, 2005 and December 31, 2005 shall be treated as a separate Plan Year and effective as of January 1, 2006, the Plan Year shall constitute the calendar year.            2.12   "Retirement" with respect to an Executive means the date following an Executive's Separation from Service on which the payment of benefits to the Executive commences under the principal tax-qualified defined benefit pension plan of Pepco Holdings or one of its subsidiaries in which the Executive participates (the "Applicable Defined Benefit Pension Plan") by reason of the Executive having attained normal or early retirement age under that plan. In the event that an Executive is not entitled to receive benefits under that plan following Separation from Service, "Retirement" means Separation from Service and attainment of age sixty-five (65). - 3 - [image77.gif] "Retirement" with respect to a Director means Separation from Service and attainment of age sixty-five (65).           2.13   "Separation from Service" means an Executive's termination of employment with the Company and any of its subsidiaries or a Director's cessation of participation on the Board of Directors. An Executive who terminates regular employment or a Director who discontinues participation on the Board of Directors and who thereafter performs consulting services for the Company on a part-time basis will nonetheless be deemed to have had a Separation from Service at the date of termination of regular employment or the date of discontinuance of participation on the Board of Directors, as the case may be.           2.14   "Unforeseen Financial Emergency" means a severe financial hardship to the Executive or Director resulting from an illness or accident of the Executive or Director, the Executive or Director's spouse, or a dependent (as defined in Section 152(a) of the Internal Revenue Code) of the Executive or Director, loss of the Executive or Director's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Executive or Director. III.    PARTICIPATION           3.01   An Executive or a Director may execute an Agreement and become a participant in the Plan prior to the first day of any Plan Year. Except as set forth in Section 5.02, an Executive's or a Director's Agreement for a Plan Year may not be amended or revoked once that Plan Year has commenced, provided that a participating Executive or a participating Director may at any time change his Beneficiary designation by providing written notice of such change - 4 - [image77.gif] to the Company. Notwithstanding the above, any election to participate in the Plan in respect of the short Plan Year beginning July 1, 2005 and ending December 31, 2005 must be made prior to March 15, 2005.            3.02   An Executive's or a Director's Agreement shall relate to (i) compensation for services performed during the Plan Year to which it relates, (ii) benefit entitlements otherwise payable in connection with prior deferrals pursuant to Section 5.01 of the Potomac Electric Power Company Director and Executive Deferred Compensation Plan, (iii) other remuneration approved by the Board of Directors as eligible to be deferred under the Plan, provided that such Agreement shall be entered into prior to payment of such compensation to the Executive or the Director, as the case may be, or (iv)other remuneration approved by the Board of Directors as eligible to be credited under the Plan by way of a transfer of a deferred compensation entitlement to this Plan from any other nonqualified deferred compensation program maintained by the Company. Notwithstanding the above, any Agreement entered into on or after January 1, 2005 shall be structured so as to comply with the timing of election rules contained in Section 409A(a)(4) of the Internal Revenue Code, as interpreted by the Internal Revenue Service through any proposed or final Regulation or other guidance. IV .     DEFERRAL OF COMPENSATION - EXECUTIVE AND DIRECTOR RULES            4.01   The deferral of compensation for an Executive shall be made in accordance with the following provisions.                        A.   Each Plan Year, the Executive may elect any or all of the following five options for deferring compensation, to the extent applicable: - 5 - [image77.gif]     Option 1 - The Executive may elect to defer an amount of Normal Compensation. The Agreement may specify that the Executive's salary will be reduced by the amount of the Deferred Compensation on a ratable basis throughout the Plan Year or that the Executive's salary will be reduced by a specified amount or amounts in a specified month or months of the Plan Year.    Option 2.      A. The Executive may elect to defer the difference between (i) the lesser of (a) the dollar limitation then in effect pursuant to Section 402(g)(1)(B) of the Internal Revenue Code and (b) six percent (6%) of his compensation, as defined in the principal tax-qualified defined contribution savings plan of Pepco Holdings or one of its subsidiaries in which the Executive participates (the "Applicable Savings Plan"), and (ii) the amount of pre-tax contributions he is permitted to make under the Applicable Savings Plan. Under this Option 2A., the Executive's salary will be reduced by the amount of Deferred Compensation at the same time and in the same amounts as if such reduction was governed by the election then in effect for the Executive under the Applicable Savings Plan.     B. Under this Option 2B., the Executive may also elect to defer up to the difference between (i) six percent (6%) of his compensation and (ii) the dollar limitation then in effect pursuant to Section 402(g)(1)(B) of the Internal Revenue Code. For the 2005 Plan Year, any election made by a Participant which involves Option 2 will be construed and applied by reference to these two subelection formats. - 6 - [image77.gif]   Option 3 - The Executive may elect to defer such other compensation which would otherwise be paid to the Executive during the Plan Year provided such compensation has been approved by the Board of Directors in its sole discretion as eligible to be deferred under the Plan.   Option 4 - Subject to the prior approval of the Board of Directors, which approval may be granted or withheld in the sole discretion of the Board of the Directors, the Executive may elect to have the Executive's Account under this Plan credited with a deferred compensation entitlement attributable to any other nonqualified deferred compensation program maintained by the Company, provided that such transfer will be accompanied by a corresponding elimination of the Company's obligation under such other deferred compensation arrangement and provided further that no such transfer will be permitted with respect to any deferred compensation entitlement which would otherwise become payable to the Executive under the terms of such other nonqualified deferred compensation program within the same calendar year as the year of the proposed transfer. Each Executive who elects Deferred Compensation with respect to a Plan Year shall specify in his Agreement for such Plan Year the Option or Options which shall apply for such Plan Year.                         B.     The Company will credit the Deferred Compensation to the Account of each participating Executive as of the day such amount would have been paid to the Executive if the Executive's Agreement had not been in effect. The Executive may elect to have the Company credit, on a monthly basis all Deferred Compensation into the Executive's Account with an amount in the nature of interest at either (i) the prime rate quoted by the Chase Manhattan Bank, - 7 - [image77.gif] N.A. (the "Prime Rate"), as of the last day of the month; (ii) a rate equal to the rate of return with respect to any one or a combination of the investment funds selected by the Human Resources Committee (an "Investment Fund Rate"), or (iii) a combination of the Prime Rate and an Investment Fund Rate. The Prime Rate or the appropriate Investment Fund Rate(s) shall be credited to the Executive's Account as of the last day of each calendar month based on the daily balances in the Account which are to be adjusted with respect to the Prime Rate or each designated Investment Fund, as the case may be. The crediting of such interest on a monthly basis shall continue until such balance in the Executive's Account has been reduced to zero by reason of benefit payments under the Plan.                          The Executive may also elect to have the investment return applicable to all or part of any Deferred Compensation credited to the Executive's Account determined by reference to phantom shares of Pepco Holdings Common Stock ("Common Stock"). In order to initially determine the number of shares of Common Stock which will serve as the basis for adjusting the value of an Executive's account, the full amount of Deferred Compensation to be credited with an investment return based upon phantom shares shall be divided by the average of the high and low sales prices of the Common Stock on the New York Stock Exchange, Inc. on the second business day prior to the date upon which the Executive's Account is to be credited with such Deferred Compensation. The resulting number will represent the number of phantom shares to be credited to such Executive's Account. For purposes of determining the value of the Executive's Account which is attributable to phantom shares, each phantom share shall be deemed to have a value of one share of Common Stock and any time a dividend payment is made with respect to a share of Common Stock, an equivalent amount shall be added to the account of the Executive with respect to each phantom share then credited to the Account. All such dividend equivalent - 8 - [image77.gif] amounts added to the Executive's Account shall be expressed in the form of phantom shares or fractions thereof.                         C.   If the Executive elects Option 2A., the Company shall credit the Executive's Account with a Matching Company Credit equal in value to the percentage of Deferred Compensation elected by the Executive under Option 2A. which would have been matched by the Company if the Executive had contributed such Deferred Compensation to the Applicable Savings Plan. The Matching Company Credit shall be made to the Executive's Account at the same time as the corresponding Deferred Compensation is credited to the Executive's Account pursuant to Option 2A. provided that the aggregate match credited to the Executive's Account due to Deferred Compensation elected by the Executive under Option 2A. plus the match credited to the Executive under the Applicable Savings Plan shall not exceed the dollar limitation then in effect pursuant to Section 402(g)(1)(B) of the Internal Revenue Code.                      In addition, if the Executive elects Option 2B., the Company shall credit the Executive's Account with a Matching Company Credit equal in value to the percentage of Deferred Compensation elected by the Executive under Option 2B., based upon the matching rate then being applied in the Applicable Savings Plan.                     D.   The Company shall furnish each participating Executive with an annual report showing the balance in the Executive's Account as of June 30 of each year. Effective as of December 31, 2005, the annual report will be prepared as of December 31 of each calendar year.            4.02    The deferral of Normal Compensation for a Director shall be made in accordance with the following provisions:                     A.    Each Plan Year or until the Director provides written notification of cancellation of a previous election, each Director may elect to defer an amount of retainer/fees - 9 - [image77.gif] constituting such Director's Normal Compensation. The Agreement may specify that the Director's retainer/fees will be reduced by the elected amount of the Deferred Compensation on a ratable basis throughout the Plan Year or that the Director's retainer/fees will be reduced by a specified amount or amounts in a specified month or months of the Plan Year. In addition, subject to the prior approval of the Board of Directors. which approval may be granted or withheld in the sole discretion of the Board of Directors, a Director may elect to have the Director's Account under this Plan credited with a deferred compensation entitlement attributable to any other nonqualified deferred compensation program maintained by the Company, provided that such transfer will be accompanied by a corresponding elimination of the Company's obligation under such other deferred compensation arrangement and provided further that no such transfer will be permitted with respect to an deferred compensation entitlement which would otherwise become payable to the Director under the terms of such other nonqualified deferred compensation program within the same calendar year as the year of the proposed transfer.                     B.   The Company will credit the Deferred Compensation to the Account of each participating Director as of the day such amount would have been paid to the Director if the Director's Agreement had not been in effect. All retainer fees and other Director fees which would have been paid to the Director in the form of shares of Company Stock had no deferral election been made will be credited to the Director's Account in the form of phantom stock. In addition, a Director may elect to have any Deferred Compensation which would otherwise have been paid to the Director in the form of cash had no deferral election been made also expressed in the form of phantom stock by so advising the Human Resources Committee as part of the - 10 - [image77.gif] Director's Agreement. The full amount of Deferred Compensation to be credited in the form of phantom shares shall be divided by the average of the high and low sale prices of the Common Stock on the New York Stock Exchange. Inc. on the second business day prior to the date upon which the Director's Account is to be credited with such Deferred Compensation. The resulting number will represent the number of phantom shares to be credited to such Director's Account. For purposes of determining the value of the Director's Account which is attributable to phantom shares, each phantom share shall be deemed to have a value of one share of Common Stock and any time a dividend payment is made with respect to a share of Common Stock, an equivalent amount shall be added to the account of the Director with respect to each phantom share then credited to the Account. All such dividend equivalent amounts added to the Director's Account shall be expressed in the form of phantom shares or fractions thereof.                     With respect to any Deferred Compensation credited to the Account of a Director which is not credited in the form of phantom shares, the Company will, in addition, credit the Director's Account on a monthly basis with an amount in the nature of interest at a rate equal to the rate of return with respect to any one or a combination of the investment funds selected by the Human Resources Committee (an "investment Fund Rate"). The appropriate rate or rates of interest shall be credited to the Director's Account as of the last day of each calendar month based on the daily balances in the Account attributable to each designated investment fund, and the crediting of such interest on a monthly basis shall continue until such balance in the Director's Account has been reduced to zero by reason of benefit payments under the Plan.                     C.   The Company shall furnish each participating Director with an annual report showing the balance in the Director's Account as of June 30 of each year. Effective as of December 31, 2005, the annual report will be prepared as of December 31 of each calendar year. - 11 - [image77.gif] V.      PAYMENT OF BENEFITS            5.01   Except as otherwise provided in this Article V. the payment of benefits to a participating Executive shall commence as of the date specified by the Executive in the Executive's Agreement under one of the following options: (i) on the date of commencement of benefits under the Applicable Defined Benefit Pension Plan in which the Executive participates; (ii) on January 31 of the calendar year following the year of the Executive's Retirement: (iii) on the first day of the month following the Executive's Separation from Service; (iv) on January 31 of calendar year following Separation from Service; (v) on January 31 of the calendar year following the later of the year of the Executive's Separation from Service or attainment of an age specified in the Agreement; or (vi) on January 31 of the calendar year specified in the Agreement, which may not be earlier than the second calendar year following the calendar year which includes the first day of the Plan Year for which the Agreement is made. Except as otherwise provided in this Article V, the payment of benefits to a participating Director shall commence as of the date specified by the Director in the Director's Agreement under one of the following options: (i) on the first day of the month following the Director's Separation from Service; (ii) on January 31 of the calendar year following the year of the Director's Separation from Service; (iii) on January 31 of the calendar year following the later of the year of the Director's Separation from Service or attainment of an age specified in the Agreement; or (iv) on January 31 of the calendar year specified in the Agreement, which may not be earlier than the second calendar year following the calendar year which includes the first day of the Plan Year for which the Agreement is made. Notwithstanding the above, if an individual who then - 12 - [image77.gif] qualifies as a "specified employee", as defined in Section 409A(a)(2)(B)(i) of the Internal Revenue Code, incurs a Separation from Service for any reason other than death and becomes entitled to a distribution from this Plan, as a result of such Separation from Service, no distribution otherwise payable to such specified employee during the first six (6) months after the date of such Separation from Service, shall be paid to such specified employee until the date which is one day after the date which is six (6) months after the date of such Separation from Service (or, if earlier, the date of death of the specified employee).            5.02    As specified in the Executive's or the Director's Agreement, as the case may be, benefits shall be paid (i) in a lump sum amount equal to the Executive's or the Director's Account balance as of the benefit commencement date, or (ii) in a series of approximately equal monthly or annual installments, as computed by the Company, over a period of between two (2) and fifteen (15) years with the final payment equaling the then remaining balance in the Executive's or the Director's Account. If annual installments are elected by the Executive or the Director, such annual installments shall be payable on the benefit commencement date and each succeeding January 31 during the payment period. Notwithstanding a specification of installment payments in an Executive's or Director's Agreement, as the case may be, if the balance in the Executive's or the Director's Account as of the benefit commencement date is less than one thousand dollars ($1,000.00), the Company shall instead make a lump sum payment of that amount on that date. The time for payment of benefits to an Executive or a Director may be modified by the Executive or Director by the filing of a written election prior to the beginning of the calendar year in which benefits would otherwise become payable under the existing Agreement. Notwithstanding the above, any delay in the time and any change in the form of a distribution from this Plan of an amount which is subject to Section 409A (i) may not take effect - 13 - [image77.gif] until at least 12 months after the date the election is made, (ii) must involve a further deferral of not less than five (5) years from the date such payment would otherwise be made (except for a payment made due to the death, disability or Unforeseen Financial Emergency of the electing Executive or Director, as the case may be, and (iii) must be made, in the case of payments otherwise scheduled to be made at a specified time or pursuant to a fixed schedule, at least 12 months prior to the date such payments were originally scheduled to be made.            5.03    An Executive may apply to the Human Resources Committee for early distribution of all or any part of his Account which is not subject to Section 409A. Any such early distribution shall be made in a single lump sum, provided that ten percent (10%) of the amount withdrawn in such early distribution shall be forfeited prior to payment of the remainder to the Executive. An Executive may not elect an early distribution hereunder if he has received an early distribution or a distribution under Section 5.05 within the previous twelve (12) months. In the event an Executive's early distribution is submitted within sixty (60) days after a Change in Control (as may be defined in an agreement between the Executive and the Company or in a plan in which the Executive participates) or an elimination of an investment alternative under the Plan that the Human Resources Committee determines is a substantial detriment to the Executive, the forfeiture penalty shall be reduced to five percent (5%).            5.04    In the event that a participating Executive or a participating Director dies before the benefit commencement date, the Company shall make benefit payments to the Executive's or the Director's Beneficiary or Beneficiaries in an aggregate amount equal to twice the balance credited to the Account of the participating Executive or participating Director, as the case may be, immediately prior to such individual's death. An amount equal to Account balance will be paid on the first of the month following the Executive's or the Director's death and the remaining - 14 - [image77.gif] amount of the death benefit will commence as of January 31 of the calendar year following the Executive's or the Director's death in accordance with the method of payment under Section 5.02 specified in the Executive's or the Director's Agreement. In the event that a participating Executive or a participating Director dies after the benefit commencement date, any remaining benefit payments shall be paid to the Executive's or the Director's Beneficiary or Beneficiaries. In the event that no Beneficiary survives the Executive or the Director, an amount equal to the remaining balance in the Executive's or Director's Account (or two times the Account balance if death occurs prior to the benefit commencement date) shall be paid to the estate of the Executive or the Director, as the case may be, in a lump sum within thirty (30) days following the date on which the Company is notified of the Beneficiary's death            5.05    Notwithstanding the foregoing, the Company may at any time make a lump sum payment to an Executive or Director (or surviving Beneficiary) equal to part or all of the balance in the Executive's or Director's Account, as the case may be, upon a showing of a financial emergency caused by circumstances beyond the control of the Executive or Director (or surviving Beneficiary) which would result in serious financial hardship if such payment were not made. The determination whether such emergency exists shall be made in the sole discretion of the Board of Directors of the Company, the amount of the payment shall be limited to the amount necessary to meet the financial emergency, and any remaining balance in the Executive's or Director's Account shall be paid at the time and in the manner otherwise set forth in the Executive's or Director's Agreement, as the case may be.            5.06    In the event that a participating Executive or Director ceases to be an employee or Director of the Company and becomes a proprietor, officer, partner, employee, or otherwise becomes affiliated with any business or entity that is in competition with the Company, or - 15 - [image77.gif] becomes employed by any governmental agency having jurisdiction over the affairs of the Company, the Company reserves the right in the sole discretion of its Board of Directors to make an immediate lump sum payment to the Executive or the Director in an amount equal to the balance in the Executive's or the Director's Account at that time, to the extent that such payment is permitted under Section 409A of the Code.            5.07    If an Executive or a Director has entered into two (2) or more Agreements with respect to different Plan Years which specify different benefit commencement dates under Section 5.01 or different methods of payment under Section 5.02, the Company will separately account for the Deferred Compensation attributable to each such Agreement and distribute the amounts covered by each Agreement in accordance with the terms thereof. VI.    RIGHTS OF PARTICIPATING OFFICERS AND BENEFICIARIES            6.01    Nothing contained in this Plan or any Agreement and no action taken hereunder shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Executive, any Director, any Beneficiary or any other person; provided the Company has established a grantor trust (Trust No. 3 originally executed on November 28, 2001) to hold assets to secure the Company's obligations to participants under the Plan if the establishment of such a trust does not result in the Plan being "funded" for purposes of the Internal Revenue Code. Except to the extent provided through a grantor trust established under the provisions of the preceding sentence, any compensation deferred under the Plan shall continue for all purposes to be a part of the general funds of the Company and to the extent that any person acquires a right to receive payments from the Company under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Company. - 16 - [image77.gif]            6.02    The right of any Executive, Director, Beneficiary, or other person to receive benefits under the Plan may not be assigned, transferred, pledged or encumbered except by will or the laws of descent and distribution, nor shall it be subject to attachment or other legal process of whatever nature.            6.03    If the Company finds that an person to whom any payment is payable under the Plan is unable to care for his or her affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefor shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a parent, or a brother or sister, or to any person deemed by the Company to have incurred expense for the person who is otherwise entitled to payment. VII.     MISCELLANEOUS            7.01    This Plan may be amended, suspended or terminated at any time by the Company provided, however, that no amendment, suspension or termination shall have the effect of impairing the rights of(i) participating Executives or their Beneficiaries or (ii) participating Directors or their Beneficiaries with respect to amounts credited to their Accounts before the date of the amendments, suspension or termination.            7.02    To the extent required by law, the Company shall withhold federal or state income or payroll taxes from benefit payments hereunder and shall furnish the recipient and the applicable governmental agency or agencies with such reports, statements, or information as may be legally required in connection with such benefit payments.            7.03    This Plan and all Agreements hereunder shall be construed in accordance with and governed by the laws of the District of Columbia. - 17 - [image77.gif]           IN WITNESS WHEREOF, the Company has caused this restated version of the Plan to be signed on this 6th day of January, 2006 which restated version reflects all modifications made to the Plan through such date of execution. ATTEST Pepco Holdings, Inc. By  /s/ ELLEN S. ROGERS                                Secretary By  /s/ D. R. WRAASE                                             Chief Executive Officer - 18 - [image77.gif]

  Exhibit 10.1 EXECUTION COPY SOLEXA, INC. SECURITIES PURCHASE AGREEMENT November 12, 2006   --------------------------------------------------------------------------------   SOLEXA, INC. SECURITIES PURCHASE AGREEMENT      This Securities Purchase Agreement (this “Agreement”) is made as of November 12, 2006, by and between Solexa, Inc., a Delaware corporation (the “Company”) with its principal office at 25861 Industrial Boulevard, Hayward, California 94545, and Illumina, Inc., a Delaware corporation (“Purchaser”) with its principal office at 9885 Towne Centre Drive, San Diego, CA 92121. RECITALS      Whereas, the parties have entered into that certain Agreement and Plan of Merger (the “Merger Agreement”) on the date hereof and, in connection therewith, the Company has agreed to issue and sell to Purchaser, and Purchaser has agreed to purchase from the Company, the Common Shares (as defined herein) at the Closing (as defined herein);      Whereas, the Company and Purchaser are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Regulation D (“Regulation D”), as promulgated by the SEC (as defined herein) under the Securities Act of 1933, as amended (the “Securities Act”); and      Whereas, capitalized terms not defined herein shall have the meanings ascribed thereto in the Merger Agreement;      Now, Therefore, in consideration of the foregoing recitals and the mutual promises, representations, warranties and covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 Authorization and Sale of Common Shares      1.1 Authorization. The Company has authorized the sale and issuance of 5,154,639 shares (the “Common Shares”) of the Company’s common stock, par value $0.01 per share (the “Common Stock”), at a price per share of $9.70 (the “Per Share Purchase Price”).      1.2 Closing. Subject to the terms and conditions of this Agreement, including without limitation, the conditions set forth in Article 5 and Article 6 of this Agreement, there shall be a closing at which the Company shall issue and sell, and Purchaser shall purchase the Common Shares, in exchange for the aggregate cash consideration of $49,999,998.   --------------------------------------------------------------------------------   ARTICLE 2 Closing Date; Delivery      2.1 Closing Date; Delivery.      (a) Location. The Closing of the purchase and sale of the Common Shares hereunder (the “Closing”) shall be held at the offices of Dewey Ballantine LLP, 1950 University Avenue, Suite 500, East Palo Alto, California 94303, on the Closing Date.      (b) Closing. Subject to the satisfaction (or waiver) of the conditions thereto set forth in Article 5 and Article 6 of this Agreement, on the date hereof or at such other time and place upon which the Company and Purchaser shall agree in writing, the Company will deliver or cause to be delivered to Purchaser, a certificate representing the Common Shares, registered in Purchaser’s name, in exchange for payment of the purchase price therefor by Purchaser by wire transfer of immediately available funds to the Company in accordance with the Company’s written wiring instructions. The date of the Closing is hereinafter referred to as the “Closing Date.” ARTICLE 3 Representations and Warranties of the Company      Except, with respect to any Section of this Article III, as set forth in the disclosure schedule delivered by the Company to Purchaser herewith (the “Disclosure Schedule”) that relates to such Section or to other Sections of this Article III to the extent it is reasonably apparent that such disclosure is applicable to such other Section, the Company represents and warrants to Purchaser:      3.1 Organization and Standing. The Company is a corporation duly incorporated and validly existing under, and by virtue of, the laws of the State of Delaware and is in good standing as a domestic corporation under the laws of said state. The Company has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as now conducted. The Company 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, leased or operated by it or the nature of its activities makes such qualification necessary, except where the failure to be so qualified could not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the Company.      3.2 Subsidiaries. Each Subsidiary of the Company is a corporation duly incorporated and validly existing under, and by virtue of, the laws of its jurisdiction of incorporation or organization and is in good standing as a domestic corporation under the laws of said jurisdiction. Each Subsidiary has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as now conducted. Each Subsidiary 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, leased or operated by it or the nature of its activities makes such qualification necessary, except where the failure to be so qualified could not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the Company. Section 3.2 of the Disclosure Schedule lists (i) each Subsidiary of the Company, 2 --------------------------------------------------------------------------------   (ii) its jurisdiction of incorporation or organization and (iii) the location of its principal executive office. Except for the capital stock of its Subsidiaries, the Company does not own, directly or indirectly, any capital stock or other ownership interest in any entity.      3.3 Corporate Power; Authorization. The Company has all requisite legal and corporate power and has taken all requisite corporate action to execute and deliver this Agreement, to sell and issue the Common Shares, and to carry out and perform all of its obligations under this Agreement. This Agreement constitutes a legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors’ rights generally and (b) as limited by equitable principles generally. The execution and delivery of this Agreement does not, and the performance of this Agreement and the compliance with the provisions hereof, the issuance, sale and delivery of the Common Shares by the Company will not conflict with, or result in, a material breach or violation of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any lien pursuant to the terms of, the Amended and Restated Certificate of Incorporation, as amended (the “Restated Certificate”) or Bylaws of the Company or any statute, law, rule or regulation or any state or federal order, judgment or decree or any indenture, mortgage, lease or other material agreement or instrument to which the Company or any of its properties is subject.      3.4 Issuance and Delivery of the Shares. Upon issuance and delivery in accordance with this Agreement and payment therefore in accordance with the terms of this Agreement, the Common Shares will be duly authorized, validly issued, fully paid and nonassessable. The issuance and delivery of the Common Shares is not subject to preemptive or any other similar rights of any Person, and the Common Shares will be free and clear of any liens or encumbrances.      3.5 SEC Documents; Financial Statements. The Company has filed in a timely manner all documents that the Company was required to file with the Securities and Exchange Commission (the “SEC”) under Sections 13, 14(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), since January 1, 2004. As of their respective filing dates, all such documents filed by the Company with the SEC (the “SEC Documents”) complied in all material respects with the requirements of the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), as applicable. None of the SEC Documents as of their respective dates contained any untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents (the “Financial Statements”) comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto. The Financial Statements have been prepared in accordance with GAAP consistently applied and fairly present the consolidated financial position of the Company and any Subsidiaries at the dates thereof and the consolidated results of their operations and consolidated cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, recurring adjustments or to the extent that such unaudited statements do not include footnotes). Since the first SEC filing by the Company covering the fiscal period ending after December 31, 2004, there has been no change in the Company’s accounting methods or principles that would be required to be disclosed in the Company’s 3 --------------------------------------------------------------------------------   financial statements in accordance with GAAP, except as described in the notes to such Company financial statements.      3.6 Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, or local governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement except for (a) compliance with the securities and blue sky laws in the states in which the Common Shares are offered and/or sold, which compliance will be effected in accordance with such laws, (b) the filing of the Registration Statement (as defined herein) and all amendments thereto with the SEC as contemplated by Section 7.2 of this Agreement and (c) the filing of a Form D pursuant to Regulation D.      3.7 No Material Adverse Change. Except as otherwise disclosed herein or in the SEC Documents filed prior to the date of this Agreement (excluding any disclosures set forth in any risk factor section thereof), since June 30, 2006, there have not been any changes on the business, prospects, condition (financial or otherwise) or results of operations of the Company except for changes which have not been or could not reasonably be expected to be, either individually or in the aggregate, materially adverse.      3.8 Authorized Capital Stock. The authorized capital stock of the Company consists of (a) 200,000,000 shares of Common Stock and (b) 2,000,000 shares of preferred stock, par value $0.01 per share (“Company Preferred Shares”). At the close of business on November 10, 2006, (i) 36,611,140 shares of Common Stock (excluding treasury shares) were issued and outstanding, (ii) no shares of Common Stock were held by the Company in its treasury, (iii) no Company Preferred Shares were issued and outstanding, (iv) 4,430,172 shares of Common Stock were reserved for issuance pursuant to outstanding unexercised options to purchase shares of Common Stock, (v) 6,150,504 shares of Common Stock have been reserved for issuance under the Company’s 2005 Equity Incentive Plan (and sub plans thereunder), (vi) shares of 7,845,889 Common Stock have been reserved for issuance pursuant to warrants to purchase shares of Common Stock, and (vii) 37,618 shares of Common Stock have been reserved for issuance under the Company’s 1998 Employee Stock Purchase Plan. All of the outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable and free of preemptive and similar rights.      3.9 Litigation. There are no actions, suits, claims, proceedings, arbitration or investigations pending before any Governmental Entity or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries or any of their respective assets or properties which, if adversely determined, (a) could reasonably be expected to have a material adverse effect on the Company or (b) would impair the ability of the Company to perform in any material respect its obligations under this Agreement.      3.10 NASDAQ Compliance. The Common Stock is registered pursuant to Section 12(g) of the Exchange Act and is listed on The Nasdaq Global Market (the “Nasdaq Global Market”), and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or de-listing the Common Stock from the Nasdaq Global Market, nor, to the Company’s knowledge, is the SEC or the National Association of Securities Dealers, Inc. (the “NASD”) contemplating terminating 4 --------------------------------------------------------------------------------   such registration or listing. The Company and the Common Stock meet the criteria for continued listing and trading on the NASDAQ Global Market.      3.11 Form S-3 Eligibility. The Company is eligible to register the Common Shares for resale by the Purchaser on Form S-3 promulgated under the Securities Act.      3.12 Use of Proceeds. The proceeds of the sale of the Common Shares will be used by the Company for working capital and general corporate purposes. None of the proceeds of the sale of the Common Shares will be distributed to any shareholder of the Company or used to redeem any capital stock of the Company.      3.13 Brokers and Finders. No person or entity will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company or Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company.      3.14 No Directed Selling Efforts or General Solicitation. Neither the Company nor any person or entity acting on its behalf has conducted any general solicitation or general advertising (as those terms are used in Regulation D) in connection with the offer or sale of any of the Common Shares.      3.15 No Integrated Offering. Neither the Company nor any person or entity acting on its or their behalf has, directly or indirectly, made any offers or sales of any Company security or solicited any offers to buy any security, under circumstances that would adversely affect reliance by the Company on Section 4(2) of the Securities Act for the exemption from registration for the transactions contemplated hereby or would require registration of the Common Shares under the Securities Act.      3.16 Private Placement. The offer and sale of the Common Shares to Purchaser as contemplated hereby is exempt from the registration requirements of the Securities Act.      3.17 Internal Accounting Controls. Except as described in the SEC Documents, the Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.      3.18 Compliance with Applicable Law.           (a) The Company and its Subsidiaries hold all permits, licenses, variances, exemptions, orders and approvals of all Governmental Entities necessary in any material respect for the lawful conduct of the business of the Company and its Subsidiaries, taken together (the “Company Permits”), and are in compliance with the terms of the Company Permits, except for any such noncompliance that would not reasonably be expected to have a material adverse affect on the Company. To the knowledge of the Company, the businesses of the Company and its Subsidiaries are being and have at all times been conducted in compliance with applicable law. 5 --------------------------------------------------------------------------------   To the knowledge of the Company, no investigation or review by any Governmental Entity with respect to the Company or any of its Subsidiaries is pending or threatened.           (b) Except as disclosed in the SEC Documents filed by the Company prior to the date hereof, the Company is in compliance, in all material respects, with (i) the provisions of the Sarbanes-Oxley Act and (ii) the listing and corporate governance rules and regulations of NASDAQ applicable to the Company as of the date of this Agreement. Except as permitted by the Exchange Act, including, without limitation, Sections 13(k)(2) and (3), since the enactment of the Sarbanes-Oxley Act, neither the Company nor any of its Subsidiaries has made, arranged, modified, or forgiven personal loans to any executive officer or director of the Company in violation of the Sarbanes-Oxley Act.           (c) The management of the Company has (i) designed and implemented disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) or caused such disclosure control and procedures to be designed under their supervision to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the management of the Company by others within those entities, and (ii) disclosed, based on its most recent evaluation to the Company’s outside auditors and the audit committee of the Board of Directors of the Company, (A) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information, (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting and (C) any other matter required to be disclosed by Law, the Company’s policies, the listing standards of NASDAQ, the Company’s audit committee’s charter or the professional standards of the Public Company Accounting Oversight Board.           (d) Since January 1, 2004, (i) neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer, employee, auditor, accountant or representative of the Company or any of its Subsidiaries has received or otherwise has knowledge of any complaint, allegation, assertion or claim from or by a “whistleblower” regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any of its Subsidiaries or their respective internal accounting controls relating to periods after January 1, 2004, including any material complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices (except for any of the foregoing which have no reasonable basis) and (ii) no attorney representing the Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation, relating to periods after January 1, 2004, by the Company or any of its officers, directors, employees or agents to the Board of Directors of the Company or any committee thereof or, to the knowledge of the Company, to any director or officer of the Company.      3.19 Transactions with Affiliates. Except as disclosed in the SEC Documents and as contemplated pursuant to this Agreement, none of the officers or directors of the Company or any of its Subsidiaries and none of the employees of the Company or any of its Subsidiaries is presently a party to any loan, lease, agreement, contract, royalty agreement, management contract or other transaction with the Company or any of its Subsidiaries or to a presently 6 --------------------------------------------------------------------------------   contemplated transaction (other than for services as employees, officers and directors in the ordinary course of business consistent with past practice) that would be required to be disclosed pursuant to Item 404 of Regulation S-K promulgated under the Securities Act.      3.20 Intellectual Property.           (a) “Intellectual Property” shall mean patents, trademarks, service marks, trade names, trade dress, designs, copyrights, mask works, trade secrets, know-how, inventions, technical data, databases, software, firmware, licenses, information, all other intellectual property and proprietary rights and processes, and any and all applications, issuances and registrations of or for any of the foregoing.           (b) Except as disclosed in the SEC Documents filed prior to the date hereof and to the knowledge of the Company, the Company, together with its Subsidiaries, owns or has the valid right to use all of the Intellectual Property used or to be used in the conduct of the business of the Company and its Subsidiaries as currently conducted or as currently proposed to be conducted prior to June 30, 2007, as described in the SEC Documents, free and clear of all material liens and encumbrances.           (c) Except as disclosed in the SEC Documents filed prior to the date hereof, and to the knowledge of the Company, neither the conduct of the business of the Company and its Subsidiaries (including, without limitation, the provision to and use by third parties of any products or services of the Company and its Subsidiaries) as currently conducted or as currently proposed to be conducted prior to June 30, 2007, as described in the SEC Documents, materially infringes, misappropriates, conflicts with or otherwise violates any Intellectual Property rights of any third party or any confidentiality obligation owed by the Company or any of its Subsidiaries to a third party, and, to the knowledge of the Company, the Intellectual Property and confidential information of the Company and its Subsidiaries are not being infringed, misappropriated or otherwise violated by any third party. The Company and each of its Subsidiaries have taken reasonable measures to maintain the confidentiality of all their trade secrets and the proprietary nature and value of their Intellectual Property.           (d) Each employee, consultant and contractor of the Company who has been provided access to confidential information of the Company or any of its Subsidiaries has executed an agreement to maintain the confidentiality of such confidential information. Each employee and consultant of the Company has executed an agreement assigning to the Company or the applicable Subsidiary all Intellectual Property invented, conceived, reduced to practice, developed or otherwise created by such person for or for the benefit of the Company or any of its Subsidiaries in connection with their work as employees or consultants of the Company or its Subsidiaries.      3.21 Insurance. The Company has delivered or made available to Purchaser prior to the date of this Agreement copies of all insurance policies which are owned by the Company or its Subsidiaries or which names the Company or any of its Subsidiaries as an insured (or loss payee) as of the date of this Agreement, including those which pertain to the Company’s or its Subsidiaries’ assets, employees or operations. All such insurance policies which are owned by the Company or its Subsidiaries are in full force and effect, are valid and enforceable. As of the date of this Agreement, neither the Company nor any of its Subsidiaries have received notice of cancellation of any such insurance policies. 7 --------------------------------------------------------------------------------        3.22 No Undisclosed Liabilities. Except as disclosed in the SEC Documents (excluding any disclosures set forth in any risk factor section thereof) filed prior to the date of this Agreement and except for liabilities incurred in the ordinary course of business consistent with past practice (in terms of scope and amount), neither the Company nor any of its Subsidiaries has any liabilities, absolute, contingent, unliquidated or otherwise, whether due or to become due of the type required to be disclosed on a balance sheet or in the related notes to consolidated financial statements prepared in accordance with GAAP, that individually, or in the aggregate, are material to the Company.      3.23 State Takeover Statutes. The Company has taken all actions required to be taken by it in order to exempt this Agreement and the transactions contemplated hereby from the provisions of Section 203 of the DGCL and, accordingly, that section does not apply to the purchase and sale of the Common Shares pursuant to this Agreement or any other transaction contemplated hereby. No other “control share acquisition”, “fair price” or other anti-takeover regulations enacted under state or federal laws in the United States apply to this Agreement or any of the transactions contemplated hereby. ARTICLE 4 Representations, Warranties and Covenants of Purchaser      Purchaser hereby represents and warrants to the Company:      4.1 Authorization. Purchaser has all requisite legal and corporate power and has taken all requisite corporate action to execute and deliver this Agreement, to purchase the Common Shares to be purchased by it, and to carry out and perform all of its obligations under this Agreement. This Agreement constitutes a legal, valid and binding obligation of Purchaser, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors’ rights generally and (ii) as limited by equitable principles generally.      4.2 Investment Experience. Purchaser is an “accredited investor” as defined in Rule 501(a) under the Securities Act. Purchaser is aware of the Company’s business affairs and financial condition and has had access to and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Common Shares. Purchaser has such business and financial experience as is required so as to be able to evaluate the risks and merits of its investment in the Company.      4.3 Investment Intent. Purchaser is purchasing the Common Shares for its own account as principal, for investment purposes only, and not with a present view to, or for, resale, distribution or fractionalization thereof, in whole or in part, within the meaning of the Securities Act, other than as contemplated by Article 7. Purchaser understands that its acquisition of the Common Shares has not been registered under the Securities Act or registered or qualified under any state securities law in reliance on specific exemptions therefrom, which exemptions may depend upon, among other things, the bona fide nature of Purchaser’s investment intent as expressed herein. Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Common Shares except in compliance with the Securities Act, and the rules and regulations promulgated thereunder. 8 --------------------------------------------------------------------------------        4.4 Brokers and Finders. No person or entity will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company or Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of Purchaser. ARTICLE 5 Conditions to Closing Obligations of Purchaser      Purchaser’s obligation to purchase the Common Shares at the Closing is, at the option of Purchaser, subject to the fulfillment or waiver of the following conditions:      5.1 Representations and Warranties. The representations and warranties made by the Company in this Agreement shall be true and correct as of the Closing, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date.      5.2 Covenants. All covenants, agreements, obligations and conditions contained in this Agreement to be performed or complied with by the Company on or prior to the Closing Date shall have been performed or complied with in all material respects.      5.3 Certificates. The Company shall deliver or cause to be delivered to Purchaser a duly executed certificate representing the Common Shares.      5.4 Legal Opinion. Purchaser shall have received on the Closing Date an opinion of Cooley Godward Kronish llp (“Cooley Godward Kronish”), counsel for the Company, dated as of the Closing Date, in substantially the form of Exhibit B.      5.5 Listing. The Company shall have complied with all requirements with respect to the listing of the Common Shares on the Nasdaq Global Market, except for such requirements not required until after the issuance of the Common Shares, such requirements to be complied with promptly after the Closing.      5.6 Officer’s Certificate. The Company shall have delivered a Certificate, executed on behalf of the Company by its Chief Executive Officer or Chief Financial Officer, dated as of the Closing Date, certifying to the fulfillment of the conditions specified in Sections 5.1 and 5.2.      5.7 Judgments. No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby. ARTICLE 6 Conditions to Closing Obligations of Company      The Company’s obligation to sell and issue the Common Shares at the Closing is, at the option of the Company, subject to the fulfillment or waiver of the following conditions: 9 --------------------------------------------------------------------------------        6.1 Receipt of Payment. Purchaser shall have delivered payment of the purchase price to the Company for the Common Shares being issued at the Closing.      6.2 Representations and Warranties. The representations and warranties made by Purchaser in this Agreement shall be true and correct as of the date hereof and at and as of the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date.      6.3 Covenants. All covenants, agreements, obligations and conditions contained in this Agreement to be performed by Purchaser on or prior to the Closing Date shall have been performed or complied with in all material respects. ARTICLE 7 Covenants      7.1 Definitions. For the purpose of this Article 7:           (a) the term “Registration Statement” shall mean any registration statement required to be filed by Section 7.2 below, and shall include (1) any preliminary prospectus, final prospectus, exhibit or amendment included (or deemed to be included) in or relating to such registration statements; and (2) all documents incorporated or deemed incorporated by reference therein; and           (b) the term “Registrable Shares” shall mean all of the Common Shares issued pursuant to this Agreement.      7.2 Registration Procedures and Expenses.           (a) The Company shall:                (i) use its best efforts to file a Registration Statement with the SEC on or before the date that is ten (10) days after the date of termination of the Merger Agreement in accordance with its terms (the “Merger Termination Date” and, such later tenth (10th) day, the “Filing Date”) on Form S-3 under the Securities Act (providing for shelf registration of the resale of such Registrable Shares under Rule 415 under the Securities Act) or on such other form which is appropriate to register such Registrable Shares for resale from time to time by Purchaser; such Registration Statement shall be an “automatic shelf registration statement” (as defined in Rule 405 under the Securities Act) (an “Automatic Shelf Registration Statement”) if the Company is then eligible to file an Automatic Shelf Registration Statement; each Registration Statement shall comply in all material respects with the requirements of the Securities Act;                (ii) use its best efforts to cause any such Registration Statement filed pursuant to Section 7.2(a)(i) above to become effective under the Securities Act as promptly after filing of such Registration Statement as practicable but in any event by the date (the “Effectiveness Deadline Date”) that is thirty (30) days following the Filing Date; provided, 10 --------------------------------------------------------------------------------   however, that in the event that the Registration Statement is reviewed by the SEC, then such Effectiveness Deadline Date shall be the date that is ninety (90) days following the Filing Date;                (iii) prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection therewith, or a new Registration Statement, as may be necessary to, and to use its best efforts to, keep at least one Registration Statement continuously effective until termination of such obligation as provided in Section 7.6 below, subject to the Company’s right to suspend pursuant to Section 7.5;                (iv) furnish to Purchaser (and to each underwriter, if any, of such Registrable Shares) such number of copies of prospectuses in conformity with the requirements of the Securities Act and such other documents as Purchaser may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Registrable Shares by Purchaser, including a copy of the prospectus to be furnished to Purchaser pursuant to Section 7.2(g);                (v) file such documents as may be required of the Company for normal securities law clearance for the resale of the Registrable Shares in such states of the United States as may be reasonably requested by Purchaser; provided, however, that the Company shall not be required in connection with this paragraph (e) to qualify as a foreign corporation or execute a general consent to service of process in any jurisdiction;                (vi) with respect to a Registration Statement that is not an Automatic Shelf Registration Statement, upon notification by the SEC that that such Registration Statement will not be reviewed or is no longer subject to further review and comment by the SEC, request, within three business days, acceleration of such Registration Statement such that it becomes effective at 5:00 p.m. New York Time on the date that effectiveness is requested (the “Registration Effective Date”);                (vii) deliver to Purchaser, by 9:00 a.m. New York time on the day following the Registration Effective Date, without charge, an electronic copy of each prospectus or prospectuses (including each form of prospectus) and each amendment or supplement thereto, each of which prospectus shall satisfy the requirements of Section 10(a) of the Securities Act. The Company hereby consents to the use of such prospectus and each amendment or supplement thereto by Purchaser in connection with the offering and sale of the Registrable Securities covered by such prospectus and any amendment or supplement thereto;                (viii) advise Purchaser promptly:                     (1) of any review initiated by the SEC with respect to the Registration Statement;                     (2) of the effectiveness of the Registration Statement or any post-effective amendments thereto;                     (3) of any request by the SEC for amendments to the Registration Statement or amendments to the prospectus or for additional information relating thereto; 11 --------------------------------------------------------------------------------                       (4) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Registrable Shares for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes; and                     (5) of the existence or discovery of any fact or the happening of any event that makes (1) the Registration Statement 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 not misleading or (2) any related prospectus (including any documents incorporated by reference therein) contain 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; in each of the foregoing cases, the Company shall promptly file with the SEC an amended Registration Statement and prospectus, or a new Registration Statement, which shall not contain any such untrue statement or omission and, in the case of an amended Registration Statement or new Registration Statement, use its best efforts to cause the same to become effective under the Securities Act as soon as practicable but in no event later than forty-five (45) days after such filing; and                (ix) use its best efforts to cause all Registrable Shares to be listed on each securities exchange, if any, on which equity securities of the Company are then listed.           (b) In the event the Company elects to file a registration statement under the Securities Act pertaining to an underwritten public offering of Common Stock of the Company, the Company shall notify the Purchaser thereof at least ten (10) days prior to filing and will afford Purchaser the opportunity to include Registrable Shares therein. In such event, the right of Purchaser to participate in such underwriting shall be conditioned upon Purchaser’s entry into an underwriting agreement in customary form with the underwriter selected for such underwriting by the Company. If in the course of the offering, the underwriter determines in good faith that market factors require a limitation of the number of shares to be underwritten, the number of shares shall be allocated first to the Company, second to Purchaser and third to any other stockholders participating in such underwriting; provided that, in any event, Purchaser shall be entitled to include in such offering an amount of its Common Shares equal to no less than 25% of the total number of shares of Common Stock constituting such offering. Purchaser’s rights under this Section 7.2(b) shall terminate on the earlier of the date on which Purchaser first holds Common Shares constituting less than 2.5% of the outstanding common stock of the Company or two (2) years after the Registration Effective Date.           (c) The Company shall bear all reasonable expenses in connection with the procedures in this Section 7.2 and the registration and underwriting of the Registrable Shares on such Registration Statement and the satisfaction of the blue sky laws of such states; provided, however, that in no event will the Company be responsible for any underwriting discounts or commissions due in connection with the sale of Registrable Shares in any underwritten offering of Registrable Shares.      7.3 Indemnification.           (a) The Company agrees to indemnify and hold harmless Purchaser, the officers, directors, stockholders and employees of Purchaser, each other Person who participates as an underwriter, broker or dealer in the offering or sale of the Common Shares and each 12 --------------------------------------------------------------------------------   person, if any, who controls Purchaser within the meaning of the Securities Act or the Exchange Act, from and against any losses or damages sustained, or liabilities or claims to which any of them may become subject (under the Securities Act or otherwise), insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or related prospectus (including the documents incorporated by reference therein), (ii) any omission or alleged omission to state a material fact required to be stated in any Registration Statement or any related prospectus (including the documents incorporated by reference therein) or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or (iii) any failure by the Company to fulfill any undertaking included in any Registration Statement; and the Company will, as incurred, reimburse such Purchaser, officer, director, stockholder, employee, participating person or controlling person for any legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim; provided, however, that the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability (collectively, “Loss”) arises out of, or is based upon, an untrue statement or omission or alleged untrue statement or omission made in such Registration Statement or related prospectus in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Purchaser, officer, director, stockholder, employee, participating person or controlling person specifically for use in preparation of such Registration Statement or prospectus.           (b) Purchaser agrees to indemnify and hold harmless the Company (and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, each officer of the Company who signs the Registration Statement and each director of the Company), from and against any losses or damages sustained, or liabilities or claims to which the Company (or any such officer, director or controlling person) may become subject (under the Securities Act or otherwise), insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in a representation by the Purchaser contained in any Registration Statement or related prospectus 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 under which they were made, not misleading in each case, on the effective date thereof for purposes of Section 11 of the Securities Act, if, and to the extent, such untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information furnished by or on behalf of Purchaser specifically for use in preparation of such Registration Statement or related prospectus, and Purchaser will reimburse the Company (and each of its officers, directors or controlling persons) for any legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim; provided, however, that in no event shall any indemnity under this Section 7.3(b) be greater in amount than the dollar amount of the proceeds (net of the amount of any damages Purchaser has otherwise been required to pay by reason of such untrue statement or omission or alleged untrue statement or omission) received by Purchaser upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.           (c) Promptly after receipt by any indemnified person of a notice of a claim or the beginning of any action in respect of which indemnity is to be sought against an 13 --------------------------------------------------------------------------------   indemnifying person pursuant to this Section 7.3, such indemnified person shall notify the indemnifying person in writing of such claim or of the commencement of such action, but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party (except to the extent that such omission materially and adversely affects the indemnifying party’s ability to defend such action). Subject to the provisions hereinafter stated, in case any such action shall be brought against an indemnified person, such indemnifying person shall be entitled to participate therein, and, to the extent that it shall elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to such indemnified person. After notice from the indemnifying person to such indemnified person of its election to assume the defense thereof, such indemnifying person shall not be liable to such indemnified person for any legal expenses subsequently incurred by such indemnified person in connection with the defense thereof; provided, however, that if there exists or shall exist a conflict of interest that would make it inappropriate in the reasonable judgment of the indemnified person for the same counsel to represent both the indemnified person and such indemnifying person or any affiliate or associate thereof, the indemnified person shall be entitled to retain its own counsel at the expense of such indemnifying person; provided, further, that no indemnifying person shall be responsible for the fees and expense of more than one separate counsel (together with appropriate local counsel) for all indemnified parties. The indemnifying party shall not settle an action without the prior written consent of the indemnified party, which consent shall not be unreasonably withheld.           (d) If after proper notice of a claim or the commencement of any action against the indemnified party, the indemnifying party does not choose to participate, then the indemnified party shall assume the defense thereof and upon written notice by the indemnified party requesting advance payment of a stated amount for its reasonable defense costs and expenses, the indemnifying party shall advance payment for such reasonable defense costs and expenses (the “Advance Indemnification Payment”) to the indemnified party. In the event that the indemnified party’s actual defense costs and expenses exceed the amount of the Advance Indemnification Payment, then upon written request by the indemnified party, the indemnifying party shall reimburse the indemnified party for such difference; in the event that the Advance Indemnification Payment exceeds the indemnified party’s actual costs and expenses, the indemnified party shall promptly remit payment of such difference to the indemnifying party.           (e) If the indemnification provided for in this Section 7.3 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other, as well as any other relevant equitable considerations; provided, that in no event shall any contribution by the Purchaser hereunder be greater in amount than the dollar amount of the proceeds (net of the amount of any damages the Purchaser has otherwise been required to pay by reason of such untrue statement or omission or alleged untrue statement or omission) received by the Purchaser upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation. 14 --------------------------------------------------------------------------------        7.4 Prospectus Delivery. Purchaser hereby covenants with the Company not to make any sale of the Registrable Shares without complying with Section 8.2. Purchaser acknowledges that there may be times when the Company must suspend the use of the prospectus related to the Registration Statement until such time as an amendment to the Registration Statement has been filed by the Company and becomes effective under the Securities Act, or until such time as the Company has filed an appropriate report or prospectus supplement with the SEC pursuant to the Exchange Act or Securities Act, as applicable. Purchaser hereby covenants that it will not sell any Registrable Shares pursuant to said prospectus during the period commencing at the time at which the Company gives Purchaser written notice of the suspension of the use of said prospectus and ending at the time the Company gives Purchaser written notice that Purchaser may thereafter effect sales pursuant to said prospectus; provided that such suspension periods shall in no event exceed thirty (30) days in any twelve (12) month period and that, in the good faith judgment of the Company’s Board of Directors, the Company would, in the absence of such delay or suspension hereunder, be required under state or federal securities laws to disclose any corporate development, a potentially significant transaction or event involving the Company, or any negotiations, discussions, or proposals directly relating thereto, in either case the disclosure of which would reasonably be expected to have a material adverse effect on the Company.      7.5 Termination of Obligations. The obligations of the Company pursuant to Section 7.2 hereof shall cease and terminate upon the earlier to occur of (a) such time as all of the Registrable Shares have been resold, (b) such time as all Registrable Shares that have not previously been resold may be resold in a three-month period pursuant to Rule 144(k) and Purchaser receives an opinion of counsel to the Company to that effect, or (c) the third anniversary of the Closing Date.      7.6 Reporting Requirements.           (a) With a view to making available the benefits of certain rules and regulations of the SEC that may at any time permit the sale of the Common Shares to the public without registration or pursuant to a registration statement on Form S-3, the Company agrees to use its best efforts to:                (i) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act;                (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and                (iii) so long as Purchaser owns Registrable Shares, to furnish to Purchaser upon request (A) a written statement by the Company as to whether it is in compliance with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, or whether it is qualified as a registrant whose securities may be resold pursuant to SEC Form S-3, and (B) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company.      7.7 Blue Sky. The Company shall obtain and maintain all necessary blue sky law permits and qualifications, or secured exemptions therefrom, required by any state for the offer and sale of Registrable Shares. 15 --------------------------------------------------------------------------------   ARTICLE 8 Restrictions on Transferability; Compliance with Securities Act; Voting      8.1 Securities Act Restrictions. The Common Shares shall not be transferable in the absence of a registration under the Securities Act or an exemption therefrom. Each certificate representing Common Shares shall bear a restrictive legend in substantially the following form (and a stop transfer order may be placed against transfer of the certificates for such shares): “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 OF THE UNITED STATES OR IN ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.”      8.2 Transfer of Securities.           (a) Except as otherwise provided in Article 9, Purchaser hereby covenants with the Company not to make any sale of Common Shares except:                (i) in accordance with a Registration Statement, in which case Purchaser shall have delivered a current prospectus in connection with such sale; provided, however, that if Rule 172 is then in effect and applicable, Purchaser shall have confirmed that a current prospectus was deemed to be delivered in connection with such sale; or                (ii) in accordance with Rule 144, in which case Purchaser covenants to comply with Rule 144.           (b) Except as otherwise provided in Article 9, Purchaser further acknowledges and agrees that, if Purchaser is selling any of the Common Shares using the prospectus forming a part of a Registration Statement, such Common Shares are not transferable on the books of the Company unless the certificate evidencing such Common Shares is submitted to the Company’s transfer agent and a separate certificate executed by an officer of, or other person duly authorized by, Purchaser in the form attached hereto as Exhibit A is submitted to Cooley Godward Kronish or the Company’s transfer agent. 8.3 Special Restrictions.           (a) Except as otherwise provided in Section 7.2(b), this Section 8.3 and Article 9, (i) from the Closing Date until six (6) months after the Merger Termination Date (such period being referred to as the “Primary Lock-up Period”), Purchaser shall not, (A) sell, offer to sell, solicit offers to buy, dispose of, loan, pledge or grant any right with respect to (collectively, a “Disposition”) the Common Shares; or (B) engage in any hedging, Short Sale or other 16 --------------------------------------------------------------------------------   transaction which is designed or could reasonably be expected to lead to or result in a Disposition of any of the Common Shares by Purchaser (“Short Sales”), which shall include, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps and similar arrangements (including on a total return basis), and sales and other transactions through non-U.S. broker-dealers or foreign regulated brokers and (ii) from the expiration of the Primary Lock-up Period until fifteen (15) months after the Merger Termination Date (the “Secondary Lock-up Period”), Purchaser shall not effect Dispositions or Short Sales of the Common Shares in excess of one third of the aggregate number of Common Shares purchased by Purchaser hereunder in each of the three (3)-month periods in the Secondary Lock-up Period. Notwithstanding any of the foregoing to the contrary, Purchaser may effect one block sale of all or a portion of the Common Shares in a single trade at anytime during the period beginning from the Registration Effective Date and ending on the later of (x) three (3) months after the Merger Termination Date, (y) ten (10) days after the Registration Effective Date and (z) seven (7) months after the Closing Date (such period being referred to as the “Block Trade Window Period”); provided that, in the case where clause (z) is applicable for determining the Block Trade Window Period, the Primary Lock-up Period shall expire seven (7) months after the Merger Termination Date and the Secondary Lock-up Period shall expire sixteen (16) months after the Merger Termination Date. The restrictions set forth in this Section 8.3 shall terminate, if not earlier terminated in accordance with its terms, on the first date on which the Common Shares then held by Purchaser constitute less than 2.5% of the outstanding Common Stock of the Company.           (b) Each certificate representing Common Shares shall bear the following legend until Purchaser’s obligation under this Section 8.3 has expired: “THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RESTRAINT ON ALIENATION PROHIBITING THE SALE OR OTHER TRANSFER OF THE SHARES REPRESENTED HEREBY FOR A SPECIFIED PERIOD OF TIME UNDER THE TERMS AND CONDITIONS OF AN AGREEMENT BETWEEN THE HOLDER HEREOF AND SOLEXA, INC. A COPY OF SUCH AGREEMENT WILL BE FURNISHED WITHOUT CHARGE UPON WRITTEN REQUEST TO SOLEXA, INC. AT ITS PRINCIPAL PLACE OF BUSINESS.”      8.4 Voting of Securities.           (a) Purchaser hereby agrees that, prior to the earlier to occur of the termination of the Merger Agreement or the consummation of the Merger, at any meeting of the stockholders of the Company (and at every adjournment and postponement thereof), however called, and in any written action by consent of stockholders of the Company, unless otherwise directed in writing by the Board of Directors of the Company, Purchaser shall cause the Common Shares to be voted proportionally with the balance of the votes cast at such meeting of stockholders or in connection with such written consent of stockholders of the Company on all matters relating to the Merger, the execution and delivery by the Company of the Merger Agreement, the adoption and approval of the Merger Agreement and the terms thereof, and each of the other actions contemplated by the Merger Agreement at such meeting of stockholders or in connection with such written consent of stockholders of the Company. 17 --------------------------------------------------------------------------------             (b) Commencing with the first stockholder vote or written consent after the Merger Termination Date, Purchaser hereby further agrees that, prior to the earlier of (i) the fifth anniversary of the date hereof or (ii) the first date after the Closing on which Purchaser holds less than five percent (5.0%) of the outstanding Common stock of the Company, at any meeting of the stockholders of the Company (and at every adjournment and postponement thereof), however called, and in any written action by consent of stockholders of the Company, Purchaser shall cause the Common Shares or any portion thereof it holds of record on the applicable record date to be voted either, at Purchaser’s sole discretion, in accordance with the recommendation(s) of the Board of Directors of the Company set forth in the applicable definitive proxy materials or information statement on all matters not identified in Section 8.4(a) above or proportionally with the balance of the votes cast at such meeting of stockholders or in connection with such written consent of stockholders of the Company.           (c) Each certificate representing any of the Common Shares bear the following legend until Purchaser’s obligations under this Section 8.4 have expired: “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF AN AGREEMENT WHICH PLACES CERTAIN RESTRICTIONS ON THE VOTING OF THE SHARES REPRESENTED HEREBY. A COPY OF SUCH AGREEMENT WILL BE FURNISHED WITHOUT CHARGE UPON WRITTEN REQUEST TO SOLEXA, INC. AT ITS PRINCIPAL PLACE OF BUSINESS.” ARTICLE 9 Put Right      9.1 Put Right. Notwithstanding any other provision of this Agreement to the contrary, Purchaser may elect, by giving the Company written notice, to exercise the following put rights in respect to the Common Shares (the “Put Right”):           (a) If the Merger Agreement has been terminated and the Company is required to pay a Termination Fee to Purchaser pursuant to Section 8.4(a) of the Merger Agreement, then, notwithstanding any effect (legal or otherwise) of the consummation of the Takeover Transaction on the Common Shares, Purchaser may elect to receive, with respect to all or a portion of the Common Shares held by Purchaser immediately prior to the consummation of the Takeover Transaction, a cash payment equal to the Per Share Purchase Price, in exchange for each Common Share held by Purchaser (the aggregate amount payable with respect to the Common Shares being referred to as the “Put Purchase Price”), and the Company (and its successor, if any), if the Takeover Transaction is in fact consummated, shall be obligated to pay the Put Purchase Price to Purchaser in exchange for delivery of such Common Shares in accordance with this Article 9. As used herein, (i) “Takeover Transaction” shall mean (A) in the case where the Termination Fee becomes payable pursuant to Section 8.4(a)(i) of the Merger Agreement, the transaction referred to in Section 8.4(a)(i)(B) of the Merger Agreement and (B) in the case where the Termination Fee becomes payable pursuant to Section 8.4(a)(ii) of the Merger Agreement, a Takeover Proposal (as used in Section 8.4 of the Merger Agreement) with respect to which a definitive agreement is entered into by the Company within nine (9) months following the Merger Termination Date or which is consummated within such period and (ii) 18 --------------------------------------------------------------------------------   “Takeover Transaction Closing Date” shall mean the date of consummation of the Takeover Transaction.           (b) The Company shall be required to provide written notice to Purchaser of the anticipated Takeover Transaction Closing Date not more than thirty (30) days and not less than fifteen (15) days prior to such date. If Purchaser decides to exercise the Put Right pursuant to this Section 9.1, then Purchaser shall give written notice to the Company of such decision (the “Put Notice”) no later than five (5) days prior to the Takeover Transaction Closing Date indicated in the Company’s notice; provided that, if any of the financial or other material terms of the Takeover Transaction is amended after the delivery of the Put Notice or if the Takeover Transaction Closing Date is expected to be delayed by more than three (3) days, then the Company shall promptly notify Purchaser of such amendment or delay and take such other actions as would permit Purchaser to amend or withdraw the Put Notice prior to the Takeover Transaction Closing Date. The Put Notice shall set forth the number of Common Shares to be sold pursuant to the Put Right and the wire instructions for the payment of the Per Share Purchase Price.           (c) If Purchaser has delivered, and has not subsequently withdrawn, a Put Notice pursuant to Section 9.1(b), upon and subject to the consummation of the Takeover Transaction, the Company shall be obligated to pay to Purchaser the Put Purchase Price for the Common Shares subject to the Put Notice, which payment shall be made no later than the third (3rd) business day following the Takeover Transaction Closing Date, in exchange for delivery by Purchaser of such Common Shares (or certificates formerly representing such Common Shares).           (d) The Company acknowledges that the agreements contained in this Section 9.1 are an integral part of the transactions contemplated in this Agreement, and that, without these agreements, Purchaser would not enter into this Agreement; accordingly, if the Company (or its successor) fails to promptly tender the Put Purchase Price in cash or other immediately available funds, and in order to obtain such payment Purchaser commences a suit which results in a judgment against the Company for payment of the Put Purchase Price, the Company (or its successor) shall pay to Purchaser its costs and expenses (including attorney’s fees) in connection with such suit, together with interest on the Put Purchase Price at a rate of twelve percent (12%) per annum. ARTICLE 10 Miscellaneous      10.1 Definitions. Capitalized terms used but not otherwise defined herein, shall have the respective meanings provided such terms in the Merger Agreement.      10.2 Governing Law. This Agreement shall be governed in all respects by and construed in accordance with the laws of the State of Delaware without any regard to conflicts of laws principles.      10.3 Survival. The representations, warranties, covenants and agreements made in this Agreement shall survive any investigation made by the Company or Purchaser and the Closing. 19 --------------------------------------------------------------------------------        10.4 Successors and Assigns. Neither party hereto may assign this Agreement or any of its rights or obligations hereunder without the written consent of the other party, except that Purchaser may assign, in its sole and absolute discretion, any or all of its rights, interests and obligations hereunder to any wholly owned Subsidiary of Purchaser. Subject to the foregoing, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties to this Agreement.      10.5 Entire Agreement, Amendment and Waiver. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject hereof, and may be amended or waived only with the written consent of the parties hereto.      10.6 Specific Performance. The parties hereto hereby declare that it is impossible to measure in money the damages which will accrue to a party hereto or to its successors or assigns by reason of a failure to perform any of the obligations under this Agreement and agree that the terms of this Agreement shall be specifically enforceable. If any party hereto or its successors or assigns institutes any action or proceeding to specifically enforce the provisions of this Agreement, any party against whom such action or proceeding is brought hereby waives the claim or defense therein that such party or such successor or assign has an adequate remedy at law, and such party shall not offer in any such action or proceeding the claim or defense that such remedy at law exists.      10.7 Notices, Etc. All notices and other communications required or permitted under this Agreement shall be in writing and may be delivered in person, by telecopy, overnight delivery service or registered or certified United States mail, addressed to the Company or Purchaser, as the case may be, at their respective addresses set forth on the signature page hereto, or at such other address as the Company or Purchaser shall have furnished to the other party in writing. All notices and other communications shall be effective upon the earlier of actual receipt thereof by the person to whom notice is directed or (a) in the case of notices and communications sent by personal delivery or telecopy, one business day after such notice or communication arrives at the applicable address or was successfully sent to the applicable telecopy number, (b) in the case of notices and communications sent by overnight delivery service, at noon (local time) on the second business day following the day such notice or communication was sent, and (c) in the case of notices and communications sent by United States mail, seven days after such notice or communication shall have been deposited in the United States mail.      10.8 Severability of this Agreement. If any provision of this Agreement shall be judicially determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.      10.9 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.      10.10 Jurisdiction. Except as otherwise expressly provided in this Agreement, the parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in the state court located within New Castle County, State of Delaware (or, in the case of any claim to which the federal courts have exclusive subject matter jurisdiction, the federal court sitting in the State of Delaware) and each of the parties 20 --------------------------------------------------------------------------------   hereby consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 10.7 shall be deemed effective service of process on such party.      10.11 Waiver of Jury Trial. 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 AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.      10.12 Publicity. Except as disclosure may be required by SEC rules and regulations, no party hereto shall issue any press release or otherwise make any public statement with respect to the transactions contemplated by this Agreement without the prior consent of the other parties as to the form and substance of such press release or statement (which consent shall not be unreasonably withheld or delayed).      10.13 Further Assurances. Each party to this Agreement shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as the other party hereto may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 21 --------------------------------------------------------------------------------        The foregoing agreement is hereby executed as of the date first above written.             Solexa, Inc., a Delaware corporation       By:   /s/ John West     Name:  John West     Title:  Chief Executive Officer     Address:                     Illumina, Inc., a Delaware corporation       By:   /s/ Jay T. Flatley     Name:  Jay T. Flatley     Title:  President, Chief Executive Officer   Address:         Taxpayer ID Number:  33-0804655      

STOCK ACQUISITION AGREEMENT This Stock Acquisition Agreement (this "Agreement") is entered into on July31, 2006, by and between the sellers listed on Schedule “A” and signatory hereto (collectively, the “Sellers” and each a “Seller”) and Adera Mines Limited, a Nevada corporation (the “Company”) with respect to the following:   A.  Sellers own collectively one hundred percent (100%) of the issued and outstanding common stock of Chatsworth Data Corporation, a California corporation (“CDC”);   B.  The Company desires to purchase all of the common stock, no par value, of CDC owned by the Sellers (the “CDC Stock”) and to operate CDC as a wholly owned subsidiary (the “CDC Subsidiary”); and   C. The Company will purchase and the Sellers will sell the CDC Stock on the terms and conditions set forth herein.   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 agree as follows (certain definitions of capitalized terms are set forth in Schedule “B”): ARTICLE I PURCHASE AND SALE 1.1  Purchase and Sale of CDC Stock. Subject to the terms and conditions contained herein, simultaneously with the execution of this Agreement, each Seller hereby conveys, transfers, assigns and delivers to the Company good and valid title to the CDC Stock, free and clear of any Liens. In full payment of the purchase price for the CDC Stock, the Company is hereby delivering (i) a wire transfer to each Sellers in the amounts set forth on Schedule “A” hereto totaling an aggregate amount of five million dollars ($5,000,000), (ii) 250,000 shares of common stock of the Company (the “Shares”) and (iii) a promissory note executed by the Company, and payable to each Seller in the amounts set forth on Schedule “A” hereto totaling an aggregate principal amount of $2,000,000 in the form of that attached hereto as Schedule “C” hereto (the “Notes”). At the Closing, Sellers shall deliver to the Company written resignations of all of the directors and officers of CDC, and representatives of the Company will be elected as the sole directors and officers of CDC after the Closing. Sellers shall also deliver to the Company all of the certificates representing the CDC Stock, endorsed in favor of the Company, and duly executed by each Seller and each such Seller’s spouse, as required by law.     --------------------------------------------------------------------------------   ARTICLE II REPRESENTATIONS AND WARRANTIES OF EACH SELLER Each Seller represents and warrants to the Company and (except as disclosed in this Agreement, including the schedules) that each of the following statements is true and correct: 2.1  Ownership of CDC Stock. The Sellers collectively own all of the outstanding equity of the Company and each has the full right and authority to transfer the CDC Stock owned by such Seller as set forth on Schedule B hereto. The CDC Stock is owned by each Seller free and clear of any claims or Liens. 2.2  CDC Financial Statements. The financial statements of CDC for the two year period ended December 2005, and for the three month period ended March 31, 2006, fairly and accurately present the Company’s asset and liabilities, financial results and overall financial condition.   2.3  No Adverse Changes. Other than as set forth on Schedule 2.3 attached hereto or as is generally known to the Sellers, since March 31, 2006, there has been no material adverse change in the financial condition, results of operations, cash flow, customer base, expense rates, regulatory environment, competitive environment, intellectual property or prospects of CDC or its business, and CDC has operated its business in the ordinary course of business. No Seller knows of any reason that any such materially adverse change should reasonably be expected in the future. 2.4  No Claims; ERISA. Other than as set forth on Schedule 2.4 attached hereto and incorporated herein by this reference, there are no claims or litigation, pending or threatened against or affecting CDC or its business or properties. CDC has no benefit plans that would qualify or be subject to the federal laws of “ERISA.” 2.5  Ownership of CDC Assets. Other than as set forth on Schedule 2.5 attached hereto and incorporated herein by this reference, CDC is the lawful owner, with good and marketable title, of the assets used in its business, including all patents, trademarks, trade secrets, proprietary information, formulae, trade formulae and other intellectual property (the “Intellectual Property”), free and clear of any Liens, all of which tangible assets are in good working condition, reasonable wear and tear excepted, and all of which intangible assets CDC has the right to use. All of the Intellectual Property is owned or licensed by CDC, and CDC has the right to use, license and exploit such property, and Sellers know of no reason why such Intellectual Property would infringe upon the rights of any other persons. 2.6  Compliance with Permits and Regulations; Good Standing. Except as otherwise set forth on Schedule 2.6 attached hereto and incorporated herein by this reference, CDC has substantially complied with, and is not in substantial default under or in substantial violation of, any permit, rule, regulation or order to which CDC or its business are subject. CDC is a corporation in good standing under the laws of the State of California. CDC is qualified as a foreign corporation in every state where it is required to do so, or where the failure to do so, would have a material effect on CDC or its business. CDC and its directors have taken no action to dissolve CDC or assign its assets for the benefit of any creditors. 2.7  Taxes. CDC and each Seller have filed all returns and paid all taxes due by them.   2 --------------------------------------------------------------------------------     2.8  Competing Ventures. Except as disclosed in Section 4.1, no Seller owns, directly or indirectly, any interest in a corporation, partnership, firm or association, which is either a competitor, potential competitor, customer or supplier of CDC or has an existing contractual relationship with CDC. 2.9  Full Disclosure. This Agreement, the financial statements and the other information delivered to the Company and its investors, brokers, representatives and agents with respect to CDC do not (a) contain any untrue statement of a material fact regarding CDC or its business or (b) omit to state a material fact necessary to make the statements regarding CDC or its business contained herein and therein not misleading. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Sellers and (except as disclosed in this Agreement, including the schedules) that each of the following statements is true and correct: 3.1 Existence and Good Standing. The Company is a corporation in good standing under the laws of the state of Nevada. The Company will own and operate CDC as a wholly owned subsidiary on and after the Closing. The Company has full power and authority to enter into and perform this Agreement and to deliver the cash purchase price and the Note. Each of the Note and this Agreement is the valid and binding obligation of the Company enforceable in accordance with its respective terms. ARTICLE IV ADDITIONAL AGREEMENTS; CLOSING CONDITIONS 4.1 Company Obligations for Closing. On the Closing, the Company shall deliver to Sellers each of the following: (i) the Note in the amounts set forth in Schedule “A”, (ii) the aggregate cash purchase price of Five Million Dollars ($5,000,000), as delivered by wire in the amounts and to the accounts or payees designated by Sellers on Schedule “A”, (iii) copies of the actions taken by the Board of Directors of the Company to approve this Agreement and the issuance of the Shares in the amounts set forth in Schedule “A” , and (iv) a certificate of Good Standing from the State of Nevada, dated within a reasonable time prior to the Closing. In addition, it shall be a condition to the Closing that the Company shall have completed a financing in the amount of $6,000,000 immediately prior to, or simultaneously with, the Closing. 4.2 Sellers’ Obligations for Closing. On the Closing, Sellers shall deliver to the Company each of the following: (i) all certificates of CDC Stock, representing 100% of the issued and outstanding capital stock of CDC, (ii) the written resignation of all officers and directors of CDC effective as of the Closing, and (iii) the audited financial statements of CDC for the years ended 2004 and 2005, and the quarterly, reviewed, financial statements for the quarter ended March 31, 2006, together with the report of the independent auditor for such financial statements.   3 --------------------------------------------------------------------------------     4.3 Further Obligations - Payment of Tax Obligations.  In addition to, and without limitation of the foregoing, the parties hereto agree and acknowledge that CDC is a “subchapter S” corporation for federal tax purposes and accordingly, the Sellers may have certain tax payment obligations for the period January 1, 2006 to the Closing (the “2006 Tax Period”). Upon completion of the financial statements of the 2006 Tax Period and the generation of the shareholders’ K-1 statements, the Sellers shall present copies of these statements to the Company. The Company shall reimburse each Seller 44% of the K-1 amount within 60 days of the presentation date of the K-1 to the Company. 4.4 Further Assurances. In addition to each and every other provision of this Agreement, each party shall execute such further documents and writings and take such further actions as may be or become necessary or desirable to carry out the provisions of this Agreement or the Note and the transactions contemplated by this Agreement or the Note. 4.5 Indemnification. 4.5.1 General. Each party hereto will indemnify each other party for any losses, damages or expenses arising from, related to or resulting from any breach (or third party claim of breach) of any representation, warranty or covenant in this Agreement. 4.5.2 Procedure. Promptly upon receipt by an Indemnified Party of a notice of a claim by a third party that may give rise to a claim under this Section, the Indemnified Party shall give written notice thereof to the Indemnifying Party, although failure to do so shall not affect the right to indemnification except to the extent of actual prejudice. The Indemnified Party shall allow the Indemnifying Party to assume control of the defense of any such action brought by a third party provided that (i) the Indemnifying Party delivers to the Indemnified Party an agreement in writing to defend such claim at its sole cost and expense within five (5) business days of notice from Indemnified Party, (ii) the Indemnifying Party is financially capable for providing indemnification for such claim, and (iii) the defense will be conducted by reputable attorneys reasonably approved by the Indemnified Party (retained by the Indemnifying Party at the Indemnifying Party's sole cost and expense). The Indemnified Party will have the right to participate in such proceedings and to be separately represented by attorneys of its own choosing at its own cost unless the interests of the Indemnified Party and the Indemnifying Party in the action conflict in such a manner and to such an extent as to require, consistent with applicable standards of professional responsibility, the retention of separate counsel for the Indemnified Party, in which case the Indemnifying Party will pay for one separate counsel chosen by the Indemnified Party. 4.5.3 Limits on Settlement. The Indemnifying Party may contest or settle such claim on such terms as the Indemnifying Party may choose, provided that the Indemnifying Party will not have the right, without the Indemnified Party's written consent, to settle any such claim if such settlement (i) arises from or is part of any criminal action, suit or proceeding, (ii) contains a stipulation to, confession of judgment with respect to, or admission or acknowledgement of, any liability or wrongdoing on the part of the Indemnified Party, (iii) relates to any federal, state or local tax matters, or (iv) provides for injunctive relief, or other relief other than damages, which is binding on the Indemnified Party.   4 --------------------------------------------------------------------------------     4.5.4 Separate Indemnity Under Lease in Favor of Certain Sellers. In addition to, and without limitation of the foregoing, the parties hereto agree and acknowledge that the Company shall indemnify and hold harmless the individual Sellers who are personal guarantors of the operating lease for CDC’s headquarters and operating facility located at 20710 Lansing Street, Chatsworth, California for any claims, damages or losses incurred by a Seller due to the Company’s breach of any term or condition of the lease after the Closing. In the event the Company shall renew or extend the lease, including the option to extend the lease by one year, the Company shall use its best efforts to eliminate the Sellers as guarantors thereunder. ARTICLE V MISCELLANEOUS 5.1  Complete Agreement; Modifications. This Agreement (including the Schedules and Exhibits hereto) constitutes the parties' entire agreement with respect to the subject matter hereof and supersedes all prior or contemporaneous agreements, representations, warranties, statements, promises and understandings, whether oral or written, with respect to the subject matter hereof. This Agreement may not be amended, altered or modified except by a writing signed by the parties. 5.2  Notices. Unless otherwise specifically permitted by this Agreement, all notices under this Agreement shall be in writing and shall be delivered by personal service, telecopy, federal express or comparable overnight service or certified mail (if such service is not available, then by first class mail), postage prepaid, to such address as may be designated from time to time by the relevant party, and which shall initially be: (i) If to the Company: (ii) If to Sellers: ADEREA MINES LIMITED 20710 Lassen Street Chatsworth, CA 91311 Tel: 818-341-9200 Fax: 818-341-3002   With a copy to:   Richardson & Patel LLP 10900 Wilshire Boulevard, Suite 500 Los Angeles, CA 90024 Tel: 310-208-1182 Fax: 310-208-1154 Attention: Jennifer A. Post, Esq.   To the Persons and Addresses set forth on Schedule A hereto,       Any notice sent by certified mail shall be deemed to have been given three (3) business days after the date on which it is mailed. All other notices shall be deemed given when received. No objection may be made to the manner of delivery of any notice actually received in writing by an authorized agent of a party.     5 --------------------------------------------------------------------------------     5.3  No Assignment. This Agreement is not assignable by either party absent prior written consent of the other party. This Agreement shall be binding upon and inure to the benefit of the parties, their respective successors and permitted assigns. There are no third party beneficiaries to this Agreement and nothing in this Agreement will be construed to increase or alter the rights of any third party. 5.4  Governing Law. This Agreement has been negotiated and entered into in the State of California, concerns a California business and all questions with respect to this Agreement and the rights and liabilities of the parties will be governed by the laws of California, regardless of the choice of laws provisions of California or any other jurisdiction. 5.5  Arbitration. Except for actions seeking injunctive relief, which may be brought before any court having jurisdiction, any disputes among the Company and the Sellers, which are not settled by agreement between the parties, shall be settled by arbitration in Los Angeles, California, in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The arbitration provisions will be the exclusive remedy of the parties except for injunctive relief. The prevailing party in any dispute will pay the other party’s reasonable attorney’s fees in connection with the arbitration. 5.6  Expenses. Each party shall bear its own fees and expenses incident to this Agreement and the transactions contemplated by this Agreement, including attorneys' fees and costs, and shall indemnify the other party from any Losses as a result of such fees and expenses. However, any party shall be entitled to recover any reasonable costs, including attorneys' fees, expended in enforcing this Agreement. 5.7  Severability. If any part, term or provision of this Agreement is held by a court to be invalid, illegal, unenforceable or otherwise in conflict with law, it shall be inoperative and void, but the validity of the remaining parts, terms or provisions shall not be affected and the rights and obligations of the parties shall be construed and enforced as if this Agreement did not contain the particular part, term or provision held to be invalid. 5.8  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. REMAINDER OF PAGE INTENTIONALLY BLANK     6 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. COUNTER PART SIGNATURE PAGE TO STOCK ACQUISITION AGREEMENT COMPANY: ADERA MINES LIMITED By: ________________________________________ Name: J. Stewart Asbury III Title: President and CEO   7 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. COUNTER PART SIGNATURE PAGE TO STOCK ACQUISITION AGREEMENT SELLLERS: ___________________________________ Print Name Above ___________________________________ Signature Name: William H. Moothart, an individual     8 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. COUNTER PART SIGNATURE PAGE TO STOCK ACQUISITION AGREEMENT SELLLERS: ___________________________________ Print Name Above ___________________________________ Signature Name: Carl G. Bohman, an individual   9 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. COUNTER PART SIGNATURE PAGE TO STOCK ACQUISITION AGREEMENT SELLLERS: ___________________________________ Print Name Above ___________________________________ Signature Name: Frank J. Lefkowitz Title: Trustee under Trust Agreement, dated July 3, 1990 ___________________________________ Print Name Above ___________________________________ Signature Name: Linda L. Lefkowitz Title: Trustee under Trust Agreement, dated July 3, 1990   10 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. COUNTER PART SIGNATURE PAGE TO STOCK ACQUISITION AGREEMENT SELLLERS: ___________________________________ Print Name Above ___________________________________ Signature Name: Hannes G. Boehm, an individual   11 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. COUNTER PART SIGNATURE PAGE TO STOCK ACQUISITION AGREEMENT SELLLERS: ___________________________________ Print Name Above ___________________________________ Signature Name: Steven Boehm Title: Trustee of the Boehm Grandchildren’s Trust Under the Marcia Reed Boehm Revocable Trust, Established December 21, 1987   12 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. COUNTER PART SIGNATURE PAGE TO STOCK ACQUISITION AGREEMENT SELLLERS: ___________________________________ Print Name Above ___________________________________ Signature Name: Melinda Williams Title: Trustee of the Williams Grandchildren’s Trust Under the Marcia Reed Boehm Revocable Trust, Established December 21, 1987   13 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. COUNTER PART SIGNATURE PAGE TO STOCK ACQUISITION AGREEMENT SELLLERS: ___________________________________ Print Name Above ___________________________________ Signature Name: Judith Day Boehm Yorke Title: Trustee of the Yorke Grandchildren’s Trust Under the Marcia Reed Boehm Revocable Trust, Established December 21, 1987   14 --------------------------------------------------------------------------------     SCHEDULE “B” DEFINITIONS   "Claim" means any claim, lawsuit, demand, suit, hearing, governmental investigation, notice of a violation, litigation, proceeding, arbitration, or other dispute, including audits, investigations or claims for or relating to any liability in respect of taxes, whether civil, criminal, administrative or otherwise. “Closing” means the mutual execution of this Agreement. "including" means "including but not limited to" unless the context requires otherwise. “Indemnified Party” means a party seeking indemnification hereunder. “Indemnifying Party” means a party from whom indemnification is sought hereunder. "Lien" means any security interest, claim, lien, charge, mortgage, deed, assignment, pledge, hypothecation, encumbrance, easement, or restriction of any kind or nature. "Losses" means any and all costs and expenses (including attorneys' fees and court costs incident to any Claim), damages, judgments, assessments and losses, net of any tax adjustments, settlements, reductions or other effects which actually result from the Loss and its payment by the party seeking indemnification. "Person" includes any individual, sole proprietorship, partnership, joint venture, trust incorporated organization, association, corporation, limited liability company, institution, party, entity or governmental authority.   15 --------------------------------------------------------------------------------   SCHEDULE “C” FORM OF PROMISSORY NOTE   16 --------------------------------------------------------------------------------     SCHEDULES 2.3 - On May 17, 2006, a $300,000 cash distribution to the CDC shareholders was authorized by Mr. Sid Anderson on behalf of the deal sponsor group for the purpose of covering the personal income taxes of the CDC shareholders for 2005 undistributed earnings. In July 2006, a $1,000,000 cash distribution to the CDC shareholders was authorized by Mr. Sid Anderson on behalf of the deal sponsor group; this distribution decreased the cash purchase price from $5 million to $4 million. 17 --------------------------------------------------------------------------------

PURCHASE AGREEMENT AND BILL OF SALE   THIS PURCHASE AGREEMENT AND BILL OF SALE (this “Agreement”) effective as of June 30, 2006, by and between STALK, LLC, an Arizona limited liability company (“Seller”) and AFV Solutions, Inc., a Nevada corporation (“Buyer”).   WITNESSETH:   WHEREAS, Seller and Buyer are both involved in the alternative fuel business:   WHEREAS, Seller desires to sell and Buyer desires to purchase certain assets (as defined herein) involved in the testing and analysis of alternative fuel systems; and   WHEREAS, in order to effectuate the sale and purchase of the Assets as aforesaid, Seller is executing and delivering this Assignment and Buyer is delivering consideration as set forth herein.   NOW, THEREFORE, in consideration of the premises, the mutual covenants and agreements contained herein and in the Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller hereby acts and agrees as follows:   1.            Conveyance of Assets. Subject to Paragraphs 2 and 3 hereof, the Seller hereby SELLS, CONVEYS, TRANSFERS, ASSIGNS AND DELIVERS unto Buyer and its successors and assigns, forever, all the assets, rights, and properties described in the following clauses (a) through (c) (collectively, the “Assets”) in the “as is” condition without any warranty whatsoever:     (a) All right, title and interest of Seller in and to the Mustang MD250 dual roller chassis dynamometer with integrated 5-gas and EPA trace software.   (b) All right, title and interest of Seller in and to the California Analytical 110v integrated emissions test bench with independent CO, CO2, HC and NOx analyzers running custom EPA FTP bag equivalent compilation software.   (c) All right, title and interest of Seller in and to Clayton Industries Virtual Test Track with self-motoring dual roller chassis dynamometer.   2.            Excluded Assets. Except as set forth in Section 1 above, Seller shall retain all of its other assets.   3.            Consideration. As consideration for the Assets, Buyer shall pay Seller, One Hundred Fifty Thousand dollars ($150,000) payable by check.   4.            Taxes. Buyer shall be responsible for all transfer, sales, personal property and miscellaneous taxes related to the purchase of the Assets hereunder.   -1- -------------------------------------------------------------------------------- 5.            Assumption of Buyer. Buyer shall assume and forever hold Seller harmless, for a period of at least sixty (60) days from the date of this agreement, the Seller’s obligations on the portion of the Seller’s facilities housing the Assets, which is located at 240 E. Coury Ave, Suite #120 & 121, Mesa, Arizona 85210 The Buyer shall pay the Seller Three Thousand Five Hundred dollars ($3,500.00) per month during such time that the Seller houses the assets. Buyer shall give Seller a minimum of thirty (30) days notice if Buyer shall choose to relocate the Assets. Providing the assets are safely removed from the Seller’s facility by the end of the 30-day notice period, Seller will thereby terminate the Buyers obligations. Buyer shall be responsible for all repairs, improvements or relocation of the Assets as of the date of this agreement. Other than expressly disclosed in this Section 4 as to liabilities directly associated with the Assets and the facility, Buyer shall not assume any other liabilities of Seller.   6.            Counterparts. This Agreement may be executed in any number of counterparts, and each counterpart hereof shall be deemed to be an original instrument, but all such counterparts shall constitute but one Agreement   7.            Further Assurances. From time to time, as and when requested by Buyer, Seller shall execute and deliver or cause to be executed and delivered, such documents and instruments and shall take, or cause to be taken, such further or other actions as may be reasonably necessary to carry out the purposes of this Agreement.   8.            Controlling Agreement. It is contemplated that Seller may, at any time or from time to time, execute acknowledge and deliver one or more separate instruments of Agreement and conveyance relating to certain of the Assets. No such separate instrument of Agreement or conveyance shall limit the scope and effect of this Agreement. In the event that any conflict or ambiguity exists as between this Agreement and any such separate instrument of Agreement, the terms and provisions of this Agreement shall govern and be controlling.   9.           Governing Law. The validity of this Agreement shall be governed by and construed in accordance with the laws of the State of Arizona, excluding any conflicts-of-law rule or principle, which might refer to another jurisdiction.   10.          Successors and Assigns. This Agreement shall bind Seller and its successors and assigns and inure to the benefit of Buyer and its successors and assigns.   11.          Descriptive Headings. The descriptive headings of the several Paragraphs, subparagraphs and clauses of this Agreement were inserted for convenience only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.   [SIGNATURE PAGE TO FOLLOW]   -2- -------------------------------------------------------------------------------- EXECUTED as of the date first set forth above.     Seller: STALK, LLC     By:/s/ Brian Hoffert                              Brian Hoffert, Managing Member     Buyer:     AFV Solutions, Inc.     a Nevada corporation       By:/s/ Jeffrey Groscost                        Jeffrey Groscost, President       -3-

SECURITY AGREEMENT BY AND BETWEEN PATIENT SAFETY TECHNOLOGIES, INC. AND HERBERT LANGSAM REVOCABLE TRUST Herbert Langsam Revocable Trust (“Secured Party”) and Patient Safety Technologies, Inc., a Delaware corporation (“Debtor”) agree as follows as of May 1, 2006: 1.            GRANT OF SECURITY INTEREST. 1.1  The Debtor hereby grants to the Secured Party a security interest in all of the assets, inventory, accounts, equipment, chattel paper, patents, trademarks, copyrights, contract rights, documents, instruments, deposit accounts, investment property (including equity interest of subsidiaries), general intangibles and other personal property and fixtures of Debtor and its subsidiaries, including first mortgage liens on all real property of Debtor and its subsidiaries, and all products or proceeds of any or all of the foregoing (collectively, the “Collateral”). Such Collateral of Debtor constitutes the security for:   1.1.1 The satisfaction and the prompt and full performance of all of Debtor’s obligations under that certain Secured Promissory Note dated May 1, 2006 (the “Note”) in the principal amount of Five Hundred Thousand and zero/100 Dollars ($500,000.00) plus interest at the rate of twelve percent (12%) per annum, as the Note may be amended, modified, or extended from time to time (including, without limitation, the obligation to make payments of principal and interest thereon); and 1.1.2 The full, faithful, true and exact performance and observance of all of the obligations, covenants and duties of Debtor under this Security Agreement, as the same may be amended, modified, or extended from time to time. 2.             DEFAULT. Any of the following events shall constitute an event of default hereunder: 2.1 The failure by Debtor to make full and timely payment when due of any sum as required to be paid to Secured Party under the Note. A true and correct copy of the Note is incorporated herein by this reference. 2.2 The failure by Debtor to fully and timely perform any covenant, agreement, obligation or duty imposed on Debtor by the Note, this Security Agreement or any other agreement by and between Debtor and Secured Party now existing or hereinafter made. 2.3 The filing by Debtor of any petition, or commencement by Debtor of any proceeding, under the Bankruptcy Act or any state insolvency law. 2.4 The making by Debtor of any general assignment for the benefit of creditors. 2.5 The filing of any petition, or commencement of any proceeding, under the Bankruptcy Act or any state insolvency law, against Debtor, or the appointment of any receiver or trustee, which petition, proceeding or appointment is not fully and completely discharged, dismissed or vacated within sixty (60) days.     --------------------------------------------------------------------------------   2.6  Any warranties made by Debtor are untrue in any material respect, or any schedule, statement, report, notice, or writing furnished by Debtor to the Secured Party are untrue in any material respect on the date as of which the facts set forth are stated or certified. 3.            INSPECTION OF RECORDS. Secured Party shall have the right without notice to inspect all financial books, records and reports of Debtor at Debtor’s premises or wherever the same may be maintained during normal business hours. 4.          REMEDIES UPON DEFAULT. 4.1 Upon the occurrence of an event of default, in addition to any and all other remedies at law or in equity available to Secured Party, Debtor hereby authorizes and empowers Secured Party, at Secured Party’s option and without notice to Debtor, except as specifically provided herein (and, to the extent necessary, hereby irrevocably appoint Secured Party as Debtor’s attorney-in-fact for such purposes) and subject to applicable laws: 4.1.1 To require Debtor to assemble any and all of the Collateral and make the same available to Secured Party at the premises wherein the same is located, or any other place designated by Secured Party; Secured Party may enter upon any premises where any of the Collateral is located and may take possession of the same without judicial process and without the need to post any bond or security as an incident thereto; and 4.1.2 To sell, assign, transfer and deliver the whole or any part of the Collateral at public or private sale, for cash, upon credit, or for future delivery, in bulk or item by item, at such prices and upon such terms as are commercially reasonable, given the nature of the Collateral and the market therefor, with or without warranties, without the necessity of the Collateral being present at any such sale or in view of the prospective purchasers thereof, and without any presentment, demand for performance, protest, notice of protest, or notice of dishonor except as set forth herein, any other such advertisement, presentment, demand or notice being expressly waived by Debtor to the extent permitted by law. At any public sale or sales of the Collateral, Secured Party or Secured Party’s assigns may bid for and purchase all or any part of the Collateral offered for sale and upon compliance with the terms of such sale, may hold, exploit and dispose of such Collateral discharged from all claims of Debtor, except to the extent that Debtor has rights in the proceeds of such sale or sales, and free from any right or redemption, all of which are hereby expressly waived and released, and may in paying the purchase price thereof, in lieu of cash assignment at the face amount thereof, together with any interest accrued thereon, all or any part of unpaid principal or interest or both, payable under the Note. Secured Party may also purchase all or any part of the Collateral at any private sale thereof to the extent that such Collateral is customarily sold in a recognized market or is the subject of a widely or regularly distributed standard price quotation. Upon conclusion of any such public or private sale, Secured Party may execute and deliver a bill of sale to the assets so sold, in the name of Debtor. Secured Party may use Debtor’s premises for the purpose of conducting of any such sale. Secured Party shall give Debtor seven (7) days’ notice, in writing, of the time and place thereof, and in the case of a public sale, the date thereof and the name of the purchaser. Notice shall be deemed given when deposited in the United States mail, postage prepaid, certified or registered, and addressed to Debtor at 1800 Century Park East, Suite 200, Los Angeles, California 90067. Secured Party shall only be required to publish an advertisement of a public sale, which advertisement may be published in a newspaper of general circulation no later than seven (7) days prior to the date of sale, and an advertisement so published shall be deemed commercially reasonable if it merely gives the place, time, and date of sale, merely identifies the Collateral by classification without describing quantity or quality; provided, however that such advertisement may, at Secured Party’s option, contain additional information. Debtor acknowledges that Secured Party may accept any offer received, provided it is commercially reasonable, that Secured Party, at Secured Party’s option, need not approach more than one possible purchaser, and that Secured Party shall, to the fullest extent permitted by law, be relieved from all liability or claim for inadequacy of price if the manner and terms of sale comply with the terms of this Security Agreement. 2   --------------------------------------------------------------------------------   4.2 In the event of any such sale by Secured Party of all or any of said Collateral on credit, or for future delivery, such property so sold may be retained by Secured Party until the selling price is paid by the purchaser. Secured Party shall incur no liability in case of the failure of the purchaser to take up and pay for the property so sold. In case of any such failure, said Collateral may be again, and from time to time, sold. 4.3 In the event of any such sale or disposition, the proceeds thereof shall be applied first to the payment of the expenses of the sale, commissions, actual attorneys’ fees, and all other charges paid or incurred by Secured Party in taking, holding, selling, advertising, or otherwise preparing such Collateral for sale or otherwise in connection with maintaining the security of such Collateral, including any taxes or other charges imposed by law upon the Collateral and/or the ownership, holding or transfer thereof; secondly, to pay, satisfy and discharge all indebtedness of Debtor to Secured Party secured hereby then due and payable pursuant to the Note; thirdly, to the extent that Debtor may still have monetary obligations to Secured Party not yet due and payable, Secured Party may retain any surplus as collateral for the payment of such sums when due; and fourthly, if all of the secured obligations are then discharged and satisfied, to pay the surplus, if any, to Debtor. Secured Party shall not look to any other assets of Debtor other than the Collateral to satisfy any claims, defaults or breaches regarding the Note. 4.4 Secured Party shall not be liable or responsible for safeguarding the Collateral, or any portion thereof, or maintaining the condition thereof, or for any loss or damage thereto and diminution in value of the Collateral either through loss or non-collection. Secured Party shall not be liable or responsible for any act or default of any carrier or warehouseman or of any other person, other than that occasioned by the gross negligence and willful misconduct of Secured Party. 5.            REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants that it is duly organized, validly existing, and in good standing under the laws of the State of Delaware with the power to own its assets and to transact business in such states where its business is conducted. Debtor represents and warrants that the Note and this Security Agreement have been duly and validly authorized, executed and delivered by Debtor and that each constitutes a valid and binding agreement, enforceable in accordance with its terms. Debtor represents that Debtor will at all times maintain the Collateral in good state of repair and condition consistent with good business practice, including replacement of damaged, destroyed, or obsolete stock certificates; will pay any and all taxes thereon or applicable thereto prior to delinquency; and shall maintain at all times appropriate insurance thereon to insure the Collateral against risk of fire and other such risks as are covered by “extended coverage”, theft, burglary and vandalism. 6.            INDEMNITY. In the case of any adverse claim with respect to the Collateral or any portion thereof arising out of any act done, or permitted or acquiesced in by Debtor, Debtor indemnifies and agrees to hold Secured Party harmless from and against any and all claims, losses, liabilities, damages, expenses, costs and actual attorneys’ fees incurred by Secured Party in or by virtue of exercising any right, power or remedy of Secured Party hereunder or defending, protecting, enforcing or prosecuting the security interest hereby created. Any such loss, cost, liability, damage or expense so incurred shall be repaid upon demand by Secured Party and until so paid shall be deemed a secured obligation hereunder. 3   --------------------------------------------------------------------------------   7.            NO WAIVER BY SECURED PARTY. Any forbearance, failure, or delay by Secured Party in exercising any right, power or remedy hereunder shall not be deemed to be a waiver of such right, power, or remedy, and any single or partial exercise of any right, power, or remedy of Secured Party shall not preclude the later exercise of any other right, power, or remedy, each of which shall continue in full force and effect until such right, power, or remedy is specifically waived by an instrument in writing, executed by Secured Party. 8.            EFFECTIVENESS OF AGREEMENT. This Security Agreement and Debtors’ duties and obligations and Secured Party’s powers to dispose of the Collateral, and all other rights, powers and remedies granted to Secured Party hereunder shall remain in full force and effect until Debtor has satisfied and discharged all of Debtor’s obligations to Secured Party secured thereby. 9.            WAIVER BY DEBTOR. All provisions of law, in equity and by statute providing for, relating to, or pertaining to pledges or security interests and the sale of pledged property or property in which a security interest is granted, or which prescribe, prohibit, limit or restrict the right to, or conditions, notice or manner of sale, together with all limitations of law, in equity, or by statute, on the right of attachment in the case of secured obligations, are hereby expressly waived by Debtor to the fullest extent Debtor may lawfully waive same. 10.           RELEASE OF COLLATERAL. Upon payment in full by Debtor, in lawful money of the United States of America, to Secured Party at the address set forth in the Note of all amounts secured hereby, and performance of all other obligations of Debtor under this Security Agreement, together with any interest thereon and any costs and expenses incurred by Secured Party in the enforcement of this Security Agreement or of any of Secured Party’s rights hereunder, or in the enforcement of any other agreements (whether heretofore or hereafter entered into) between Debtor and Secured Party, or any of the rights of Secured Party thereunder, and upon the request of Debtor therefor, Secured Party will deliver to Debtor, at Debtor’s sole cost and expense, such termination statements and such other documents of release, reconveyance and reassignments as shall be sufficient to discharge Debtor of the liabilities secured hereby and to terminate and release the security interest in the Collateral created hereby. 11.           MISCELLANEOUS.  11.1 This Security Agreement and all of the rights and duties in connection herewith shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles governing conflicts of law. 11.2 This Security Agreement and all of its terms and provisions shall be binding upon the heirs, successors, transferees and assigns of each of the parties hereto. 11.3 In the event any portion of this Security Agreement is determined to be invalid or unenforceable, the remaining portions shall remain in full force and effect as if that invalid or unenforceable portion had never been a part hereof. 11.4 In the event litigation is commenced to enforce or interpret this Security Agreement, or any provision hereof, the prevailing party shall be entitled to recover its reasonable costs and attorneys’ fees. 4   --------------------------------------------------------------------------------   11.5 This Security Agreement may be amended only by written consent of each of the parties hereto. 11.6 Any and all notices, demands, requests, or other communications required or permitted by this Security Agreement or by law to be served on, given to, or delivered to any party hereto by any other party to this Security Agreement shall be in writing and shall be deemed duly served, given, or delivered when personally delivered to the party, or in lieu of such personal delivery, when deposited in the United States mail, first-class postage prepaid addressed to the party at the address herein appearing. 11.7 This Security Agreement constitutes the entire agreement between the parties pertaining to the subject matter contained herein and supersedes all prior and contemporaneous agreements, representations and understandings of the parties. No waiver of any of the provisions of this Security Agreement shall be deemed, or shall constitute a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. 11.8 This Security Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. The exhibits attached hereto are made a part hereof and are incorporated herein by this reference. 11.9 Nothing in this Security Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Security Agreement on any persons other than the parties to it and their respective successors and assigns, nor is anything in this Security Agreement intended to relieve or discharge the obligations or liability of any third persons to any party to this Security Agreement, nor shall any provision give any third person any right of subrogation or action against any party to this Security Agreement. 11.10 Each party’s obligations under this Security Agreement are unique. If any party should default in its obligations under this Security Agreement, the parties each acknowledge that it would be extremely impracticable to measure the resulting damages; accordingly, the non-defaulting party, in addition any other available rights or remedies, may sue in equity for specific performance without the necessity of posting a bond or other security, and the parties each expressly waive the defense that a remedy in damages will be adequate. 11.11 All representations, warranties and agreements of the parties contained in this Security Agreement, or in any instrument, certificate, opinion or other writing provided for in it, shall survive the completion of all acts contemplated herein. 11.12 Whenever the context of this Security Agreement requires, the masculine gender includes the feminine or neuter gender, and the singular number includes the plural. 11.13 As used herein, the word “days” shall refer to calendar day, including holidays, weekends, non-business days, etc. 11.14 The captions contained herein do not constitute part of this Security Agreement and are used solely for convenience and shall in no way be used to construe, modify, limit or otherwise affect this Security Agreement. 5   --------------------------------------------------------------------------------   IN WITNESS WHEREOF, this Security Agreement is executed as of the date first set forth above. DEBTOR SECURED PARTY     PATIENT SAFETY TECHNOLOGIES, INC. HERBERT LANGSAM REVOCABLE TRUST             BY: ______________________________ BY:___________________________ NAME: ___________________________ Herbert Langsam, Trustee TITLE:  ___________________________               6   --------------------------------------------------------------------------------  

Exhibit 10.1 NON-QUALIFIED STOCK OPTION AGREEMENT FOR EMPLOYEES UNDER THE BOSTON PRIVATE FINANCIAL HOLDINGS, INC. 2004 STOCK OPTION AND INCENTIVE PLAN Name of Optionee:                                      No. of Option Shares:                                  Option Exercise Price per Share: $                                        [FMV] Grant Date:                      Expiration Date:                      Pursuant to the Boston Private Financial Holdings, Inc. 2004 Stock Option and Incentive Plan (the “Plan”) as amended through the date hereof, Boston Private Financial Holdings, Inc. (the “Company”) hereby grants to the Optionee named above, who is an Employee as defined in the Plan, an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified above all or part of the number of shares of Common Stock, par value $1.00 per share (the “Stock”) of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan. 1. Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability schedule hereunder, this Stock Option shall be exercisable with respect to the following number of Option Shares on the dates indicated:   Number of Option Shares Exercisable    Exercisability Date       In the event of (i) the termination of the Optionee’s service as an employee of the Company because of the Optionee’s death, disability or retirement, or (ii) a Change of Control of the Company as defined in Section 16 of the Plan, this Stock Option shall become immediately exercisable in full, whether or not exercisable at such time. Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the provisions hereof and of the Plan. -------------------------------------------------------------------------------- 2. Manner of Exercise. (a) The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this Stock Option, the Optionee may give notice to the Administrator or its designated representative, of his or her election to purchase some or all of the Option Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased. Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the Optionee on the open market or that have been beneficially owned by the Optionee for at least six months and are not then subject to restrictions under any Company plan; (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; or (iv) a combination of (i), (ii) and (iii) above. Payment instruments will be received subject to collection. The delivery of certificates representing the Option Shares will be contingent upon the Company’s receipt from the Optionee of full payment for the Option Shares, as set forth above and any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock to be purchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by delivery of previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of the Stock Option shall be net of the Shares attested to. (b) Certificates for shares of Stock purchased upon exercise of this Stock Option shall be issued and delivered to the Optionee upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such issuance and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this Stock Option shall have been exercised pursuant to the terms hereof, the Company shall have issued and delivered the shares to the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock. (c) The minimum number of shares with respect to which this Stock Option may be exercised at any one time shall be 100 shares, unless the number of shares with respect to which this Stock Option is being exercised is the total number of shares subject to exercise under this Stock Option at the time. -------------------------------------------------------------------------------- (d) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof. 3. Termination. If the Optionee ceases to be a Employee of the Company or any of its Subsidiaries, the period within which to exercise the Stock Option may be subject to earlier termination as set forth below. (a) Termination For Cause. If the Optionee ceases to be an Employee for Cause, any Stock Option held by the Optionee shall terminate immediately and be of no further force and effect. For purposes hereof, “Cause” shall mean a vote by the Board resolving that the Optionee shall be dismissed as a result of (i) any material breach by the Optionee of any agreement between the Optionee and the Company; (ii) the conviction or indictment of or plea of nolo contendere by the Optionee to a felony or a crime involving moral turpitude; or (iii) any material misconduct or willful and deliberate non-performance (other than by reason of disability) by the Optionee of the Optionee’s duties to the Company. (b) Termination by Reason of Death. If the Optionee ceases to be an Employee by reason of death, any Stock Option held by the Optionee may be exercised by his or her legal representative or legatee for a period of 24 months from the date of death. (c) Termination by Reason of Retirement. If the Optionee ceases to be an employee by reason of Retirement (as defined in Section 1 of the Plan), any Stock Option held by the Optionee may be exercised for a period of 24 months from the date of termination or until the Expiration Date, if earlier. (d) Other Termination. If the Optionee ceases to be an Employee for any reason other than Cause, death or retirement as provided above, any Stock Option held by the Optionee may be exercised for a period of 30 days from the date of termination or until the Expiration Date, if earlier. 4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein. 5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee. -------------------------------------------------------------------------------- 6. Miscellaneous. (a) Notice hereunder shall be given to the Company at its principal place of business, and shall be given to the Optionee at the address set forth below, or in either case at such other address as one party may subsequently furnish to the other party in writing. (b) This Stock Option does not confer upon the Optionee any rights with respect to continuance as an Employee. (c) Pursuant to Section 14 of the Plan, the Committee may at any time amend or cancel any outstanding portion of this Stock Option, but no such action may be taken which adversely affects the Optionee’s rights under this Agreement without the Optionee’s consent.   BOSTON PRIVATE FINANCIAL HOLDINGS, INC.   By:   Title: The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned.   Dated:                          Optionee’s Signature   Optionee’s name and address:            

Exhibit 10.23   Agreement on Amount of Credit Line No.: Wu Zhong Yin Shou Zi No. 0561113   Party A: MULTI-FINELINE ELECTRONIX (SUZHOU No. 2) CO., LTD. Business license No. 011598 Legal Representative: Phil Harding Residence: Dongwu Industrial Park, Wuzhong Economic Development Zone, Suzhou Contact: 65130088   Party B: BANK OF CHINA LIMITED SUZHOU WUZHONG BRANCH Director: Liu Li Tel: 0512-65272848   In order to develop friendly and cooperative relationship, Party A and Party B have reached the following agreement through consultation based on the principle of voluntariness, equality, mutual benefit and sincerity.   Article 1 Business Scope   Party B shall provide line of credit for Party A in accordance with this agreement. Under the conditions in conformity to the provisions of this agreement and relevant agreement, Party A can apply for cycle use, adjustment or single use of short term loan of RMB and short term loan of foreign currency, issuance of banker’s acceptance bill as well as settlement and financing services (generally called “single credit service”) from Party B. Settlement and financing services herein refer to issuance of letter of credit, inward documentary bills, shipping guarantee, packing loan, outward documentary bills, discounting of acceptance bill under usance letter of credit, issuance of letter of guarantee / stand-by letter of credit and other settlement and financing services available of Party B with approval.   Article 2 Type and Amount of Credit Line   Party B agrees to provide the following credit line for Party A: the total amount is RMB 40,000,000 Yuan; the credit line of foreign currency services shall be converted into RMB according to the selling price of foreign exchange announced by Party B on the date of signature and validation of this agreement:   The credit line that Party B agrees to provide Party A includes:   1. Amount of short term loan in domestic and foreign currency: RMB 20,000,000 Yuan;   2. Amount of letter of guarantee: RMB 20,000,000 Yuan;   The credit line of Party A already incurred from Party B before conclusion of this agreement shall be deemed as the credit under this agreement, which will account for a part of the credit line approved by Party B in this agreement.   Article 3 Use of the Credit Line   Within the term of the credit line agreed in Article 5 of this agreement, Party A can use the credit line in cycle within the amount limit of each single credit service specified in the above articles;   If Party A needs to adjust the amount of the single credit service specified in Article 1, Party A shall submit the written application to Party B, and Party B will determine the specific method of adjustment.   Page 1 of 7 -------------------------------------------------------------------------------- Article 4 Agreement for Single Credit Service   If Party A intends to apply for any single credit service under this agreement, Party A shall enter into the following agreements with Party B (generally called single service agreement):   1. For short-term loan of RMB, Party A shall enter into “RMB Loan Contract (Short Term)” with Party B;   2. For short-term loan of foreign currency, Party A shall enter into “Foreign Currency Loan Contract” with Party B;   3. For issuance of banker’s acceptance bill, Party A shall enter into “Commercial Acceptance Bill Agreement” with Party B;   4. For international settlement and financing service, Party A shall choose appropriate or enter into the following relevant attachments or written applications with Party B:   A. Both parties agree to enter into the single service agreement with the applicable attachment listed below through consultation, and it shall constitute an integral part of this agreement:   For the following attachments, the one marked with “þ” means “applicable,” and the one marked with “x” means “not applicable.” For applicable attachments, both parties do not need to sign or affix seal on relevant attachment. Either party shall not raise any object to the validity of such attachment that constitutes the legal document binding to both parties.     x Attachment (1): For issuance of letter of credit.     x Attachment (2): For inward documentary bills.     x Attachment (3): For packing loan.     x Attachment (4): For outward documentary bills.     x Attachment (5): For discounting of acceptance bill under usance letter of credit.     þ Attachment (6): For issuance of letter of guarantee.   B. The following application shall be submitted to Party B when Party A applies for specific settlement and financing service. Both parties shall fill in the document through consultation. Upon affixation of the official seal or business seal of Party B, it shall become a single service agreement and constitute an integral part of this agreement:     (1) Application for issuance of letter of guarantee     (2) Application for modification of letter of guarantee   5. Any other written agreement made between both parties for single credit service and the receipt of loan, application, letter and credence for money withdrawal, etc. submitted by Party A to Party B with the validity confirmed by Party B.   The single service agreement shall constitutes an integral part of this agreement, and both parties shall define the rights and obligation of both parties in accordance with the single service agreement and this agreement, particularly the balance of creditor’s right of Party B to Party A. In case of any conflict between the single service agreement and this agreement, the single service agreement shall take priority.   Article 5 Term of Use of Credit Line   The term of use of the credit line under this agreement shall start from the date on which this agreement comes into force as specified in Article 17 and end on January 24, 2007.   The term of use of the credit line will not be renewed automatically.   Before expiration of the term of use of the credit line, Party A may submit application for renewal to Party B. Upon approval and determination of the guarantee by Party B, the term of use can be renewed in writing. The new term of use of the credit line will be provided in the written agreement of renewal.   After expiration of the term of use of the credit line, both Party A and Party B shall go on executing the provisions of this agreement and relevant single service agreement concerning any actually incurred single credit service without affecting any incurred creditor’s rights and debts.   Page 2 of 7 -------------------------------------------------------------------------------- Article 6 Preconditions for Single Credit Service   Party A must meet the following conditions when applies for the single credit service under this agreement:   1. Submit the application for relevant single credit service to Party B before the expiration of the term of credit line specified in Article 5 of this agreement;   2. Reserve the company document, bill, seal, list of relevant persons and signature sample in connection with this agreement and the single service agreement as well as properly fill in relevant voucher;   3. Open necessary account for the single credit service as required by Party B;   4. Properly go through the procedures for legal and administrative examination and approval of the single credit service, submit the copy or duplicate of the approval document according to the requirements of Party B; for the procedures to be handled by Party B according to the regulations of the national laws and rules, Party A agrees to provide any necessary cooperation;   5. Meet the preconditions for other services or money withdrawal according to the specifications of the single service agreement;   6. Pay the guarantee deposit or the guarantee agreement required by Party B has come into force;   7. Party A agrees to make the statements and promises specified in Article 10 of this agreement;   8. Other conditions that Party A should meet as required by Party B.   Article 7 Obligations of Party B   Party B has the following obligations:   1. Timely handle the application for single credit service as suggested by Party A according to the specifications of the single service agreement;   2. Provide civilized service while handling the application for single credit service as suggested by Party A;   3. Pay high attention to the supervision, query, and comment of Party A with proper treatment.   Article 8 Obligations of Party A   Party A has the following obligations:   1. Timely pay the expense payable to Party B within the specific time provided in this agreement and the single service agreement, and the charging method will take relevant regulations of Party B;   2. Pay excess reserves to Party B within the specific time provided in this agreement and the single service agreement;   3. Timely clear off the Party A’s debts to Party B as specified in this agreement and the single service agreement, including but not limited to the principal, interest, penalty interest, relevant expense, and any rate variance loss due to Party A’s breach of contract;   4. Use the obtained funds for the purpose specified in this agreement and the single service agreement.   Article 9 Suretyship   Regarding any debt of Party A to Party B incurred according to this agreement and any single service agreement (including after adjustment of variety within the total amount of credit line), both parties agree to take the maximum amount of suretyship provided by MULTI-FINELINE ELECTRONIX (SUZHOU) CO., LTD. and enter into the “Contract of Suretyship of Maximum Amount” Wu Zhong Yin Bao Zi No. 0561113.   In case of any event of Party A or the surety that may affect the performance of contract or cause the document of suretyship void at Party B’s discretion, or the debt paying ability of the surety is decreased due to deterioration of financial condition or any other reasons, or the surety breaches any contract made with Party B including other suretyship contracts, or the capacity of suretyship is lessened or lost due to devaluation, damage, loss or expropriation of the object of pledge,   Page 3 of 7 -------------------------------------------------------------------------------- Party B has the right to require Party A to change the surety or provide new object of pledge for guaranty of the debt of Party A to Party B.   Article 10 Statement and Promise   Party A makes the following statements:   1. Party A is a corporate that is established and existing pursuant to relevant laws. It has gone through the procedures of industrial & commercial registration and is granted with necessary rights, and it is able to perform the obligations under this agreement and the single service agreement under its name;   2. Conclusion and performance of this agreement and the single service agreement are based on the real intention of Party A. It has acquired legal and effective authorization of the company in accordance with the memorandum of association or other internal management documents, and it will not breach any agreement, contract and any other legal documents that are binding to Party A;   3. All the documents, financial statements, vouchers and any other files provided to Party B by Party A under this agreement and the single service agreement are true, complete, accurate and valid;   4. The transaction background on which Party A applies for the service from Party B is true and legal without any illegal purpose such as money laundry. Party A’s provision of any document to Party B according to the requirements of Party B shall not be interpreted that Party B has the obligation and liability to check the trueness and legality of the transaction of Party A;   5. Party A does not conceal any fact that may have effect on the financial status and performance capacity of itself and the guarantor.   Party A makes the following guarantees:   1. Party A will regularly submit its financial statements to Party B (including but not limited to annual statement, quarterly statement and monthly statement) and other relevant data;   2. Party A will accept and cooperate with Party B in inspection and supervision of the use of credit line and relevant production, operation and financial activities of Party A;   3. If Party A has already entered into or will enter into a counter guarantee agreement or similar agreement with the guarantor under this agreement in regard to the obligations of the guarantor, such agreement should not do any harm to any rights of Party B under this agreement;   4. In case of anything that may have effect on the financial status or performance of Party A or the guarantor, including but not limited to reduction of registered capital, important transfer of assets or stock right, bearing important debt or setting new important debt on the object under mortgage, sealing up of object under mortgage, disbandment, revocation or application for bankruptcy voluntarily (or involuntarily), etc., Party A shall notify Party B as soon as possible without hesitation;   5. For separation, merger, joint operation, joint venture or cooperation with foreign investor, contracted operation, reorganization, conversion or other alteration in the operation mode in any way, Party A shall obtain the prior written permission of Party B;   6. For the matters not provided in this agreement, Party A agrees to comply with the international conventions and relevant regulations of Party B.   Article 11 Adjustment or Cancellation of Credit Line   During the term of use of the credit line, Party B has the right to adjust or cancel the credit line for Party A and declare expiration of the incurred debts ahead of schedule under any of the circumstances:   1. Party A breaches the agreement as specified in Article 12 of this agreement;   2. Party B believes the significant negative news occurs in the market or industry concerned;   3. Party B believes that any limitation policy issued by the state, any foreign government or international organization will or may cause great adverse effect on the industry or trade concerned in this agreement.   4. Serious deterioration in Party A’s financial status or serious problem in Party A’s production or operation.   Page 4 of 7 -------------------------------------------------------------------------------- Article 12 Breach of Agreement   Any of the following behaviors will be considered as breach of agreement by Party A:   1. Party A fails to perform the obligations of payment and liquidation to Party B as specified in this agreement and the single service agreement;   2. Party A fails to pay Party B the excess reserve as specified in this agreement and the single service agreement;   3. Party A fails to use the funds for the purpose as agreed in this agreement and the single service agreement;   4. The statement of Party A in this agreement is not true or Party A breaks any of its promises in this agreement;   5. Party A breaches any other provisions concerning the rights and obligations under this agreement and the single service agreement;   6. Party A breaches any other contract made with Party B;   In case of any behavior listed above, Party B has the right to take the following measures respectively or at the same time:   1. Declare expiration of the loan / financing principal and interest and any other payables under the single service agreement without prior notice to Party A;   2. Directly deduct the principal, interest, penalty interest and rate variance loss of the debts to be paid back by Party A from the account that Party A opened in Party B or any other organizations of the Bank of China; the unexpired amount in Party A’s account will be deemed as the amount expired ahead of schedule. If the currency is different from the charging currency of Party B, the amount will be counted based on the exchange rate on the day of deduction;   3. Dispose the assets of guarantee to enjoy the propriety of compensation or claim for compensation from the guarantor;   4. Other necessary and possible measures as Party B believes necessary.   Article 13 Other Provisions   Without the written permission of Party B, Party A shall not assign any rights or obligations under this agreement to a third party.   If Party B has to entrust any other branches of the Bank of China (including branch bank and sub-branch bank) to perform its rights and obligations under this agreement due to the needs of business, Party A shall give consent. Any branch office of the Bank of China authorized by Party B has the right to execute all the rights under this agreement and the right to bring a lawsuit in the court or submit any dispute in connection with this agreement to the arbitration authority for settlement. Party A waives the right to raise any objection against the action or subject of arbitration raised by the branch office of the Bank of China.   Under the condition of no effect on any other provisions of this agreement, this agreement shall also be binding to both parties and their successors and assignees.   Article 14 Reservation of Rights   If Party B does not execute partial rights under this agreement or does not require Party A to perform partial obligations, it should not indicate that Party B gives up such rights or permits exemption of such obligations, also it should not indicate that Party B gives up other rights or permits exemption of other obligations of Party A under this agreement.   Any tolerance or permission of extension by Party B shall not affect Party B’s execution of any rights under this agreement or any other legal rights, and also it shall not be deemed as waiver of above rights of Party B.   Article 15 Modification, Cancellation and Interpretation of Contract   Unless otherwise specified in this agreement, this agreement is subject to modification, supplementation, or cancellation with the written permission of both parties. Any modification or supplementation of this agreement shall constitute an integral part of this agreement.   If any provision in this agreement becomes invalid, it shall not affect the validity of any other provisions of this agreement.   The titles and service names in this agreement and the single service agreement are only for convenience of indication, which should not be considered as the interpretation of the rights and obligations of the parties to this agreement.   Page 5 of 7 -------------------------------------------------------------------------------- Article 16 Settlement of Dispute   The Laws of the People’s Republic of China are applicable to this agreement.   Any dispute of conflict arising from execution of this agreement or in connection with this agreement shall be settled through consultation of both parties. If no agreement can be reached, either party can take legal action to the People’s Court where Party B or other branch office of the Bank of China that performs the rights and obligations under this agreement is located for settlement.   Article 17 Validation of the Agreement   This agreement shall come into force from the date of signature of the legal representatives or the authorized representatives of both parties or from the date of affixation of the official seals. The date whichever is later shall be applicable.   This agreement has three originals, Party A retains one, Party B retains two, and all of them have the same legal force.   Article 18 Special Note   Party A and Party B have fully consulted with each other on all the provisions of this agreement and the single service agreement.   Party B has reminded Party A to pay special attention to the provisions concerning the rights and obligations of both parties to have a comprehensive and accurate understanding of them. Party B has provided explanation of above provisions at the request of Party A.   Party A:   /s/    PHILIP A. HARDING            Party B: Bank of China Limited Suzhou Wuzhong Branch Legal representative or authorized representative:    Authorized representative:   January 25, 2006   /s/    LIU LI           Site: The Bank of China Wuzhong Branch   Page 6 of 7 -------------------------------------------------------------------------------- Attachment (6): Service of Issuing Letter of Guarantee   This attachment constitutes a part of Wu Zhong Yin Shou Zi No. 0561113 “Agreement on Amount of Credit Line” (hereinafter referred as the “agreement”) made between MULTI-FINELINE ELECTRONIX (SUZHOU) CO., LTD. (hereinafter referred to as “Party A”) and BANK OF CHINA LIMITED SUZHOU WUZHONG BRANCH (hereinafter referred to as “Party B”) on January 25, 2006.   1. In case of any conflict between this attachment and the agreement, this attachment shall take priority.   2. When Party A applies for issuance of letter of guarantee from Party B, the preconditions specified in Article 6 of the agreement shall be met.   3. Issuance and modification of the letter of guarantee:   (1) If Party B accepts the Application for Issuance of Letter of Guarantee submitted by Party A, Party B shall issue the letter of guarantee as agreed by both parties.   (2) The specific contents of the letter of guarantee to be issued by Party B for Party A may refer to the “Application for Issuance of Letter of Guarantee” submitted by Party A to Party B, but the final contents will be in letter of guarantee issued by Party B.   (3) If Party A needs to conduct modification of the letter of guarantee, it shall submit an “Application for Modification of Letter of Guarantee” to Party B. If such modification involves the amount, currency, interest rate and time limit, etc. and Party B believes that will bring heavier obligation of guarantee, Party B has the right to require Party A to increase the guarantee deposit or require Party A to have the counter guarantor to sign on the “Application for Modification of Letter of Guarantee,” otherwise Party B has the right to refuse the application of Party A for modification.   (4) Any modification of the letter of guarantee shall not change any other rights and obligations of Party A under the agreement and this attachment.   4. Party A shall pay the excess reserve as specified in Article 2 of the “Application for Issuance of Letter of Guarantee.”   5. Party A agrees that during the valid term of the letter of guarantee, in case of any claim for compensation under the letter of guarantee, and such claim of the beneficiary meets the conditions provided in the letter of guarantee through examination by Party B, Party B has the right to directly deduct such amount from the excess reserve paid by Party A to perform the obligation of payment. If the excess reserve is not enough to cover the payment of compensation and Party B needs to make payment for Party A, such payment will become the debt of Party A to Party B under the agreement and this attachment. The interest rate will be counted based on the rate of overdue payment provided by Party B.   6. Except for the provision of Article 9 of the agreement, Party A shall make the following supplementary promises to Party B for the purpose of the services under this attachment:   (1) If the letter of guarantee is issued by any other bank under trust, Party A agrees to bear any risks and liabilities of Party B for the issuing bank under the letter of guarantee;   (2) In case the execution, modification, alteration or termination of the basic transaction under the basic contract based on which the letter of guarantee is issued has any effect on Party B’s liability for guarantee, Party A shall notify Party B immediately;   (3) Party A shall cooperate with Party B in handling relevant procedures of examination and approval for the purpose of execution of the agreement for external guarantee;   (4) Party A will bear any risk of loss, delay, error or damage, etc. of the correspondences and bills during transmission via post, telecommunication or any other way as well as the risk arising from using the service of a third party by Party B;   (5) If the letter of guarantee does not provide the specific date of invalidation, information about compliance with the foreign laws or conventions, and the specific amount of guarantee, Party A agrees to be responsible for compensation for any risks, liabilities and losses brought to Party B;   7. Besides the circumstances specified in Article 12 of the agreement, if Party A fails to comply with the promises in Article 6 of this attachment, Party A has then breached the agreement under this attachment. Party B has the right to execute the rights specified in Article 12 of the agreement.   Page 7 of 7

  Exhibit 10.11 WSG0502-D364 ELEVENTH AMENDMENT TO SPRINT WHOLESALE SERVICES DATA AND PRIVATE LINE AGREEMENT This Eleventh Amendment (WSG0502-0364) is made to the Sprint Wholesale Services Data and Private Line Agreement (WSG0209-030R4s) between SPRINT COMMUNICATIONS COMPANY L.P. (“Sprint”) and VALOR TELECOMMUNICATIONS ENTERPRISES, LLC, (“Customer”) signed by Customer on February 5, 2003 and by Sprint on February 20, 2003, as amended by a:               AMENDMENT   WSG#   Customer Signature Date   Sprint Signature Date First Amendment   WSG034-03lr4   June 10, 2003   July 14, 2003 Second Amendment   WSG0308-040rl   September 2, 2003   September 8, 2003 Third Amendment   WSG03-9-111   September 22, 2003   September 30, 2003 Fourth Amendment   WSG0310-093   November 13, 2003   December 1, 2003 Fifth Amendment   WSG0405-0214   June 4, 2004   June 9, 2004 Sixth Amendment   WSG0407-0165   September 1, 2004   September 3, 2004 Seventh Amendment   WSG0408-0236   October 19, 2004   October 21, 2004 Eighth Amendment   WSG0411-0100   December 6, 2004   December 8, 2004 Ninth Amendment   WSG0501-0135   January 26, 2005   January 27, 2005 Tenth Amendment   WSG0501-0161   January 31, 2005   January 31, 2005 (collectively, the “Agreement”).             The following modified and added terms and conditions are made a part of the Agreement effective the first day of the first month after Sprint accepts this signed Eleventh Amendment (“Eleventh Amendment Commencement Date”), as evidenced by the Sprint SPRB stamp. If during the Eleventh Amendment implementation process, a Service bills after the Eleventh Amendment Commencement Date at a rate other than the rate stated in this Eleventh Amendment, Sprint will adjust Customer’s invoice to apply the appropriate rate within 90 days after the date of the invoice containing the incorrect rate. Sprint and Customer agree as follows: 1.   The Agreement is amended by deleting Attachment A, Section 1 entitled “TERM” in its entirely and replacing it as follows:   1.   TERM: 30 Months 2.   The Agreement is amended by deleting Attachment A, Section 2 entitled “MINIMUM MONTHLY COMMITMENT” in its entirely and replacing it as follows:   2.   MINIMUM MONTHLY COMMITMENT:       Customer’s Minimum Monthly Commitment for Private Line Services is: RESTRICTED SPRINT CONFIDENTIAL AND PROPRIETARY INFORMATION 1 --------------------------------------------------------------------------------   WSG0502-0364                   Minimum Monthly Months   Net Usage Commitment 3.   The Agreement is amended by adding the fallowing NPA/NXX to the table in Section 3.g in Attachment A us follows:           1-year term         T-l NPA/NXX   DDS56 MRC   MRC 830/257         325/656         4.   The Agreement is amended by adding the following Pop-to-Pop Plan to the table in Section 6 in Attachment A as follows:   6.   T-1 Private Line Pop-to-Pop Plan                       IX (POP-to-POP)   Circuit POP-to-POP   Charge   Term Kerrville, TX 830-997   San Angelo, TX 325-656           *   ACF, COC, and Local Loop installation charges should be waived tor above circuits.   *   ACF and COC monthly recurring charges (MRC) should be waived for above circuits. 5.   To become effective, this Eleventh Amendment must be signed by an authorized representative of Customer. Any change to this Eleventh Amendment is subject to written acceptance by a Sprint officer, All other terms and conditions in the Agreement, not amended above, will remain in effect. This Eleventh Amendment and any information concerning its terms and conditions are Sprint’s proprietary information and are governed by the parties’ Nondisclosure Agreement.   6.   Sprint’s offer to amend the Agreement will be withdrawn if this Eleventh Amendment is not executed by both parties within 45 days after February 18, 2005. RESTRICTED SPRINT CONFIDENTIAL AND PROPRIETARY INFORMATION 2 --------------------------------------------------------------------------------   WSG0502-0364               VALOR TELECOMMUNICATIONS ENTERPRISES, LLC.   SPRINT COMMUNICATIONS COMPANY L. P.               By:   /s/ Grant Raney   BY:   /s/ Art MacDowell               Name:   Grant Raney       Art MacDowell Vice President, Wholesale Services Group Title:   Senior Vice President Operations, Sales & Marketing                       Date:   3/25/05   Date:   3/31/05       (SEAL) [d33151d3315119.gif]   (SEAL) [d33151d3315120.gif] RESTRICTED SPRINT CONFIDENTIAL AND PROPRIETARY INFORMATION 3

  EXHIBIT 10.1 EXECUTION VERSION THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT      This Third Amended and Restated Employment Agreement is made and entered into on December 20, 2006 (this “Agreement”), between CUMULUS MEDIA INC., a Delaware corporation (the “Company”), and LEWIS W. DICKEY, JR. (the “Executive”). W I T N E S S E T H:      WHEREAS, the Company is a radio broadcasting company focused on the acquisition, operation and development of radio stations both directly and through its investment in Cumulus Media Partners, LLC;      WHEREAS, the Company and the Executive previously entered into an employment agreement dated May, 1998 (the “1998 Employment Agreement”), an amended and restated employment agreement dated as of July 1, 2001 (the “First Amendment”), and a second amended and restated employment agreement dated as of October 14, 2004 (the “Second Amendment” and, together with the 1998 Employment Agreement and the First Amendment, the “Prior Agreements”);      WHEREAS, pursuant to the terms of the Second Amendment, either party may terminate the Second Amendment pursuant to written notice to the other party on or before January 2, 2007, which is 180 days prior to the expiration of the current employment period, set to expire on July 1, 2007;      WHEREAS, the Company believes it to be in the best interests of it and its stockholders to assure itself of the continued services of the Executive on terms and conditions that are in the best interests of the Company, so that it will have the benefit of his ability, experience and services, and the Executive is willing to enter into this Agreement to that end, upon the terms and conditions hereinafter set forth; and      WHEREAS, it is intended that the Executive will continue to serve the Company as its Chairman, President and Chief Executive Officer following the execution and delivery of this Agreement and that this Agreement, except as provided in Section 17, shall amend and restate and, thus, supersede the Prior Agreements.      NOW, THEREFORE, in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby covenant and agree as follows:      1. EMPLOYMENT.      The Company hereby agrees to continue to employ the Executive, and the Executive hereby agrees to continue to remain in the employ of the Company, on and subject to the terms and conditions of this Agreement.   --------------------------------------------------------------------------------        2. TERM.      The period of this Agreement (the “Agreement Term”) shall commence as of December 20, 2006 (the “Effective Date”) and shall expire as of the close of business on May 31, 2013 (the “Initial Term”). The Agreement Term shall be automatically extended for an additional year at the expiration of the Initial Term, or any succeeding term, unless written notice of non-extension is provided by either party to the other party at least 180 days prior to the expiration of the Initial Term or any succeeding term, as the case may be. The period of the Executive’s employment under this Agreement (the “Employment Period”) shall commence as of the Effective Date hereof and shall expire at the end of the Agreement Term, unless terminated or extended in accordance with the terms and conditions of this Agreement.      3. POSITION, DUTIES AND RESPONSIBILITIES.      (a) The Executive shall serve as, and with the title, office and authority of, the Chairman, President and Chief Executive Officer of the Company. The Executive shall also hold similar titles, offices and authority with the Company’s subsidiaries and its successors. The Company shall use its best efforts to cause the Executive to be nominated and elected to the Board of Directors of the Company (the “Board”) and of its subsidiaries and its successors for the duration of the Employment Period.      (b) The Executive shall have effective supervision and control over, and responsibility for, the strategic direction and general and active day-to-day leadership and management of the business and affairs of the Company and the subsidiaries of the Company, subject only to the authority of the Board, and shall have all of the powers, authority, duties and responsibilities usually incident to the position and office of Chairman, President and Chief Executive Officer of the Company. The Executive shall report directly to the Board.      (c) The Executive agrees to devote substantially all of his business time, efforts and skills to the performance of his duties and responsibilities under this Agreement; provided, however, that nothing in this Agreement shall preclude the Executive from devoting reasonable periods required for (i) participating in professional, educational, philanthropic, public interest, charitable, social or community activities, (ii) serving as a director or member of an advisory committee of any corporation or other entity that the Executive was serving on as of the Effective Date or any other corporation or entity that is not in competition with the Company, or (iii) managing his personal investments; provided, further, that any such activities set forth in clauses (i) through (iii) above do not materially interfere with the Executive’s regular performance of his duties and responsibilities hereunder.      (d) The Executive shall perform his duties at the offices of the Company located in Atlanta, Georgia, but from time to time the Executive may be required to travel to other locations in the proper conduct of his responsibilities under this Agreement.      4. SIGNING BONUS; RETENTION PLAN.      (a) In consideration for the Executive entering into this Agreement, the Company shall award to the Executive a signing bonus, consisting of 685,000 deferred shares of the Company’s Class A Common Stock (such common stock, the “Common Stock” and such 2 --------------------------------------------------------------------------------   signing bonus, the “Deferred Shares Signing Bonus”), issuable on the first anniversary of the Effective Date (or immediately upon a Change of Control (as defined in Section 10) should such event occur prior to the first anniversary of the Effective Date).      (b) In consideration in part for the Deferred Shares Signing Bonus, and as part of a retention plan to retain the services of the Executive for the benefit of the Company, in the event that, prior to the expiration of the Initial Term, Executive resigns for other than Good Reason (as defined in Section 10) or his employment is terminated for Cause (as defined Section 10), then Executive agrees to promptly pay to the Company an amount in cash (the “Retention Plan Payment”) according to the following schedule:           Date of Resignation or Termination   Amount   On or before December 20, 2007   $ 6,500,000   After December 20, 2007 but on or before December 20, 2008   $ 5,500,000   After December 20, 2008 but on or before December 20, 2009   $ 4,500,000   After December 20, 2009 but on or before December 20, 2010   $ 3,500,000   After December 20, 2010 but on or before December 20, 2011   $ 2,500,000   After December 20, 2011 but on or before December 20, 2012   $ 1,500,000   After December 20, 2012 but on or before May 31, 2013   $ 500,000   This provision for the payment of the Retention Plan Payment shall terminate and be of no further force or effect upon the occurrence of a Change of Control that precedes any such resignation or termination of employment by the Executive. It is understood and agreed that the amount of the Retention Plan Payment represents the Executive’s and the Company’s reasonable estimate of actual damages suffered by the Company with respect to the matters relating to this Agreement, made at the time this Agreement is executed; that the Retention Plan Payment provision is necessary and desirable because actual damages are indeterminable or difficult to measure at the time of execution of this Agreement; and the provision for the payment of the Retention Plan Payment and the amount of the Retention Plan Payment is not intended to be, and is not, a penalty for breach of this Agreement.      5. COMPENSATION AND BENEFITS.      In consideration of the services to be rendered by the Executive during the Employment Period, the Company shall pay or provide the Executive the compensation and benefits set forth below.      (a) SALARY. The Company shall pay the Executive a base salary (the “Base Salary”) equal to $900,000 per year during the first 12 months of the Agreement Term; with annual increases of $40,000 thereafter. In its sole discretion, the Compensation Committee of the Board (the “Compensation Committee”) may review the Base Salary with a view toward consideration of merit increases as the Compensation Committee deems appropriate. The Base Salary shall be paid in arrears in substantially equal installments at monthly or more frequent intervals, in accordance with the normal payroll practices of the Company. 3 --------------------------------------------------------------------------------        (b) INCENTIVE BONUSES. The Company shall provide the Executive with the opportunity to earn an annual bonus (the “Annual Bonus”), with the potential amount of the Annual Bonus to be between 75% of his Base Salary, upon achievement of annual “target” performance goals, and 100% of his Base Salary, upon achievement of annual “maximum” performance goals, with the “target” and “maximum” performance goals established by the Compensation Committee (in consultation with the Executive) in advance for each fiscal year of the Company ending during the Employment Period, payable to the Executive in the event that such performance goals are met during the relevant year. Any Annual Bonus shall be paid as promptly in the following fiscal year as practicable following such determination whether the applicable goals had been achieved for the preceding fiscal year. The Executive shall participate in all other short-term and long-term bonus or incentive plans or arrangements in which other senior executives of the Company generally are eligible to participate from time to time, with the Executive’s short-term and long-term bonus or incentive compensation opportunities under such plans and arrangements to be determined by the Compensation Committee. Any incentive bonus payable to the Executive for service during fiscal year 2006 shall be payable pursuant to the Second Amendment.      (c) EMPLOYEE BENEFITS. The Executive shall be entitled to participate in all employee benefit plans, programs, practices or arrangements of the Company in which other senior executives of the Company are eligible, to the extent permissible under law, to participate from time to time, including, without limitation, any qualified or non-qualified pension, profit sharing and savings plans, any death benefit and disability benefit plans, any medical, dental, health and welfare plans and any stock purchase programs that are approved by the Compensation Committee on terms and conditions at least as favorable as provided to other senior executives of the Company.      (d) FRINGE BENEFITS AND PERQUISITES. The Executive shall be entitled to all fringe benefits and perquisites that are generally made available to senior executives of the Company from time to time that are approved by the Compensation Committee. In addition, the Executive shall receive a car allowance of $1,000 per month.      6. EQUITY INCENTIVES.      As further consideration for the services rendered by the Executive during the Employment Period, no later than May 1 of each of the calendar years during the Agreement Term (such date upon which the grant is made for any calendar year herein, an “Equity Grant Date”) the Executive shall be granted time-vested restricted shares (the “Time-Vested Restricted Shares”) and performance-vested restricted shares (the “Performance Restricted Shares” and, together with the Time-Vested Restricted Shares, the “Restricted Shares”) constituting shares of Common Stock on the terms and conditions set forth below.      (a) TIME-VESTED RESTRICTED SHARES. In connection with the annual grants described above, Time-Vested Restricted Shares constituting 160,000 shares of Common Stock shall be granted in each year to the Executive. Except as otherwise provided for in this Agreement, each such grant shall vest in three installments with one-half of such Time-Vested Restricted Shares vesting on the second anniversary of the date of such grant, and one-quarter of 4 --------------------------------------------------------------------------------   same on each of the third and fourth anniversaries of the date of such grant, subject to Section 6(d).      (b) PERFORMANCE RESTRICTIVE SHARES. In connection with the annual grants described above, Performance Restricted Shares constituting 160,000 shares shall be granted in each year to the Executive. Except as otherwise provided for in this Agreement, each such grant shall vest upon achievement of certain specified performance goals, including Adjusted EBITDA budgeting goals, as established by the Compensation Committee (in consultation with the Executive) in advance for the three-year period beginning on January 1 of the fiscal year of the date of grant, subject to Section 6(d). Any Performance Restricted Shares that have not vested due to failure to achieve such goals shall be forfeited.      (c) CHANGE OF CONTROL. In the event of a Change of Control, the unvested portion of any Restricted Shares shall become immediately and fully vested. This accelerated vesting provision shall apply only to Restricted Shares that have been granted as of the date triggering acceleration and shall have no force or effect with respect to any Restricted Shares described herein that are not then issued. In addition, upon a Change of Control during the Initial Term, the Company will grant to the Executive an award of Common Stock (the “Change of Control Grant”), according to the following schedule, subject to the Executive’s continuous employment through such date:               Number of       Shares   Date of Change of Control   Awarded   Prior to the Equity Grant Date for the calendar year 2008     430,000   On or thereafter but prior to the Equity Grant Date for the calendar year 2009     360,000   On or thereafter but prior to the Equity Grant Date for the calendar year 2010     290,000   On or thereafter but prior to the Equity Grant Date for the calendar year 2011     220,000   On or thereafter but prior to the Equity Grant Date for the calendar year 2012     150,000   On or thereafter until the end of the Initial Term     80,000   Notwithstanding the foregoing, the Company may, at its sole option, pay a lump-sum cash payment in lieu of the Change of Control Grant, equal to the then fair market value of the Change of Control Grant, as determined by the Board in good faith.      (d) FORFEITURE OF RESTRICTED SHARES. Subject to Sections 6(c), 9(a)(iv), and 9(c)(iii), any Restricted Shares that have not theretofore become vested shall be forfeited if the Executive ceases to be continuously employed by the Company at any time prior to the applicable vesting date.      (e) RESTRICTIONS ON TRANSFER OF RESTRICTED SHARES. The Restricted Shares may not be transferred, sold, pledged, exchanged, assigned or otherwise encumbered or disposed of by the Executive, except to the Company, until they have become vested. The certificate(s) representing the Restricted Shares shall be held in custody by the Company, together with a stock power endorsed in blank by the Executive with respect thereto, until those 5 --------------------------------------------------------------------------------   shares have become vested, and at such time the certificate(s) representing such vested shares shall be promptly issued to the Executive.      (f) OTHER EQUITY INCENTIVES. In addition to the foregoing equity grants, the Executive shall be given consideration from time to time by the Compensation Committee for the grant of stock options or other equity incentives with respect to the Common Stock under any stock option or equity-based incentive plan or arrangement of the Company approved by the Compensation Committee for which senior executives of the Company are eligible to participate.      7. EQUITY REPURCHASE.      On the Effective Date, the Executive shall, and hereby does, sell to the Company, and the Company shall purchase from the Executive, all of his rights and interests in and to (a) currently outstanding options to purchase 500,000 shares of Common Stock, previously granted to the Executive on October 2, 2000 at an exercise price per share of $6.4375 and options to purchase 500,000 shares of Common Stock, previously granted to the Executive on April 12, 2001 at an exercise price per share of $5.92, in each case as to which Executive confirms his irrevocable election that such options are exercisable for shares of Common Stock and not for shares of the Company’s Class C Common Stock, and options to purchase 150,000 shares of Common Stock, previously granted to the Executive on March 4, 2003 at an exercise price per share of $14.03, for an aggregate purchase price of $6,849,950, and (b) 500,000 currently outstanding shares of Common Stock, previously granted to the Executive on April 25, 2005 and March 3, 2006, for an aggregate purchase price of $5,275,000, each purchase price paid in a lump-sum cash payment at the time of purchase, with the payment therefor subject to applicable withholding for federal and Georgia income taxes.      8. TERMINATION OF EMPLOYMENT.      The Employment Period will be terminated upon the happening of any of the following events:      (a) RESIGNATION FOR GOOD REASON. The Executive may voluntarily terminate his employment hereunder for Good Reason. For purposes of this Agreement, “Good Reason” shall mean:      (i) the assignment to the Executive of any duties inconsistent with the Executive’s position (including status, offices, titles or reporting relationships), authority, duties or responsibilities as contemplated by Section 3, any adverse change in the Executive’s reporting responsibilities, or any action by the Company that results in a diminution in such position, authority, duties or responsibilities, but excluding for these purposes an isolated and insubstantial action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive;      (ii) the failure of the Company to nominate the Executive to the Board or the failure of the Board to recommend that the Company’s stockholders elect the Executive to the Board; 6 --------------------------------------------------------------------------------        (iii) any failure by the Company to comply with the compensation and benefits provisions of Sections 5 or 6 or to comply with any other material obligation of the Company under this Agreement, including, without limitation, any failure by the Company to obtain an assumption of this Agreement by a successor corporation as required under Section 15(a);      (iv) a notice of non-extension of the Agreement Term given by the Company to the Executive as set forth in Section 2 prior to the expiration of the Initial Term; or      (v) the relocation, without the consent of the Executive, of the Executive’s office to a location more than 40 miles from its current location in Atlanta, Georgia. However, in no event shall the Executive be considered to have terminated his employment for “Good Reason” unless and until the Company receives written notice from the Executive identifying in reasonable detail the acts or omissions constituting “Good Reason” and the provision of this Agreement relied upon, and such acts or omissions are not cured by the Company to the reasonable satisfaction of the Executive within 15 days of the Company’s receipt of such notice.      (b) RESIGNATION WITHOUT GOOD REASON. The Executive may voluntarily terminate his employment hereunder for any reason at any time, including for any reason that does not constitute Good Reason.      (c) TERMINATION FOR CAUSE. The Company may terminate the Executive’s employment hereunder for Cause. For purposes of this Agreement, the Executive shall be considered to be terminated for “Cause” only upon (i) the conviction of the Executive of a felony under the laws of the United States or any state thereof, whether or not appeal is taken, (ii) the conviction of the Executive for a violation of criminal law involving the Company and its business, (iii) the willful misconduct of the Executive, or the willful or continued failure by the Executive (except as provided in Section 8(e)) to substantially perform his duties hereunder, in either case which has a material adverse effect on the Company; or (iv) the willful fraud or material dishonesty of the Executive in connection with his performance of duties to the Company. However, in no event shall the Executive’s employment be considered to have been terminated for Cause unless and until the Executive receives a copy of a resolution adopted by the Board finding that, in the good faith opinion of the Board, the Executive is guilty of acts or omissions constituting Cause, which resolution has been duly adopted by an affirmative vote of a majority of the Board, excluding the Executive and any individual alleged to have participated in the acts constituting Cause. Any such vote shall be taken at a meeting of the Board called and held for such purpose, after reasonable written notice is provided to the Executive setting forth in reasonable detail the facts and circumstances claimed to provide a basis of termination for Cause and the Executive is given an opportunity, together with counsel, to be heard before the Board. The Executive shall have the opportunity to cure any such acts or omissions (other than items (i) or (ii) above) within 15 days of the Executive’s receipt of such resolution. The foregoing shall not limit the right of the Company to suspend the Executive from his day-to-day responsibilities with the Company pending the completion of such notice and cure procedures. 7 --------------------------------------------------------------------------------        (d) TERMINATION WITHOUT CAUSE. The Board shall have the right to terminate the Executive’s employment hereunder other than for Cause at any time, subject to the consequences of such termination as set forth in this Agreement.      (e) DISABILITY. The Executive’s employment hereunder shall terminate upon his Disability. For purposes of this Agreement, “Disability” shall mean the inability of the Executive to perform his duties to the Company on account of physical or mental illness or incapacity for a period of four and one-half consecutive months, or for a period of 135 calendar days, whether or not consecutive, during any 365-day period, as a result of a condition that is treated as a total or permanent disability under the long-term disability insurance policy of the Company that covers the Executive. The Executive’s employment hereunder shall be deemed terminated by reason of Disability on the last day of the applicable period; provided, however, in no event shall the Executive be terminated by reason of Disability unless the Executive receives written notice from the Company, at least 15 days in advance of such termination, stating its intention to terminate the Executive for reason of Disability.      (f) DEATH. The Executive’s employment hereunder shall terminate upon his death.      9. COMPENSATION UPON TERMINATION OF EMPLOYMENT.      In the event the Executive’s employment by the Company is terminated during the Agreement Term, the Executive, in addition to any benefits provided pursuant to Section 17, shall be entitled to the severance payments and benefits specified below:      (a) RESIGNATION FOR GOOD REASON; TERMINATION WITHOUT CAUSE. In the event the Executive voluntarily terminates his employment hereunder for Good Reason or is terminated by the Company other than for Cause, death or Disability, the Company shall pay the Executive and provide him with the following:      (i) ACCRUED RIGHTS. Upon the Executive’s termination of employment, the Company shall pay the Executive a lump-sum amount equal to the sum of (A) his earned but unpaid Base Salary through the date of termination, (B) any earned but unpaid Annual Bonus for any completed fiscal year, and (C) any unreimbursed business expenses or other amounts due to the Executive from the Company as of the date of termination. The Company shall also pay to the Executive, upon the final preparation of the Company’s audited financial statements for the year in which termination of employment occurs, an additional lump-sum amount calculated based on the degrees of achievement of the bonus performance goals applicable to the Annual Bonus for such year, determined in accordance with the terms of the bonus plan for such year but prorated on a daily basis to reflect the partial year of service. In addition, the Company shall provide to the Executive all payments, rights and benefits due as of the date of termination under the terms of the Company’s employee and fringe benefit plans and programs in which the Executive participated during the Employment Period (together with the lump-sum payments described above, the “Accrued Rights”).      (ii) SEVERANCE PAYMENT. The Company shall pay the Executive the an amount equal to two times the annual Base Salary in effect at the time of termination. 8 --------------------------------------------------------------------------------   Any amount payable pursuant to this Section 9(a)(ii) shall be payable in four equal consecutive quarterly installments, with the first such payment to be made within 15 days following the date of termination; provided, however, if any payment to the Executive would constitute a “deferral of compensation” under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the Executive is a “specified employee” (as such phrase is defined in Section 409A of the Code), the Executive (or his beneficiary) will receive payment of such installment upon the earlier of (A) six months following the Executive’s “separation from service” with the Company (as such phrase is defined in Section 409A of the Code) or (B) the Executive’s death.      (iii) EQUITY RIGHTS. In the event the Executive voluntarily terminates his employment hereunder for Good Reason, all unvested Time-Vested Restricted Shares and Performance Restricted Shares shall be forfeited and, in the event the Company terminates Executive’s employment without Cause, 50% of any unvested Time-Vested Restricted Shares and Performance Restricted Shares shall become immediately and fully vested, and the remaining 50% of any Time-Vested Restricted Shares and Performance Restricted Shares shall be forfeited; provided, however, in the event that the employment of the Executive is terminated without Cause during the six-month period immediately preceding a Change of Control by the Company, then 100% of any unvested Time-Vested Restricted Shares and Performance Restricted Shares shall become immediately and fully vested. This accelerated vesting provision shall apply only to Time Vested Restricted Shares and Performance Restricted Shares that have been granted as of the date triggering acceleration and shall have no force or effect with respect to any Restricted Shares described herein which are not then issued. For avoidance of doubt, this Section 9(a)(iii) shall have no effect on the Executive’s right to receive the Signing Bonus Deferred Shares.      (iv) CONTINUED BENEFITS. For the 12-month period following the date of the Executive’s termination of employment, the Company shall continue to provide the Executive and his eligible dependents, at its sole cost, with the medical, dental, disability and life insurance coverages that were provided to the Executive immediately prior to termination of employment, subject to cancellation by the Company in the event that the Executive obtains coverage under comparable substitute plans of another employer. Following the expiration of such 12-month period and for the lifetime of the Executive, the Executive and his eligible dependents shall be entitled to continue participating (at the Executive’s sole expense) in the Company’s group medical, dental, disability and life insurance coverages, with the Executive’s cost to be determined on a basis consistent with the method for determining employee payments under the health care continuation requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”).      (b) RESIGNATION WITHOUT GOOD REASON; TERMINATION FOR CAUSE. In the event the Executive voluntarily terminates his employment hereunder other than for Good Reason or is terminated by the Company for Cause, the Company shall pay the Executive and provide him with those Accrued Rights described in the first sentence of Section 9(a)(i). Upon such termination, (i) the Executive shall not be entitled to receive, and the Company shall have no obligation to provide, any severance payments under this Agreement, (ii) the Executive and 9 --------------------------------------------------------------------------------   his dependents shall not be entitled to receive, the Company shall have no obligation to provide to the Executive or his dependents, any medical, dental, disability or life insurance coverage except as required by COBRA or other applicable law or under the terms of the applicable plans, and (iii) all unvested Restricted Shares shall be forfeited. For avoidance of doubt, this Section 9(b) shall have no effect on the Executive’s right to receive the Signing Bonus Deferred Shares.      (c) DISABILITY; DEATH. In the event the Executive’s employment hereunder is terminated by reason of the Executive’s Disability or death, the Company shall pay and provide the Executive (or his legal representative) with the following:      (i) ACCRUED RIGHTS. The Company shall pay and provide to the Executive (or his legal representative) any Accrued Rights, including all disability or life insurance benefits (as applicable).      (ii) SALARY CONTINUATION. The Company shall provide the Executive (or his legal representative) with a lump-sum payment equal to the Executive’s then-current annual Base Salary.      (iii) EQUITY RIGHTS. As of the date of the Executive’s termination under this Section 9(c), all unvested Restricted Shares shall become immediately and fully vested. For avoidance of doubt, this Section 9(b) shall have no effect on the Executive’s right to receive the Signing Bonus Deferred Shares.      (iv) CONTINUED BENEFITS. For the 12-month period following the date of the Executive’s Disability or death, the Company shall continue to provide the Executive and/or his eligible dependents (as applicable), at its sole cost, with the medical, dental, disability and life insurance coverages that were provided to the Executive immediately prior to termination of employment. Following the expiration of such 12-month period, the Executive shall be entitled to continue group benefit coverages on the same basis as described in Section 9(a)(iv).      10. CHANGE OF CONTROL DEFINITIONS.      For purposes of this Agreement, the following terms shall have the meanings given below:      “CHANGE OF CONTROL” means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any “Person” or “Group” of related persons (as such terms are used in Section 13(d)(3) of the Securities Exchange Act of 1934), (ii) the adoption of a plan relating to the liquidation or dissolution of the Company, (iii) the consummation of any transaction (including, without limitation, any purchase, sale, acquisition, disposition, merger or consolidation) the result of which is that any Person or Group becomes the “beneficial owner” (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Securities Exchange Act of 1934) of more than 50% of the aggregate voting power of all classes of capital stock of the Company having the right to elect directors under ordinary circumstances, or (iv) the first day on which a majority of the members of the Board are not Continuing Directors. 10 --------------------------------------------------------------------------------        “CONTINUING DIRECTORS” means, as of any date of determination, any member of the Board who (i) was a member of the Board on the Effective Date or (ii) was nominated for election or elected to the Board with the approval of (a) two-thirds of the Continuing Directors who were members of the Board at the time of such nomination or election or (b) two-thirds of those Directors who were previously approved by Continuing Directors.      “SUBSIDIARY” means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of capital stock, entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof).      11. PARACHUTE TAX INDEMNITY.      (a) If it shall be determined that any amount paid, distributed or treated as paid or distributed by the Company to or for the Executive’s benefit (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 11) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (the “Code”) or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of all federal, state and local taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.      (b) All determinations required to be made under this Section 11, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized accounting firm (the “Accounting Firm”) selected by the Company that shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne by the Company. Any Gross-Up Payment, as determined pursuant to this Section 11, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (an “Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to this Section 11 and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the 11 --------------------------------------------------------------------------------   amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the Executive’s benefit. Notwithstanding the foregoing, any Gross-Up Payment, including any Underpayment, will be made only in a manner and to the extent (and at the earliest date or dates) such that Section 409A of the Code will not be violated.      (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later then ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; (iii) cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceeding relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expense. Without limitation on the foregoing provisions of this Section 11, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the Executive’s taxable year with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority, so long as such action does not have a material adverse effect on the contest being pursued by the Company.      (d) If, after the Executive’s receipt of an amount advanced by the Company pursuant to this Section 11, the Executive becomes entitled to receive any refund with respect to such 12 --------------------------------------------------------------------------------   claim, the Executive shall (subject to the Company’s complying with the requirements of this Section 11) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the Executive’s receipt of an amount advanced by the Company pursuant to this Section 11, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.      12. NO MITIGATION OR OFFSET.      The Executive shall not be required to seek other employment or to reduce any severance benefit payable to him under Section 9, and, except as provided in Section 9(a)(iv), no such severance benefit shall be reduced on account of any compensation received by the Executive from other employment. The Company’s obligation to pay benefits (severance or otherwise) under this Agreement shall not be reduced by any amount owed by the Executive to the Company, except for any amounts owed by the Executive to the Company pursuant to Section 4(b), to which the Company shall have an express right of setoff (in addition to any other remedies available to it under law).      13. TAX WITHHOLDING; METHOD OF PAYMENT.      All compensation payable pursuant to this Agreement shall be subject to reduction by all applicable withholding, social security and other federal, state and local taxes and deductions. Any lump-sum payments provided for in this Agreement shall be made in a cash payment, net of any required tax withholding. If the Company shall be required to withhold any federal, state or local tax in connection with the vesting of any Restricted Shares pursuant to this Agreement, the Executive shall pay the tax or make provisions that are satisfactory to the Company for the payment thereof. Unless the Executive elects to satisfy all or any part of any such withholding obligation by the payment to the Company of immediately available funds on or before the date such withholding is required, then the Company is hereby authorized to and shall cause a surrender of a portion of the nonforfeitable shares of Common Stock that are to be transferred to the Executive hereunder, and the shares of Common Stock so surrendered shall be credited against any such withholding obligation at the fair market value per share of such shares on the date of such surrender.      14. RESTRICTIVE COVENANTS.      (a) COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION. The Executive acknowledges that during the course of his affiliation with the Company he has or will have access to and knowledge of certain information and data which the Company considers confidential or proprietary and the release of such information or data to unauthorized persons would be extremely detrimental to the Company. As a consequence, the Executive hereby agrees and acknowledges that he owes a duty to the Company not to disclose, and agrees that without the prior written consent of the Company, at any time, either during or after his employment with the Company, he will not communicate, publish or disclose, to any person anywhere, or use for 13 --------------------------------------------------------------------------------   his own account any Confidential Information (as hereinafter defined), except as may be necessary or appropriate to conduct his duties hereunder, provided the Executive is acting in good faith and in the best interest of the Company, or as may be required by law or judicial process. The Executive will use his best efforts at all times to hold in confidence and to safeguard any Confidential Information from falling into the hands of any unauthorized person and, in particular, will not permit any Confidential Information to be read, duplicated or copied. The Executive will return to the Company all Confidential Information in the Executive’s possession or under the Executive’s control whenever the Company shall so request, and in any event will promptly return all such Confidential Information if the Executive’s relationship with the Company is terminated for any or no reason and will not retain any copies thereof. For purposes hereof the term “Confidential Information” shall mean any information or data used by or belonging or relating to the Company or any of its subsidiaries or Affiliates that is not known generally to or available for use by the industry in which the Company is or may be engaged, other than as a result of the Executive’s acts or omissions to act, and which the Company maintains on a confidential basis, including, without limitation, any and all trade secrets, proprietary data and information relating to the Company’s business and products, price list, customer lists, processes, procedures or standards, know-how, manuals, business strategies, records, drawings, specifications, designed, financial information, whether or not reduced to writing, or information or data which the Company advises the Executive should be treated as confidential information. The covenants made in this Section 14(a) shall remain in effect during the term of the Executive’s relationship with the Company and, in the case of Confidential Information that constitutes trade secrets under the Uniform Trade Secrets Act, shall survive the termination of such relationship for any reason indefinitely, and, in the case of all other Confidential Information, shall survive for a period of five years after such termination. The Executive further agrees and acknowledges that Confidential Information, as between the Company and the Executive, shall be deemed and at all time remain and constitute the exclusive property of the Company.      (b) COVENANT NOT TO COMPETE. The Executive acknowledges that he has established and will continue to establish favorable relations with the customers, clients and accounts of the Company and will have access to trade secrets of the Company and that the Company would be irreparably damaged if the Executive were to provide similar services to any person or entity competing with the Company or engaged in a similar business in the markets served or to be served by the Company. Therefore, in consideration of such relations and to further protect trade secrets, directly or indirectly, of the Company, the Executive agrees that during the term of his employment by the Company and for a period of eighteen months from the date of termination of the Executive, except that such eighteen month period shall not apply in the event of termination of employment (i) by the Company other than for Cause, (ii) by the Executive for Good Reason or (iii) by the Company or the Executive for any reason within one year following a Change of Control, the Executive will not, directly or indirectly, without the express written consent of the Company:      (i) act as a manager of a business substantially similar to, a supervisor of officers or employees rendering services for, or as an advisor with respect to the conduct of, whether on the Executive’s own behalf or as an employee, director, or independent contractor of, any business that consists of radio broadcasting services (the “Business”) and serves the listening areas (as defined by the Arbitron Metro Survey Area) set forth on 14 --------------------------------------------------------------------------------   Exhibit A, within which area the Executive acknowledges the Company currently conducts its business or has definite or immediate plans to conduct its business, (the “Competitive Businesses”);      (ii) solicit, or attempt to solicit, clients, customers or accounts of the Company, (A) which during the 12-month period prior to the date of termination of the Executive has obtained or contracted to obtain services from the Company and with which the Executive had contact during the term of the Executive’s employment by the Company or (B) whose name and/or address both would constitute Confidential Information and became known to Executive as a customer or client or potential customer or client of the Company in any manner during the term of the Executive’s employment by the Company, for, on behalf of or otherwise related to any such Competitive Businesses or any products related thereto; or      (iii) solicit or in any manner influence or encourage any person who is an employee of the Company at the time the Executive’s employment terminates or who was such an employee with the Company at any time during the 12-month period immediately preceding the date of such termination and with whom the Executive had contact during the term of the Executive’s employment by the Company to leave such employ or service with the Company for any employment opportunity with any Competitive Businesses. Notwithstanding the foregoing, if any court determines that the covenant not to compete, or any part thereof, is unenforceable because of the duration of such provision or the geographic area or scope covered thereby, all of which the Executive acknowledges are reasonable under the circumstances, such court shall have the power to reduce the duration, area or scope of such provisions and, in its reduced form, such provision shall then be enforceable and shall be enforced.      (c) In the event that, and each time during the Executive’s employment with the Company, as, the Company (i) establishes the Business hereinafter in a territory other than those areas listed on Exhibit A or (ii) adds a substantially different service line to the Business, the Executive agrees to execute and deliver an amendment to this Agreement adding the territory or additional service line or some combination thereof upon payment to the Executive by the Company of the sum of $100.00.      (d) SPECIFIC PERFORMANCE. Recognizing the irreparable damage will result to the Company in the event of the breach or threatened breach of any of the foregoing covenants and assurances by the Executive contained in Sections 14(a) or 14(b), and that the Company’s remedies at law for any such breach or threatened breach will be inadequate, the Company and its successors and assigns, in addition to such other remedies which may be available to them, shall be entitled to an injunction, including a mandatory injunction, to be issued by any court of competent jurisdiction ordering compliance with this Agreement or enjoining and restraining the Executive, and each and every person, firm or Company acting in concert or participation with him, from the continuation of such breach and, in addition thereto, he shall pay to the Company all ascertainable damages, including costs and reasonable attorneys’ fees sustained by the Company by reason of the breach or threatened breach of said covenants and assurances. The 15 --------------------------------------------------------------------------------   obligations of the Executive and the rights of the Company, its successors and assigns under this Section 14 shall survive the termination of this Agreement. The covenants and obligations of the Executive set forth in this Section 14 is in addition to and not in lieu of or exclusive of any other obligations and duties of the Executive to the Company, whether express or implied in fact or in law.      (e) POTENTIAL UNENFORCEABILITY OF ANY PROVISION. If a final judicial determination is made that any provision of this Agreement is an unenforceable restriction against the Executive, the provisions hereof shall be rendered void only to the extent that such judicial determination finds such provisions unenforceable, and such unenforceable provisions shall automatically be reconstituted and become a part of this Agreement, effective as of the date first written above, to the maximum extent in favor of the Company that is lawfully enforceable. A judicial determination that any provision of this Agreement is unenforceable shall in no instance render the entire Agreement unenforceable, but rather the Agreement will continue in full force and effect absent any unenforceable provision to the maximum extent permitted by law.      15. SUCCESSORS.      (a) This Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and any person, firm, corporation or other entity which succeeds to all or substantially all of the business, assets or property of the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business, assets or property of the Company, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, the “Company” shall mean the Company as hereinbefore defined and any successor to its business, assets or property as aforesaid which executes and delivers an agreement provided for in this Section 15(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. Notwithstanding the foregoing provisions of this Section 15(a), this Agreement shall not be assignable by the Company without the prior written consent of the Executive.      (b) This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts are due and payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid to the Executive’s designated beneficiary or, if there be no such designated beneficiary, to the legal representatives of the Executive’s estate.      16. NO ASSIGNMENT.      Except as to withholding of any tax under the laws of the United States or any other country, state or locality, neither this Agreement nor any right or interest hereunder nor any amount payable at any time hereunder shall be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment, or other legal process, or encumbrance of any kind by the Executive or the beneficiaries of the Executive or by his legal representatives without the 16 --------------------------------------------------------------------------------   Company’s prior written consent, nor shall there be any right of set-off or counterclaim in respect of any debts or liabilities of the Executive, his beneficiaries or legal representatives, except in the case of termination of employment for Cause; provided, however, that nothing in this Section 16 shall preclude the Executive from designating a beneficiary to receive any benefit payable on his death, or the legal representatives of the Executive from assigning any rights hereunder to the person or persons entitled thereto under his will or, in case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to his estate.      17. ENTIRE AGREEMENT.      (a) This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and, except as specifically provided herein, cancels and supersedes any and all other agreements between the parties with respect to the subject matter hereof. In particular, this Agreement amends and restates and, thus, supersedes the Prior Agreements, except for (i) any and all provisions of the Second Amendment that relate to the payment of incentive bonuses for services performed by the Executive during fiscal year 2006, (ii) any and all provisions in the Prior Agreements that relate to the grant of equity incentives granted pursuant to Section 5 of each of the Prior Agreements, which provisions, including any provisions under Sections 5 or 7 of each of the Prior Agreements, shall remain in effect throughout the Agreement Term of this Agreement, and (iii) any and all provisions of the loan reduction program set forth in Section 8 of the First Amendment, which provisions shall remain in effect according to the original terms and conditions thereof with no changes. Any amendment or modification of this Agreement shall not be binding unless in writing and signed by the Company and the Executive. Notwithstanding the foregoing, the parties hereto shall enter into restricted stock agreements or deferred share agreements in respect of the Restricted Shares, the Deferred Shares Signing Bonus and, if applicable, the Change of Control Grant, setting forth terms and conditions consistent with the provisions of this Agreement and such other terms and conditions approved by the Compensation Committee, in each case consistent with the Company’s equity incentive plans or as approved by the Company’s stockholders.      (b) Notwithstanding anything to the contrary in this Agreement, to the extent this Agreement provides for the issuance of any securities of the Company in excess of the amount of securities available for issuance pursuant to the Company’s then-existing equity incentive plans, the issuance of such excess securities shall be postponed indefinitely, pending approval by the Company’s stockholders (which the Company shall use its commercially reasonable efforts to facilitate obtaining) of (i) an amendment to one or more of the Company’s equity incentive plans to increase the number of securities available for issuance under such plan or plans by no less than the amount of such excess, (ii) a new equity incentive plan providing for the issuance of securities in an amount no less than the amount of such excess, or (iii) the issuance of securities, outside of an equity incentive plan, equal to the amount of such excess.      18. SEVERABILITY.      In the event that any provision of this Agreement is determined to be invalid or unenforceable, the remaining terms and conditions of this Agreement shall be unaffected and shall remain in full force and effect, and any such determination of invalidity or unenforceability shall not affect the validity or enforceability of any other provision of this Agreement. 17 --------------------------------------------------------------------------------        19. SECTION 409A OF THE CODE.      To the extent applicable, it is intended that the compensation arrangements under this Agreement be in full compliance with the provisions of Section 409A of the Code. To the extent any provision in this Agreement is or will be in violation of Section 409A of the Code, the Agreement shall be amended in such a manner as the parties may agree such that the Agreement is or remains in compliance with Section 409A of the Code and the intent of the parties is maintained to the maximum extent possible.      20. NOTICES.      All notices which may be necessary or proper for either the Company or the Executive to give to the other shall be in writing and shall be delivered by hand or sent by registered or certified mail, return receipt requested, or by air courier, to the Executive at: Mr. Lewis W. Dickey, Jr. 3535 Piedmont Road Building 14, 14th Floor Atlanta, Georgia 30305 and shall be sent in the manner described above to the Secretary of the Company at the Company’s principal executives offices at 3535 Piedmont Road, Building 14, 14th Floor, Atlanta, Georgia 30305 or delivered by hand to the Secretary of the Company, and shall be deemed given when sent, provided that any notice required under Section 8 or notice given pursuant to Section 2 shall be deemed given only when received. Any party may by like notice to the other party change the address at which he or they are to receive notices hereunder.      21. GOVERNING LAW.      This Agreement shall be governed by and enforceable in accordance with the laws of the State of Georgia, without giving effect to the principles of conflict of laws thereof.      22. ARBITRATION.      Any controversy or claim arising out of, or related to, this Agreement, or the breach thereof, shall be settled by binding arbitration in the City of Atlanta, Georgia, in accordance with the rules then obtaining of the American Arbitration Association, and the arbitrator’s decision shall be binding and final, and judgment upon the award rendered may be entered in any court having jurisdiction thereof.      23. LEGAL FEES AND EXPENSES.      To induce the Executive to execute this Agreement and to provide the Executive with reasonable assurance that the purposes of this Agreement will not be frustrated by the cost of its enforcement should the Company fail to perform its obligations hereunder, the Company shall pay and be solely responsible for any attorneys’ fees and expenses and court costs incurred by the Executive as a result of a claim that the Company has breached or otherwise failed to 18 --------------------------------------------------------------------------------   perform this Agreement or any provision hereof to be performed by the Company, regardless of which party, if any, prevails in the contest. [ SIGNATURE PAGE TO FOLLOW ] 19 --------------------------------------------------------------------------------        The Company and the Executive are signing this Agreement effective as of the date first above written. EXECUTIVE /s/ Lewis W. Dickey, Jr. LEWIS W. DICKEY, JR. CUMULUS MEDIA INC. /s/ Martin R. Gausvik By: Martin R. Gausvik Title: Executive Vice President, Treasurer and           Chief Financial Officer [Signature Page to Employment Agreement]   --------------------------------------------------------------------------------   EXHIBIT A Listening Areas       Bangor   Albany Florence   Columbus-Starkville Harrisburg   Flint Myrtle Beach   Lake Charles Tallahassee   Lexington Wilmington   Melbourne Youngstown   Montgomery     Saginaw Fayetteville, AR   Shreveport Fayetteville, NC     Ft. Smith   Abilene Kalamazoo   Amarillo Mobile   Ann Arbor Monroe   Appleton Pensacola   Battle Creek Rockford   Beaumont Savannah   Grand Junction Toledo   Green Bay     Killeen Temple Bismarck   Odessa Cedar Rapids   Topeka Dubuque   Wichita Falls Eugene     Fairbault   San Francisco Owatonna   Dallas Oxnard-Ventura   Houston Quad Cities   Atlanta Santa Barbara   Cincinnati Waseca   Kansas City Waterloo   Indianapolis     York  

  Exhibit 10.7(f) Amendment No. 5 to Executive Employment Agreement      This Amendment No. 5 to the Executive Employment Agreement dated as of April 1, 2000 (the “Agreement”) between BMC Software, Inc. (the “Employer”) and the undersigned executive (the “Executive”) is entered into as of this 31st day of January, 2004 (the “Effective Date”).      For and in consideration of One Dollar ($1.00) and other good and valuable consideration, the receipt of which is hereby acknowledged, the Employer and the Executive hereby agree that the Agreement shall be amended as follows, effective as of the Effective Date:      1. The last paragraph of Section 6.5 of the Agreement (which was added pursuant to Amendment No. 2 to the Agreement) shall be deleted and the following shall be substituted therefor:      “Notwithstanding anything to the contrary in this Agreement, if the Executive is a “disqualified individual” (as defined in Section 280G(c) of the Internal Revenue Code of 1986, as amended (the “Code”)), and the severance benefits provided for in this Section 6.5, together with any other payments and benefits which the Executive has the right to receive from the Employer and its affiliates, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), then the severance benefits provided hereunder (beginning with any benefit to be paid in cash hereunder) shall be either (1) reduced (but not below zero) so that the present value of such total amounts and benefits received by the Executive will be one dollar ($1.00) less than three times the Executive’s “base amount” (as defined in Section 280G of the Code) and so that no portion of such amounts and benefits received by the Executive shall be subject to the excise tax imposed by Section 4999 of the Code or (2) paid in full, whichever produces the better net after-tax position to the Executive (taking into account any applicable excise tax under Section 4999 of the Code and any other applicable taxes). The determination as to whether any such reduction in the amount of the severance benefit is necessary shall be made initially by the Employer in good faith. If a reduced severance benefit is paid hereunder in accordance with clause (1) of the first sentence of this paragraph and through error or otherwise that payment, when aggregated with other payments and benefits from the Employer (or its affiliates) used in determining if a “parachute payment” exists, exceeds one dollar ($1.00) less than three times the Executive’s base amount, then the Executive shall immediately repay such excess to the Employer upon notification that an overpayment has been made.” 1 --------------------------------------------------------------------------------        2. The following new Section 9.16 shall be added to the end of Article 9 of the Agreement:      “9.16 AMENDMENT OF CERTAIN OUTSTANDING STOCK OPTIONS      Each Out-of-the-Money Option (as hereinafter defined) is hereby amended to provide that, at any time and from time to time prior to the termination of such option, the Executive may surrender all or a portion of such option to the Employer for no consideration by providing written notice to the Employer at its principal executive office addressed to the attention of the President or the Treasurer. Such notice shall specify the number of shares with respect to which the Out-of-the-Money Option is being surrendered and, if such option is being surrendered with respect to less than all of the shares then subject to such option, then such notice shall also specify the date upon which such option became (or would become) exercisable in accordance with the terms thereof with respect to the shares being surrendered. The term “Out-of-the-Money Option” means each stock option granted to the Executive by the Employer prior to the effective date of Amendment No. 5 to this Agreement (the “Effective Date”) with respect to which the purchase price per share of common stock of the Employer under such option (as adjusted through the Effective Date) is greater than the fair market value of a share of common stock of the Employer (determined under the plan pursuant to which such option was granted) as of the Effective Date. The provisions of this Section 9.16 shall survive the termination of this Agreement.”      3. This Amendment No. 5 (a) shall supersede any prior agreement between the Employer and the Executive relating to the subject matter of this Amendment No. 5 and (b) shall be binding upon and inure to the benefit of the parties hereto and any successors to the Employer and all persons lawfully claiming under the Executive.      4. Except as expressly modified by this Amendment No. 5, the terms of the Agreement shall remain in full force and effect and are hereby confirmed and ratified.      IN WITNESS WHEREOF, the Employer and the Executive have executed this Amendment No. 5 as of the day and year first above written.       EXECUTIVE   EMPLOYER           BMC SOFTWARE, INC.       /s/ DAN BARNEA   By: /s/ JEROME ADAMS Dan Barnea     2

EXHIBIT 10.7 DSL.NET, INC. 50 BARNES PARK NORTH, SUITE 104 WALLINGFORD, CT 06492 August 28, 2006 David F. Struwas c/o DSL.net, Inc. 50 Barnes Park North, Suite 104 Wallingford, CT 06492 Re: Retention Bonus Dear Dave: As you know, DSL.net, Inc. (the “Company”) entered into a Purchase Agreement with MegaPath Inc. and a wholly-owned subsidiary of MegaPath Inc. (“MegaPath”) on August 22, 2006 (the “Purchase Agreement”). It is a condition to the closing of the financing transaction contemplated by the Agreement (the “Financing”) that the Company have entered into this agreement with you. In recognition of your historic valuable contributions to the success of the Company and your continuing value to the Company during the period following the closing of the Financing, to incent you to remain as an employee of the Company, and in consideration for the mutual covenants set out herein, the Company is prepared to offer to you the following: ·      Provided that you remain employed by the Company up until February 28, 2007 (the “Retention Date”), you will be paid a retention bonus (the “Retention Bonus”) equal to three months of your current base salary. The Company will withhold and remit all applicable deductions from the Retention Bonus, which will be paid to you within five (5) business days of the Retention Date. If your employment with the Company is terminated by you or by the Company for any reason prior to the Retention Date, you will not be paid the Retention Bonus.   Except as expressly amended herein, nothing in this agreement alters or amends the terms of your employment with the Company as at the Effective Date (as defined below) of this letter. This agreement becomes effective (the “Effective Date”) on the later of the date that the Company receives from you an executed copy of this agreement and the closing of the Financing. The benefits set forth herein are being made available to you in recognition of your unique knowledge and skills and in consideration for your continuing loyalty and dedication to the Company during this important period, and are in addition to your current compensation and any other benefits to which you are or may become entitled. This agreement is binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Please acknowledge your receipt of this agreement by signing one copy of this letter and returning it to the undersigned. Yours truly, DSL.net, Inc. Per order of the Board of Directors By:  /s/ Walter Keisch                                   Name: Walter Keisch Title:   Chief Financial Officer Agreed to this 28th day of August, 2006: /s/ David F. Struwas                                                                      David F. Struwas

Exhibit 10.43 EXECUTION COPY AMENDMENT NO. 1 TO CREDIT AGREEMENT This Amendment No. 1 to Credit Agreement (this “Amendment”) is entered into as of September 15, 2006, by and among Midas International Corporation, a Delaware corporation, as borrower (the “Borrower”), the Lenders (as defined below), JPMorgan Chase Bank, N.A., as LC Issuer, Swing Line Lender and Administrative Agent (the “Agent”), National City Bank of the Midwest, as syndication agent and LaSalle Bank National Association, as documentation agent. RECITALS A. The Borrower, the lenders party thereto (the “Lenders”), the Agent, National City Bank of the Midwest, as syndication agent, and LaSalle Bank National Association, as documentation agent, are parry to that certain Credit Agreement dated as of October 27, 2005 (the “Credit Agreement”). Unless otherwise specified herein, capitalized terms used in this Amendment shall have the meanings ascribed to them by the Credit Agreement. B. The Borrower has requested that the Agent and the Lenders amend the Credit Agreement. C. The Agent and the Lenders are willing to amend the Credit Agreement on the terms and conditions set forth below. NOW, THEREFORE, in consideration of the mutual execution hereof and other good and valuable consideration, the parties hereto agree as follows: 1. Amendments to Credit Agreement. (a) Article I of the Credit Agreement is hereby amended by: (i) inserting the following defined terms in alphabetical order: ““Subordinated Indebtedness Condition” means any time that the aggregate outstanding principal balance of Subordinated Indebtedness of the Borrower and its Subsidiaries is greater than or equal to $50,000,000; provided, that for purposes of determining such outstanding principal balance, any original issue discount shall be disregarded.” ““Subordinated Indebtedness Trigger Date” means the first date after September 15, 2006 on which the Subordinated Indebtedness Condition shall exist.”; (ii) deleting in its entirety the second proviso contained in the definition of Permitted Acquisition; and -------------------------------------------------------------------------------- (iii) restating the following definitions in their entirety: ““Authorized Officer” means any of the chief executive officer, chief financial officer, treasurer, any assistant treasurer and/or the controller of the Parent or the Borrower, as the context may require.” “Consolidated Capital Expenditures” means, with reference to any period and without duplication, any expenditures of Parent and its Subsidiaries calculated on a consolidated basis for such period for any purchase or other acquisition of any asset which would be classified as a fixed or capital asset on a consolidated balance sheet of Parent and its Subsidiaries prepared in accordance with GAAP, excluding (a) the cost of assets acquired with Capitalized Lease Obligations, (b) expenditures of insurance proceeds to rebuild or replace any asset after a casualty loss, (c) leasehold improvement expenditures for which Parent or any Subsidiary is reimbursed promptly by the lessor, (d) any capitalized payroll expenses related to software development or information technology services, in an amount not to exceed $ 1,000,000 in the aggregate in any fiscal year and (e) expenditures consisting of consideration for a Permitted Acquisition. ““Revolving Credit Commitment” means, for each Lender, the obligation of such Lender to make Revolving Credit Loans to, and participate in Facility LCs and Swing Line Loans issued upon the application of, the Borrower in an aggregate amount not exceeding at any one time outstanding the amount set forth opposite its signature below, as it may be modified as a result of any assignment that has become effective pursuant to Section 12.3 or as otherwise modified from time to time pursuant to the terms hereof; provided, that on the Subordinated Indebtedness Trigger Date, if the Aggregate Revolving Credit Commitment is greater than $75,000,000, such Aggregate Revolving Credit Commitment shall be permanently reduced by the lesser of (i) $35,000,000 and (ii) the amount required to reduce the Aggregate Revolving Credit Commitment to $75,000,000 and each Lender's Revolving Credit Commitment shall be concurrently permanently reduced on a pro rata basis.” (b) Section 2.6(c) of the Credit Agreement is hereby amended by (i) replacing the amount 130,000,000” with the text 155,000,000 (such amount, as it may be reduced as a result of the exercise by the Borrower of its option to increase the Revolving Credit Commitment under this subsection (c), the “Maximum Accordion Increase Amount”)” and by restating the first parenthetical in its entirety to read as follows: “(resulting in maximum total Revolving Credit Commitments of up to $165,000,000, as such maximum commitments may be reduced in accordance with the provisions of this Agreement) (it being understood that the Maximum Accordion Increase Amount shall not be reduced as a result of the existence of the Subordinated Indebtedness Condition)” and (ii) restating the last sentence of such section in its entirety as follows: “Any such increase of the total Revolving Credit Commitments shall be subject to receipt by the Agent from the Borrower of (i) resolutions of the board of directors of the Borrower approving such increase and (ii) such other resolutions, supplemental opinions, certificates and other documents as the Agent may reasonably request.”   - 2 - -------------------------------------------------------------------------------- (c) Section 2.8(b) of the Credit Agreement is hereby amended by restating such section in its entirety as follows: “(b) Mandatory Prepayments/Mandatory Reduction of Revolving Credit Commitments. The Borrower shall make mandatory prepayments of the Revolving Credit Loans in amounts equal to the following: (i) promptly upon the receipt thereof by Parent or any of its Subsidiaries, 100% of the aggregate Net Available Proceeds realized upon any Asset Disposition permitted by the terms of this Agreement but only if such proceeds exceed $15,000,000 in the aggregate in any fiscal year (and then only to the extent of such excess, with any such amounts to be payable on the last day of each fiscal quarter of Parent, as applicable); provided, that in any event, the Borrower shall not be required to make any such prepayment at the end of any of the first three fiscal quarters of each fiscal year of Parent unless the aggregate of such excess Net Available Proceeds which has not previously been prepaid by the Borrower in such fiscal year is greater than or equal to $250,000; (ii) promptly upon the extension of any committed loan facility to Parent or its Subsidiaries, whether or not drawn, 66 2/3% of the Net Available Proceeds thereof; provided, that the provisions of this clause (ii) shall not apply in connection with any incurrence of Subordinated Indebtedness by the Borrower or its Subsidiaries to the extent that the Aggregate Revolving Credit Commitments will otherwise be reduced in connection with such incurrence in the manner set forth in the last sentence of this Section 2.8(b); and (iii) promptly, at any time that the Aggregate Outstanding Credit Exposure exceeds the Aggregate Revolving Credit Commitments, the amount of such excess. The Aggregate Revolving Credit Commitments shall be permanently reduced by the amount of any such required prepayment amount regardless of whether the aggregate principal amount of the Revolving Credit Loans outstanding is less than such required prepayment amount. In addition, on the Subordinated Indebtedness Trigger Date, if the Aggregate Revolving Credit Commitment is greater than $75,000,000, such Aggregate Revolving Credit Commitment shall be permanently reduced by the lesser of (i) $35,000,000 and (ii) the amount required to reduce the Aggregate Revolving Credit Commitment to $75,000,000.” (d) Section 6.1(a) of the Credit Agreement is hereby amended by deleting clause (ii) in its entirety and renumbering clause (iii) as clause (ii). (e) Section 6.1(b) of the Credit Agreement is hereby amended by deleting the text “its chief financial officer, controller or treasurer” and replacing it with the text “an Authorized Officer of Parent”.   - 3 - -------------------------------------------------------------------------------- (f) Sections 6.1(d) and (f) of the Credit Agreement are hereby amended by deleting the text “the chief financial officer, controller or treasurer” and replacing it with the text “an Authorized Officer”. (g) Section 6.10 of the Credit Agreement is hereby amended and restated in its entirety as follows: “6.10 Dividends; Share Repurchases. Parent will not, nor will it permit any of its Subsidiaries to, declare or pay any dividends or make any distributions on its capital stock (other than dividends payable in its own capital stock) or redeem, repurchase or otherwise acquire or retire any of its capital stock at any time outstanding (or engage in any transaction which has a substantially similar effect as the foregoing), except that (a) any Wholly-Owned Subsidiary may declare and pay dividends or make distributions to the Borrower, (b) the Borrower may pay dividends to Parent to permit Parent to pay its legal, administrative and audit expenses and (c) Parent may repurchase its capital stock or pay dividends in respect of its capital stock (and Borrower may pay dividends to Parent to permit Parent to repurchase such capital stock or pay such dividends), so long as on such date of determination (i) the Pro Forma Leverage Ratio (as defined below) is less than or equal to 2.75 to 1.0 (or 3.25 to 1.00 at any time that the Subordinated Indebtedness Condition shall exist), both prior to and after giving effect to such repurchase and/or payment of dividends by Parent and (ii) no Default or Unmatured Default has occurred and is continuing or would result therefrom. For purposes of this Section 6.10 “Pro Forma Leverage Ratio” shall mean as of any date of determination, the Leverage Ratio calculated pursuant to Section 6.24.2, with the amounts set forth in clause (a) of such definition measured as of the date of determination and the amount set forth in clause (b) of such definition determined on a pro forma basis as of the last day of the most recent fiscal quarter of Parent for which financial statements are available and giving effect to the proposed repurchase and/or payment of dividends by Parent. (h) Section 6.14(g) of the Credit Agreement is hereby amended by deleting the proviso contained therein in its entirety. (i) Section 6.14(h) of the Credit Agreement is hereby amended and restated in its entirety as follows: “(h) Permitted Acquisitions made by the Borrower or any Wholly-Owned Subsidiary, so long as: (i) no Default or Unmatured Default shall have occurred and be continuing at the time of the consummation of the proposed Permitted Acquisition or immediately after giving effect thereto; (ii) the Borrower shall have given the Agent written notice of such proposed Permitted Acquisition on the earlier of (x) the date on which the Permitted Acquisition is publicly announced and (y) 10 Business Days prior to the consummation of such proposed Permitted Acquisition (or such shorter period of time as may be reasonably acceptable to the Agent), which notice shall be executed by an Authorized Officer of Borrower and shall describe in reasonable detail the principal terms and conditions of such Permitted Acquisition and shall be accompanied by calculations demonstrating that, giving effect to such proposed Permitted Acquisition and any Indebtedness incurred in connection therewith, the Borrower's Leverage Ratio is less than 2.75 to 1.00 (or 3.25 to 1.00 at any time that a   - 4 - -------------------------------------------------------------------------------- Subordinated Indebtedness Condition shall exist) (with such Leverage Ratio calculated on a pro forma basis as if the applicable Permitted Acquisition shall have occurred on the first day of the relevant testing period, with any determination of Indebtedness and EBITDA of the target company (including any adjustments thereto) to be subject to the approval of the Agent); and (iii) at the time of any such Permitted Acquisition involving the creation or acquisition of a domestic Subsidiary, or the acquisition of capital stock or other equity interests of any Person, such Person, if a domestic Subsidiary, shall have executed and delivered to the Agent a joinder to the Guaranty.” (j) Section 6.20 of the Credit Agreement is hereby amended and restated in its entirety as follows: “6.20 Nature of Business: Fiscal Year. Neither Parent nor any of its Subsidiaries will (i) engage to any material extent in any business other than businesses of the type conducted by Parent and its Subsidiaries on the date of execution of the Agreement and businesses which are reasonably similar, complementary, ancillary or otherwise related thereto or (ii) change its fiscal year.” (k) Section 6.24.2 of the Credit Agreement is hereby amended by inserting the following proviso at the end of such section: “provided, that at any time that the Subordinated Indebtedness Condition shall exist, such ratio shall not be greater than 3.50 to 1.00.” (1) Section 6.24 of the Credit Agreement is hereby amended by inserting the following new Section 6.24.4: “6.24.4 Senior Leverage Ratio. At any time that the Subordinated Indebtedness Condition shall exist, the Borrower will not permit the ratio, determined as of the end of each fiscal quarter, of (a)(i) Bank Debt, plus (ii) obligations pursuant to or in respect of Letters of Credit, plus (iii) Capitalized Lease Obligations, less (iv) Subordinated Indebtedness, in each case for Parent and its Subsidiaries as of the date of determination to (b) Consolidated EBITDA for the then most recently ended 12 fiscal months, to be greater than 2.25 to 1.00. (m) The Pricing Schedule to the Credit Agreement is hereby amended and restated in its entirety as set forth on Schedule 1 hereto. 2. Representations and Warranties of the Borrower. The Borrower represents and warrants that: (a) The execution, delivery and performance by the Borrower of this Amendment have been duly authorized by all necessary corporate action and that this Amendment is a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, except as the enforcement thereof may be subject to (i) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally and (ii) general principles of equity (regardless of whether such enforcement is sought in a proceeding in equity or at law);   - 5 - -------------------------------------------------------------------------------- (b) Each of the representations and warranties contained in the Credit Agreement is true and correct in all material respects on and as of the date hereof as if made on the date hereof, except to the extent that any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct on and as of such earlier date; and (c) After giving effect to this Amendment, no Default or Unmatured Default has occurred and is continuing. 3. Effective Date. This Amendment shall become effective upon satisfaction of the following conditions: (a) Executed Amendment. Receipt by the Agent of duly executed counterparts of this Amendment from the Borrower and each Lender. (b) Fee Letter. Receipt by the Agent of a Fee Letter executed by the Borrower and the payment by the Borrower to the Agent of the fees required to be paid to Agent as set forth therein. (c) Upfront Fee. The Borrower shall have paid to the Agent, for the benefit of the Lenders party hereto, an upfront fee in an amount equal to 4.0 basis points on each such Lender's Commitment. (d) Consent and Reaffirmation. The Consent and Reaffirmation of guaranty dated as of the date hereof in the form attached hereto as Exhibit A executed by each of the Guarantors. 4. Reference to and Effect Upon the Credit Agreement. (a) The Credit Agreement and the other Loan Documents shall remain in full force and effect, and the execution, delivery and effectiveness of this Amendment shall not operate as a waiver or forbearance of any Default or Unmatured Default or any right, power or remedy of the Agent or any Lender under the Credit Agreement or any of the other Loan Documents, or constitute a consent, waiver or modification with respect to any provision of the Credit Agreement or any of the other Loan Documents, and the Borrower hereby fully ratifies and affirms each Loan Document to which it is a party. (b) Upon the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby. 5. Costs and Expenses. The Borrower hereby affirms its obligations under Section 9.5.1 of the Credit Agreement to reimburse the Agent for all reasonable costs and out-of-pocket expenses paid or incurred by the Agent in connection with the preparation, negotiation, execution and delivery of this Amendment, including but not limited to the reasonable fees and expenses of attorneys for the Agent with respect thereto.   - 6 - -------------------------------------------------------------------------------- 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 7. 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 purposes. 8. Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original but all such counterparts shall constitute one and the same instrument. [signature pages follow]   - 7 - -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed this Amendment as of the date and year fast above written.   BORROWER: MIDAS INTERNATIONAL CORPORATION, a Delaware corporation /s/ William M. Guzik By:   William M. Guzik Its:   Senior Vice President,   Chief Financial Officer Signature Page to First Amendment -------------------------------------------------------------------------------- LENDERS: JPMORGAN CHASE BANK, N.A. Individually, as LC Issuer, as Swing Line Lender and as Agent /s/ Pamela S. Paradies By:   Pamela S. Paradies Title:   Senior Vice President Signature Page to First Amendment -------------------------------------------------------------------------------- NATIONAL CITY BANK, successor by merger to National City Bank of the Midwest, as Syndication Agent and Lender /s/ Stephanie A. Kline By:   Stephanie A. Kline Title:   Vice President Signature Page to First Amendment -------------------------------------------------------------------------------- LASALLE BANK NATIONAL ASSOCIATION, as Documentation Agent and Lender /s/ Amy R. Weidner By:   Amy R. Weidner Title:   FVP Signature Page to First Amendment -------------------------------------------------------------------------------- HARRIS N.A., as Lender /s/ Patrick McDonnell By:   Patrick McDonnell Title:   Managing Director Signature Page to First Amendment -------------------------------------------------------------------------------- BANK OF AMERICA, N.A., as Lender /s/ Jonathan M. Phillips By:   Jonathan M. Phillips Title:   Vice President Signature Page to First Amendment -------------------------------------------------------------------------------- EXHIBIT A CONSENT AND REAFFIRMATION Each of the undersigned (“Guarantors”) hereby (i) acknowledges receipt of a copy of Amendment No. 1 to the Credit Agreement dated as of September 15, 2006 (the “First Amendment'); (ii) consents to the execution and delivery thereof by the Borrower; (iii) agrees to be bound thereby; (iv) affirms that nothing contained therein shall modify in any respect whatsoever its guaranty of the obligations of the Borrower to Agent and Lenders pursuant to the terms of that certain Guaranty (the “Guaranty”) dated as of October 27, 2005, as amended, restated, modified or supplemented prior to the date hereof, and (v) reaffirms that the Guaranty is and shall continue to remain in full force and effect. Although each of the Guarantors has been informed of the matters set forth herein and in the First Amendment and has acknowledged and agreed to same, such Guarantors understand that the Agent and Lenders have no obligation to inform any of the Guarantors of such matters in the future or to seek any of the Guarantors' acknowledgment or agreement to future amendments or waivers, and nothing herein shall create such a duty. This Consent and Reaffirmation shall be governed by and construed in accordance with the laws of the State of Illinois, without reference to principles of conflicts of law. [signature pages follow] -------------------------------------------------------------------------------- IN WITNESS WHEREOF, each of the undersigned has executed this Consent and Reaffirmation on and as of the date of such First Amendment.   MUFFLER CORPORATION OF AMERICA By:     Its:     MIDAS PROPERTIES INC. By:     Its:     MIDAS REALTY CORPORATION By:     Its:     COSMIC HOLDINGS LLC By:     Its:     MIDAS, INC. By:     Its:     Signature page to First Amendment -------------------------------------------------------------------------------- MIDAS ILLINOIS INC. By:     Its:     PROGRESSIVE AUTOMOTIVE SYSTEMS, INC. By:     Its:     MIDAS INTERNATIONAL CORPORATION, a Wyoming corporation By:     Its:     -------------------------------------------------------------------------------- Schedule 1 PRICING SCHEDULE   APPLICABLE MARGIN    LEVEL I STATUS     LEVEL II STATUS     LEVEL III STATUS     LEVEL IV STATUS     LEVEL V STATUS     LEVEL VI STATUS   Eurodollar Rate    0.75 %   1.00 %   1.25 %   1.50 %   1.75 %   2.00 % Floating Rote    0 %   0 %   0 %   0.0 %   0.25 %   0.50 % APPLICABLE MARGIN    LEVEL I STATUS     LEVEL II STATUS     LEVEL III STATUS     LEVEL IV STATUS     LEVEL V STATUS     LEVEL VI STATUS   LC Fee    0.75 %   1.00 %   1.25 %   1.50 %   1.75 %   2.00 % Commitment Fee    0.175 %   0.20 %   0.225 %   0.275 %   0.325 %   0.375 % For the purposes of this Schedule, the following terms have the following meanings, subject to the final paragraph of this Schedule: “Financials” means the annual or quarterly financial statements of Parent delivered pursuant to Section 6.1(a) or (b). “Level I Status” exists at any date if, as of the last day of the fiscal quarter of Parent referred to in the most recent Financials, the Leverage Ratio is less than 1.00 to 1.00. “Level II Status” exists at any date if, as of the last day of the fiscal quarter of Parent referred to in the most recent Financials, (i) the Borrower has not qualified for Level I Status and (ii) the Leverage Ratio is less than 1.50 to 1.00. “Level III Status” exists at any date if, as of the last day of the fiscal quarter of Parent referred to in the most recent Financials, (i) the Borrower has not qualified for Level I Status or Level II Status and (ii) the Leverage Ratio is less than 2.00 to 1.00. “Level IV Status” exists at any date if, as of the last day of the fiscal quarter of Parent referred to in the most recent Financials, (i) the Borrower has not qualified for Level I Status, Level II Status or Level III Status and (ii) the Leverage Ratio is less than 2.50 to 1.00. “Level V Status” exists at any date if, as of the last day of the fiscal quarter of Parent referred to in the most recent Financials, (i) the Borrower has not qualified for Level I Status, Level It Status, Level III Status or Level IV Status and (ii) either (A) the Subordinated Indebtedness Condition shall not exist and the Leverage Ratio is greater than or equal to 2.50 to 1.00 or (B) the Subordinated Indebtedness Condition shall exist and the Leverage Ratio is less than 3.00 to 1.00. “Level VI Status” exists at any date, if the Borrower has not qualified for Level I Status, Level II Status, Level III Status, Level IV or Level V Status and the Subordinated Indebtedness Condition shall exist. “Status” means Level I Status, Level II Status, Level III Status, Level IV Status, Level V or Level VI Status. The Applicable Margin and Applicable Fee Rate shall be determined in accordance with the foregoing table based on the Parent's Status as reflected in the then most recent Financials. Adjustments, if any, to the Applicable Margin or Applicable Fee Rate shall be effective five Business Days after the Agent has received the applicable Financials. If the Parent fails to deliver the Financials to the Agent at the time required pursuant to Section 6.1 then the Applicable Margin and Applicable Fee Rate shall be the highest Applicable Margin and Applicable Fee Rate set forth in the foregoing table until five days after such Financials are so delivered.

INVESTMENT AGREEMENT   INVESTMENT AGREEMENT (this "AGREEMENT"), dated as of May 30, 2006 by and between USCorp a Nevada corporation (the "Company"), and Dutchess Private Equities Fund, LP, a Delaware limited partnership (the "Investor").   WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Investor shall invest up to Ten Million dollars ($10,000,000) to purchase the Company's Common Stock, $.01 par value per share (the "Common Stock");   WHEREAS, such investments will be made in reliance upon the provisions of Section 4(2) under the Securities Act of 1933, as amended (the "1933 Act"), Rule 506 of Regulation D, and the rules and regulations promulgated thereunder, and/or upon such other exemption from the registration requirements of the 1933 Act as may be available with respect to any or all of the investments in Common Stock to be made hereunder; and   WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement substantially in the form attached hereto (the "Registration Rights Agreement") pursuant to which the Company has agreed to provide certain registration rights under the 1933 Act, and the rules and regulations promulgated thereunder, and applicable state securities laws.   NOW THEREFORE, in consideration of the foregoing recitals, which shall be considered an integral part of this Agreement, the covenants and agreements set forth hereafter, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Investor hereby agree as follows:   SECTION 1. DEFINITIONS.   As used in this Agreement, the following terms shall have the following meanings specified or indicated below, and such meanings shall be equally applicable to the singular and plural forms of such defined terms. “1933 Act” shall have the meaning set forth in the preamble of this agreement. “1934 Act” shall mean the Securities Exchange Act of 1934, as it may be amended. “Affiliate” shall have the meaning specified in Section 5(h), below. “Agreement” shall mean this Investment Agreement.     --------------------------------------------------------------------------------   “Best Bid” shall mean the highest posted bid price of the Common Stock during a given period of time. “By-laws” shall have the meaning specified in Section 4(C). “Certificate of Incorporation” shall have the meaning specified in Section 4(C). “Closing” shall have the meaning specified in Section 2(G). “Closing Date” shall mean no more than seven (7) Trading Days following the Put Notice Date. “Common Stock” shall have the meaning set forth in the preamble of this Agreement. “Control” or “Controls” shall have the meaning specified in Section 5(H). “Effective Date” shall mean the date the SEC declares effective under the 1933 Act the Registration Statement covering the Securities. “Environmental Laws” shall have the meaning specified in Section 4(M). “Equity Line Transaction Documents” shall mean this Agreement, the Registration Rights Agreement. “Execution Date” shall mean the date indicated in the preamble to this Agreement. “Indemnities” shall have the meaning specified in Section 11. “Indemnified Liabilities” shall have the meaning specified in Section 11.   “Ineffective Period” shall mean any period of time that the Registration Statement or any Supplemental Registration Statement (as defined in the Registration Rights Agreement between the parties) becomes ineffective or unavailable for use for the sale or resale, as applicable, of any or all of the Registrable Securities (as defined in the Registration Rights Agreement) for any reason (or in the event the prospectus under either of the above is not current and deliverable) during any time period required under the Registration Rights Agreement. “Investor” shall have the meaning indicated in the preamble of this Agreement. “Material Adverse Effect” shall have the meaning specified in Section 4(a).   2 --------------------------------------------------------------------------------   “Maximum Common Stock Issuance” shall have the meaning specified in Section 2(H). “Minimum Acceptable Price” with respect to any Put Notice Date shall mean seventy-five percent (75%) of the lowest closing bid prices for the ten (10) Trading Day period immediately preceding each Put Notice Date. “Open Market Adjustment Amount” shall have the meaning specified in Section 2(I). "Open Market Purchase" shall have the meaning specified in Section 2(I) “Open Market Share Purchase” shall have the meaning specified in Section 2(I). “Open Period” shall mean the period beginning on and including the Trading Day immediately following the Effective Date and ending on the earlier to occur of (i) the date which is thirty-six (36) months from the Effective Date; or (ii) termination of the Agreement in accordance with Section 9, below. “Pricing Period” shall mean the period beginning on the Put Notice Date and ending on and including the date that is five (5) Trading Days after such Put Notice Date. “Principal Market” shall mean the American Stock Exchange, Inc., the National Association of Securities Dealers, Inc. Over-the-Counter Bulletin Board, the NASDAQ National Market System or the NASDAQ SmallCap Market, whichever is the principal market on which the Common Stock is listed. “Prospectus” shall mean the prospectus, preliminary prospectus and supplemental prospectus used in connection with the Registration Statement. “Purchase Amount” shall mean the total amount being paid by the Investor on a particular Closing Date to purchase the Securities. “Purchase Price” shall mean ninety-five percent (95%) of the lowest closing Best Bid price of the Common Stock during the Pricing Period. “Put” shall have the meaning set forth in Section 2(B)(1) hereof. “Put Amount” shall have the meaning set forth in Section 2(B)(1) hereof. “Put Notice” shall mean a written notice sent to the Investor by the Company stating the Put Amount in U.S. dollars the Company intends to sell to the Investor pursuant to the terms of the Agreement and stating the current number of Shares issued and outstanding on such date.     3 --------------------------------------------------------------------------------   “Put Notice Date” shall mean the Trading Day, as set forth below, immediately following the day on which the Investor receives a Put Notice, however a Put Notice shall be deemed delivered on (a) the Trading Day it is received by facsimile or otherwise by the Investor if such notice is received prior to 9:00 am Eastern Time, or (b) the immediately succeeding Trading Day if it is received by facsimile or otherwise after 9:00 am Eastern Time on a Trading Day. No Put Notice may be deemed delivered on a day that is not a Trading Day. “Put Restriction” shall mean the days between the beginning of the Pricing Period and Closing Date. During this time, the Company shall not be entitled to deliver another Put Notice. “Put Shares Due” shall have the meaning specified in Section 2(I). “Registration Period” shall have the meaning specified in Section 5(C), below. “Registration Rights Agreement” shall have the meaning set forth in the recitals, above. “Registration Statement” means the registration statement of the Company filed under the 1933 Act covering the Common Stock issuable hereunder. “Related Party” shall have the meaning specified in Section 5(G). “Repurchase Adjustment Amounts” “Resolution” shall have the meaning specified in Section 8(E). “SEC” shall mean the U.S. Securities & Exchange Commission. “SEC Documents” shall have the meaning specified in Section 4(F). “Securities” shall mean the shares of Common Stock issued pursuant to the terms of the Agreement. “Shares” shall mean the shares of the Company’s Common Stock. “Subsidiaries” shall have the meaning specified in Section 4(A). “Trading Day” shall mean any day on which the Principal Market for the Common Stock is open for trading, from the hours of 9:30 am until 4:00 pm.   4 --------------------------------------------------------------------------------     SECTION 2. PURCHASE AND SALE OF COMMON STOCK.   (A) PURCHASE AND SALE OF COMMON STOCK. Subject to the terms and conditions set forth herein, the Company shall issue and sell to the Investor, and the Investor shall purchase from the Company, up to that number of Shares having an aggregate Purchase Price of Ten Million dollars ($10,000,000).   (B) DELIVERY OF PUT NOTICES.   (I) Subject to the terms and conditions of the Transaction Documents, and from time to time during the Open Period, the Company may, in its sole discretion, deliver a Put Notice to the Investor which states the dollar amount (designated in U.S. Dollars) (the "Put Amount"), which the Company intends to sell to the Investor on a Closing Date (the "Put"). The Put Notice shall be in the form attached hereto as Exhibit C and incorporated herein by reference. The amount that the Company shall be entitled to Put to the Investor (the "Put Amount") shall be equal to, at the Company's election, either: (a) Two Hundred percent (200%) of the average daily volume (U.S. market only) of the Common Stock for the Ten (10) Trading Days prior to the applicable Put Notice Date, multiplied by the average of the three (3) daily closing bid prices immediately preceding the Put Date, or (b) two hundred fifty thousand dollars ($250,000). During the Open Period, the Company shall not be entitled to submit a Put Notice until after the previous Closing has been completed. The Purchase Price for the Common Stock identified in the Put Notice shall be equal to ninety-five percent (95%) of the lowest closing Best Bid price of the Common Stock during the Pricing Period.   (C) COMPANY’S RIGHT TO WITHDRAW. The Company shall reserve the right, but not the obligation, to withdraw that portion of the Put that is below the Minimal Acceptable Price, by submitting to the Investor, in writing, a notice to cancel that portion of the Put. Any shares above the Minimal Acceptable price due to the Investor shall be carried out by the Company under the terms of this Agreement.   (D) INTENTIONALLY OMITTED   (E) CONDITIONS TO INVESTOR'S OBLIGATION TO PURCHASE SHARES. Notwithstanding anything to the contrary in this Agreement, the Company shall not be entitled to deliver a Put Notice and the Investor shall not be obligated to purchase any Shares at a Closing (as defined in Section 2(G)) unless each of the following conditions are satisfied:   (I) a Registration Statement shall have been declared effective and shall remain effective and available for the resale of all the Registrable Securities (as defined in the Registration Rights Agreement) at all times until the Closing with respect to the subject Put Notice;   (II) at all times during the period beginning on the related Put Notice Date and ending on and including the related Closing Date, the Common Stock shall have been listed on the Principal Market and shall not have been suspended from trading thereon for a period of two (2) consecutive Trading Days during the Open Period and the Company shall not have been notified of any pending or threatened proceeding or other action to suspend the trading of the Common Stock;     5 --------------------------------------------------------------------------------   (III) the Company has complied with its obligations and is otherwise not in breach of or in default under, this Agreement, the Registration Rights Agreement or any other agreement executed in connection herewith which has not been cured prior to delivery of the Investor’s Put Notice Date;   (IV) no injunction shall have been issued and remain in force, or action commenced by a governmental authority which has not been stayed or abandoned, prohibiting the purchase or the issuance of the Securities; and   (V) the issuance of the Securities will not violate any shareholder approval requirements of the Principal Market.   If any of the events described in clauses (I) through (V) above occurs during a Pricing Period, then the Investor shall have no obligation to purchase the Put Amount of Common Stock set forth in the applicable Put Notice.   (F) RESERVED   (G) MECHANICS OF PURCHASE OF SHARES BY INVESTOR. Subject to the satisfaction of the conditions set forth in Sections 2(E), 7 and 8, the closing of the purchase by the Investor of Shares (a "Closing") shall occur on the date which is no later than seven (7) Trading Days following the applicable Put Notice Date (each a "Closing Date"). Prior to each Closing Date, (I) the Company shall deliver to the Investor pursuant to this Agreement, certificates representing the Shares to be issued to the Investor on such date and registered in the name of the Investor; and (II) the Investor shall deliver to the Company the Purchase Price to be paid for such Shares, determined as set forth in Sections 2(B). In lieu of delivering physical certificates representing the Securities and provided that the Company's transfer agent then is participating in The Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Investor, the Company shall use all commercially reasonable efforts to cause its transfer agent to electronically transmit the Securities by crediting the account of the Investor's prime broker (as specified by the Investor within a reasonably in advance of the Investor's notice) with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system.   The Company understands that a delay in the issuance of Securities beyond the Closing Date could result in economic damage to the Investor. After the Effective Date, as compensation to the Investor for such loss, the Company agrees to make late payments to the Investor for late issuance of Securities (delivery of Securities after the applicable Closing Date) in accordance with the following schedule (where "No. of Days Late" is defined as the number of trading days beyond the Closing Date, with the Amounts being cumulative.):     6 --------------------------------------------------------------------------------       LATE PAYMENT FOR EACH   NO. OF DAYS LATE $10,000 WORTH OF COMMON STOCK     1 $100 2 $200 3 $300 4 $400 5 $500 6 $600 7 $700 8 $800 9 $900 10 $1,000 Over 10 $1,000 + $200 for each Business Day late beyond 10 days   The Company shall make any payments incurred under this Section in immediately available funds upon demand by the Investor. Nothing herein shall limit the Investor's right to pursue actual damages for the Company's failure to issue and deliver the Securities to the Investor, except that such late payments shall offset any such actual damages incurred by the Investor, and any Open Market Adjustment Amount, as set forth below.   (H) OVERALL LIMIT ON COMMON STOCK ISSUABLE. Notwithstanding anything contained herein to the contrary, if during the Open Period the Company becomes listed on an exchange that limits the number of shares of Common Stock that may be issued without shareholder approval, then the number of Shares issuable by the Company and purchasable by the Investor, shall not exceed that number of the shares of Common Stock that may be issuable without shareholder approval (the "Maximum Common Stock Issuance"). If such issuance of shares of Common Stock could cause a delisting on the Principal Market, then the Maximum Common Stock Issuance shall first be approved by the Company's shareholders in accordance with applicable law and the By-laws and Amended and Restated Certificate of Incorporation of the Company, if such issuance of shares of Common Stock could cause a delisting on the Principal Market. The parties understand and agree that the Company's failure to seek or obtain such shareholder approval shall in no way adversely affect the validity and due authorization of the issuance and sale of Securities or the Investor's obligation in accordance with the terms and conditions hereof to purchase a number of Shares in the aggregate up to the Maximum Common Stock Issuance limitation, and that such approval pertains only to the applicability of the Maximum Common Stock Issuance limitation provided in this Section 2(H).   (I) If, by the third (3rd) business day after the Closing Date, the Company fails to deliver any portion of the shares of the Put to the Investor (the "Put Shares Due") and the Investor purchases, in an open market transaction or otherwise, shares of Common Stock necessary to make delivery of shares which would have been delivered if the full amount of the shares to be delivered to the Investor by the Company (the "Open Market Share Purchase"), then the Company shall pay to the Investor, in addition to any other amounts due to Investor pursuant to the Put, and not in lieu thereof, the Open Market Adjustment Amount (as defined below). The "Open Market Adjustment Amount" is the amount equal to the excess, if any, of (x) the Investor's total purchase price (including brokerage commissions, if any) for the Open Market Share Purchase minus (y) the net proceeds (after brokerage commissions, if any) received by the Investor from the sale of the Put Shares Due. The Company shall pay the Open Market Adjustment Amount to the Investor in immediately available funds within five (5) business days of written demand by the Investor. By way of illustration and not in limitation of the foregoing, if the Holder purchases shares of Common Stock having a total purchase price (including brokerage commissions) of $11,000 to cover an Open Market Purchase with respect to shares of Common Stock it sold for net proceeds of $10,000, the Open Market Purchase Adjustment Amount which the Company will be required to pay to the Holder will be $1,000.     7 --------------------------------------------------------------------------------     SECTION 3. INVESTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS.   The Investor represents and warrants to the Company, and covenants, that:   (A) SOPHISTICATED INVESTOR. The Investor has, by reason of its business and financial experience, such knowledge, sophistication and experience in financial and business matters and in making investment decisions of this type that it is capable of (I) evaluating the merits and risks of an investment in the Securities and making an informed investment decision; (II) protecting its own interest; and (III) bearing the economic risk of such investment for an indefinite period of time.   (B) AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Investor and is a valid and binding agreement of the Investor enforceable against the Investor in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies.   (C) SECTION 9 OF THE 1934 ACT. During the term of this Agreement, the Investor will comply with the provisions of Section 9 of the 1934 Act, and the rules promulgated thereunder, with respect to transactions involving the Common Stock. The Investor agrees not to sell the Company's stock short, either directly or indirectly through its affiliates, principals or advisors, the Company's common stock during the term of this Agreement.   (D) ACCREDITED INVESTOR. Investor is an "Accredited Investor" as that term is defined in Rule 501(a) of Regulation D promulgated under the 1933 Act.     8 --------------------------------------------------------------------------------   (E) NO CONFLICTS. The execution, delivery and performance of the Transaction Documents by the Investor and the consummation by the Investor of the transactions contemplated hereby and thereby will not result in a violation of Partnership Agreement or other organizational documents of the Investor.   (F) OPPORTUNITY TO DISCUSS. The Investor has received all materials relating to the Company's business, finance and operations which it has requested. The Investor has had an opportunity to discuss the business, management and financial affairs of the Company with the Company's management.   (G) INVESTMENT PURPOSES. The Investor is purchasing the Securities for its own account for investment purposes and not with a view towards distribution and agrees to resell or otherwise dispose of the Securities solely in accordance with the registration provisions of the 1933 Act (or pursuant to an exemption from such registration provisions).   (H) NO REGISTRATION AS A DEALER. The Investor is not and will not be required to be registered as a "dealer" under the 1934 Act, either as a result of its execution and performance of its obligations under this Agreement or otherwise.   (I) GOOD STANDING. The Investor is a Limited Partnership, duly organized, validly existing and in good standing in the State of Delaware.   (J) TAX LIABILITIES. The Investor understands that it is liable for its own tax liabilities.   (K) REGULATION M. The Investor will comply with Regulation M under the 1934 Act, if applicable.   SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.   Except as set forth in the Schedules attached hereto, or as disclosed on the Company's SEC Documents, the Company represents and warrants to the Investor that:   (A) ORGANIZATION AND QUALIFICATION. The Company is a corporation duly organized and validly existing in good standing under the laws of the State of Nevada, and has the requisite corporate power and authorization to own its properties and to carry on its business as now being conducted. Both the Company and the companies it owns or controls (“Subsidiaries”) are duly qualified to do business and are in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect" means any material adverse effect on the business, properties, assets, operations, results of operations, financial condition or prospects of the Company and its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements and instruments to be entered into in connection herewith, or on the authority or ability of the Company to perform its obligations under the Transaction Documents (as defined in Section 1 and 4(B), below).     9 --------------------------------------------------------------------------------     (B) AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS.   (I) The Company has the requisite corporate power and authority to enter into and perform this Agreement, the Registration Rights Agreement, and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the "Equity Line Transaction Documents"), and to issue the Securities in accordance with the terms hereof and thereof.   (II) The execution and delivery of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby, including without limitation the reservation for issuance and the issuance of the Securities pursuant to this Agreement, have been duly and validly authorized by the Company's Board of Directors and no further consent or authorization is required by the Company, its Board of Directors, or its shareholders.   (III) The Transaction Documents have been duly and validly executed and delivered by the Company.   (IV) The Transaction Documents constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and remedies.   (C) CAPITALIZATION. As of the date hereof, the authorized capital stock of the Company consists of 550,000,000 shares of Class A Common Stock, $.01 par value per share, of which as of December 31, 2005, 33,756,461 shares are issued and outstanding, with an additional 835,000 shares issued during Q1 of 2006; 10,000,000 shares of Series A Preferred Stock authorized with no shares issued or outstanding, 50,000,000 shares of Series B Preferred Stock with 155,000 shared issued or outstanding and as of December 31, 2005, 155,000 outstanding Common Stock warrants. Further, the Company has authorized 250,000,000 shares of non-voting Class B Common Shares, $0.001 par value per share, of which 5,000,000 are issued and outstanding. All of such outstanding shares have been, or upon issuance will be, validly issued and are fully paid and nonassessable.   Except as disclosed in the Company's publicly available filings with the SEC:   (I) no shares of the Company's capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company; (II) there are no outstanding debt securities; (III) there are no outstanding shares of capital stock, options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries; (IV) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except the Registration Rights Agreement); (V) there are no outstanding securities of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (VI) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities as described in this Agreement; (VII) the Company does not have any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement; and (VIII) there is no dispute as to the classification of any shares of the Company's capital stock.   The Company has furnished to the Investor, or the Investor has had access through EDGAR to, true and correct copies of the Company's Amended and Restated Certificate of Incorporation, as in effect on the date hereof (the "Certificate of Incorporation"), and the Company's By-laws, as in effect on the date hereof (the "By-laws"), and the terms of all securities convertible into or exercisable for Common Stock and the material rights of the holders thereof in respect thereto.   (D) ISSUANCE OF SHARES. The Company has reserved ________ Shares for issuance pursuant to this Agreement, which have been duly authorized and reserved those Shares for issuance (subject to adjustment pursuant to the Company's covenant set forth in Section 5(F) below) pursuant to this Agreement. Upon issuance in accordance with this Agreement, the Securities will be validly issued, fully paid for and non-assessable and free from all taxes, liens and charges with respect to the issue thereof. In the event the Company cannot register a sufficient number of Shares for issuance pursuant to this Agreement, the Company will use its best efforts to authorize and reserve for issuance the number of Shares required for the Company to perform its obligations hereunder as soon as reasonably practicable.     10 --------------------------------------------------------------------------------   (E) NO CONFLICTS. The execution, delivery and performance of the Equity Line Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (I) result in a violation of the Certificate of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the By-laws; or (II) conflict with, or constitute a material default (or an event which with notice or lapse of time or both would become a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, contract, indenture mortgage, indebtedness or instrument to which the Company or any of its Subsidiaries is a party, or to the Company's knowledge result in a violation of any law, rule, regulation, order, judgment or decree (including United States federal and state securities laws and regulations and the rules and regulations of the Principal Market or principal securities exchange or trading market on which the Common Stock is traded or listed) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected. Except as disclosed in Schedule 4(e), neither the Company nor its Subsidiaries is in violation of any term of, or in default under, the Certificate of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the By-laws or their organizational charter or by-laws, respectively, or any contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its Subsidiaries, except for possible conflicts, defaults, terminations, amendments, accelerations, cancellations and violations that would not individually or in the aggregate have or constitute a Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted, and shall not be conducted, in violation of any law, statute, ordinance, rule, order or regulation of any governmental authority or agency, regulatory or self-regulatory agency, or court, except for possible violations the sanctions for which either individually or in the aggregate would not have a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the 1933 Act or any securities laws of any states, to the Company's knowledge, the Company is not required to obtain any consent, authorization, permit or order of, or make any filing or registration (except the filing of a registration statement as outlined in the Registration Rights Agreement between the Parties) with, any court, governmental authority or agency, regulatory or self-regulatory agency or other third party in order for it to execute, deliver or perform any of its obligations under, or contemplated by, the Transaction Documents in accordance with the terms hereof or thereof. All consents, authorizations, permits, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof and are in full force and effect as of the date hereof. Except as disclosed in Schedule 4(e), the Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The Company is not, and will not be, in violation of the listing requirements of the Principal Market as in effect on the date hereof and on each of the Closing Dates and is not aware of any facts which would reasonably lead to delisting of the Common Stock by the Principal Market in the foreseeable future.     11 --------------------------------------------------------------------------------   (F) SEC DOCUMENTS; FINANCIAL STATEMENTS. As of the date hereof, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the "SEC Documents"). The Company has delivered to the Investor or its representatives, or they have had access through EDGAR to, true and complete copies of the SEC Documents. As of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted 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. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, by a firm that is a member of the Public Companies Accounting Oversight Board ("PCAOB") consistently applied, during the periods involved (except (I) as may be otherwise indicated in such financial statements or the notes thereto, or (II) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other written information provided by or on behalf of the Company to the Investor which is not included in the SEC Documents, including, without limitation, information referred to in Section 4(D) of this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstance under which they are or were made, not misleading. Neither the Company nor any of its Subsidiaries or any of their officers, directors, employees or agents have provided the Investor with any material, nonpublic information which was not publicly disclosed prior to the date hereof and any material, nonpublic information provided to the Investor by the Company or its Subsidiaries or any of their officers, directors, employees or agents prior to any Closing Date shall be publicly disclosed by the Company prior to such Closing Date.   (G) ABSENCE OF CERTAIN CHANGES. Except as otherwise set forth in the SEC Documents, the Company does not intend to change the business operations of the Company in any material way. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy law nor does the Company or its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings.       12 --------------------------------------------------------------------------------   (H) ABSENCE OF LITIGATION AND/OR REGULATORY PROCEEDINGS. Except as set forth in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of Company or any of its Subsidiaries, threatened against or affecting the Company, the Common Stock or any of the Company's Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or directors in their capacities as such, in which an adverse decision could have a Material Adverse Effect.   (I) ACKNOWLEDGMENT REGARDING INVESTOR'S PURCHASE OF SHARES. The Company acknowledges and agrees that the Investor is acting solely in the capacity of an arm's length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Equity Line Transaction Documents and the transactions contemplated hereby and thereby and any advice given by the Investor or any of its respective representatives or agents in connection with the Equity Line Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Investor's purchase of the Securities, and is not being relied on by the Company. The Company further represents to the Investor that the Company's decision to enter into the Equity Line Transaction Documents has been based solely on the independent evaluation by the Company and its representatives.   (J) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. Except as set forth in the SEC Documents, as of the date hereof, no event, liability, development or circumstance has occurred or exists, or to the Company's knowledge is contemplated to occur, with respect to the Company or its Subsidiaries or their respective business, properties, assets, prospects, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws on a registration statement filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not been publicly announced.   (K) EMPLOYEE RELATIONS. Neither the Company nor any of its Subsidiaries is involved in any union labor dispute nor, to the knowledge of the Company or any of its Subsidiaries, is any such dispute threatened. Neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that relations with their employees are good. No executive officer (as defined in Rule 501(f) of the 1933 Act) has notified the Company that such officer intends to leave the Company's employ or otherwise terminate such officer's employment with the Company.     13 --------------------------------------------------------------------------------   (L) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. Except as set forth in the SEC Documents, none of the Company's trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights necessary to conduct its business as now or as proposed to be conducted have expired or terminated, or are expected to expire or terminate within two (2) years from the date of this Agreement. The Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and, except as set forth in the SEC Documents, there is no claim, action or proceeding being made or brought against, or to the Company's knowledge, being threatened against, the Company or its Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement; and the Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and its Subsidiaries have taken commercially reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties.   (M) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (I) are, to the knowledge of the management and directors of the Company and its Subsidiaries, in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"); (II) have, to the knowledge of the management and directors of the Company, received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (III) are in compliance, to the knowledge of the management and directors of the Company, with all terms and conditions of any such permit, license or approval where, in each of the three (3) foregoing cases, the failure to so comply would have, individually or in the aggregate, a Material Adverse Effect.   (N) TITLE. The Company and its Subsidiaries have good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in the SEC Documents or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of its Subsidiaries. Any real property and facilities held under lease by the Company or any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries.     14 --------------------------------------------------------------------------------   (O) INSURANCE. Each of the Company's Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company reasonably believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any of its Subsidiaries has been refused any insurance coverage sought or applied for and neither the Company nor its Subsidiaries 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 at a cost that would not have a Material Adverse Effect.   (P) REGULATORY PERMITS. The Company and its Subsidiaries have in full force and effect all certificates, approvals, authorizations and permits from the appropriate federal, state, local or foreign regulatory authorities and comparable foreign regulatory agencies, necessary to own, lease or operate their respective properties and assets and conduct their respective businesses, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, approval, authorization or permit, except for such certificates, approvals, authorizations or permits which if not obtained, or such revocations or modifications which, would not have a Material Adverse Effect.   (Q) INTERNAL ACCOUNTING CONTROLS. The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (I) transactions are executed in accordance with management's general or specific authorizations; (II) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles by a firm with membership to the PCAOB and to maintain asset accountability; (III) access to assets is permitted only in accordance with management's general or specific authorization; and (IV) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.   (R) NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company's officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company's officers has or is expected to have a Material Adverse Effect.     15 --------------------------------------------------------------------------------     (S) TAX STATUS. The Company and each of its Subsidiaries has made or filed all United States federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.   (T) CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents filed at least ten (10) days prior to the date hereof and except for arm's length transactions pursuant to which the Company makes payments in the ordinary course of business upon terms no less favorable than the Company could obtain from disinterested third parties and other than the grant of stock options disclosed in the SEC Documents, none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.   (U) DILUTIVE EFFECT. The Company understands and acknowledges that the number of shares of Common Stock issuable upon purchases pursuant to this Agreement will increase in certain circumstances including, but not necessarily limited to, the circumstance wherein the trading price of the Common Stock declines during the period between the Effective Date and the end of the Open Period. The Company's executive officers and directors have studied and fully understand the nature of the transactions contemplated by this Agreement and recognize that they have a potential dilutive effect on the shareholders of the Company. The Board of Directors of the Company has concluded, in its good faith business judgment, and with full understanding of the implications, that such issuance is in the best interests of the Company. The Company specifically acknowledges that, subject to such limitations as are expressly set forth in the Equity Line Transaction Documents, its obligation to issue shares of Common Stock upon purchases pursuant to this Agreement is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.     16 --------------------------------------------------------------------------------   (V) LOCK-UP. The Company shall cause its officers, insiders, directors, and affiliates or other related parties under control of the Company, to refrain from selling Common Stock during each Pricing Period.   (W) NO GENERAL SOLICITATION. Neither the Company, nor any of its affiliates, nor any person acting on its behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Common Stock to be offered as set forth in this Agreement.   (X) NO BROKERS, FINDERS OR FINANCIAL ADVISORY FEES OR COMMISSIONS. No brokers, finders or financial advisory fees or commissions will be payable by the Company, it's agents or Subsidiaries, with respect to the transactions contemplated by this Agreement, except as otherwise disclosed in this Agreement.   SECTION 5. COVENANTS OF THE COMPANY   (A) BEST EFFORTS. The Company shall use all commercially reasonable efforts to timely satisfy each of the conditions set forth in Section 7 of this Agreement.   (B) BLUE SKY. The Company shall, at its sole cost and expense, on or before each of the Closing Dates, take such action as the Company shall reasonably determine is necessary to qualify the Securities for, or obtain exemption for the Securities for, sale to the Investor at each of the Closings pursuant to this Agreement under applicable securities or "Blue Sky" laws of such states of the United States, as reasonably specified by the Investor, and shall provide evidence of any such action so taken to the Investor on or prior to the Closing Date.   (C) REPORTING STATUS. Until one of the following occurs, the Company shall file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status, or take an action or fail to take any action, which would terminate its status as a reporting company under the 1934 Act: (i) this Agreement terminates pursuant to Section 9 and the Investor has the right to sell all of the Securities without restrictions pursuant to Rule 144(k) promulgated under the 1933 Act, or such other exemption (ii) the date on which the Investor has sold all the Securities and this Agreement has been terminated pursuant to Section 9.   (D) USE OF PROCEEDS. The Company will use the proceeds from the sale of the Shares (excluding amounts paid by the Company for fees as set forth in the Transaction Documents) for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other purposes that the Board of Directors, in its good faith deem to be in the best interest of the Company.       17 --------------------------------------------------------------------------------   (E) FINANCIAL INFORMATION. During the Registration Period, the Company agrees to make available to the Investor via EDGAR or other electronic means the following documents and information on the forms set forth: (I) within five (5) Trading Days after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-KSB, its Quarterly Reports on Form 10-QSB, any Current Reports on Form 8-K and any Registration Statements or amendments filed pursuant to the 1933 Act; (II) copies of any notices and other information made available or given to the shareholders of the Company generally, contemporaneously with the making available or giving thereof to the shareholders; and (III) within two (2) calendar days of filing or delivery thereof, copies of all documents filed with, and all correspondence sent to, the Principal Market, any securities exchange or market, or the National Association of Securities Dealers, Inc., unless such information is material nonpublic information.     (F) RESERVATION OF SHARES. The Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, a sufficient number of shares of Common Stock to provide for the issuance of the Securities to the Investor as required hereunder. In the event that the Company determines that it does not have a sufficient number of authorized shares of Common Stock to reserve and keep available for issuance as described in this Section 5(F), the Company shall use all commercially reasonable efforts to increase the number of authorized shares of Common Stock by seeking shareholder approval for the authorization of such additional shares.     (G) LISTING. The Company shall promptly secure and maintain the listing of all of the Registrable Securities (as defined in the Registration Rights Agreement) on the Principal Market and each other national securities exchange and automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and shall maintain, such listing of all Registrable Securities from time to time issuable under the terms of the Equity Line Transaction Documents. Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal Market (excluding suspensions of not more than one (1) trading day resulting from business announcements by the Company). The Company shall promptly provide to the Investor copies of any notices it receives from the Principal Market regarding the continued eligibility of the Common Stock for listing on such automated quotation system or securities exchange. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 5(G).     (H) TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall cause each of its Subsidiaries not to, enter into, amend, modify or supplement, or permit any Subsidiary to enter into, amend, modify or supplement, any agreement, transaction, commitment or arrangement with any of its or any Subsidiary's officers, directors, persons who were officers or directors at any time during the previous two (2) years, shareholders who beneficially own 5% or more of the Common Stock, or Affiliates or with any individual related by blood, marriage or adoption to any such individual or with any entity in which any such entity or individual owns a 5% or more beneficial interest (each a "Related Party"), except for (I) customary employment arrangements and benefit programs on reasonable terms, (II) any agreement, transaction, commitment or arrangement on an arms-length basis on terms no less favorable than terms which would have been obtainable from a disinterested third party other than such Related Party, or (III) any agreement, transaction, commitment or arrangement which is approved by a majority of the disinterested directors of the Company. For purposes hereof, any director who is also an officer of the Company or any Subsidiary of the Company shall not be a disinterested director with respect to any such agreement, transaction, commitment or arrangement. "Affiliate" for purposes hereof means, with respect to any person or entity, another person or entity that, directly or indirectly, (I) has a 5% or more equity interest in that person or entity, (II) has 5% or more common ownership with that person or entity, (III) controls that person or entity, or (IV) is under common control with that person or entity. "Control" or "Controls" for purposes hereof means that a person or entity has the power, directly or indirectly, to conduct or govern the policies of another person or entity.     18 --------------------------------------------------------------------------------     (I) FILING OF FORM 8-K. On or before the date which is four (4) Trading Days after the Execution Date, the Company shall file a Current Report on Form 8-K with the SEC describing the terms of the transaction contemplated by the Equity Line Transaction Documents in the form required by the 1934 Act, if such filing is required.     (J) CORPORATE EXISTENCE. The Company shall use all commercially reasonable efforts to preserve and continue the corporate existence of the Company.     (K) NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE A PUT. The Company shall promptly notify the Investor upon the occurrence of any of the following events in respect of a Registration Statement or related prospectus in respect of an offering of the Securities: (I) receipt of any request for additional information by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to the Registration Statement or related prospectus; (II) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose; (III) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Securities for sale in any jurisdiction or the initiation or notice of any proceeding for such purpose; (IV) the happening of any event that makes any statement made in such Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of a Registration Statement, 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 not misleading, and that in the case of the related prospectus, 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 the light of the circumstances under which they were made, not misleading; and (V) the Company's reasonable determination that a post-effective amendment to the Registration Statement would be appropriate, and the Company shall promptly make available to Investor any such supplement or amendment to the related prospectus. The Company shall not deliver to Investor any Put Notice during the continuation of any of the foregoing events in this Section 5(K).   (L) REIMBURSEMENT. If (I) the Investor becomes involved in any capacity in any action, proceeding or investigation brought by any shareholder of the Company, in connection with or as a result of the consummation of the transactions contemplated by the Equity Line Transaction Documents, or if the Investor is impleaded in any such action, proceeding or investigation by any person (other than as a result of a breach of the Investor’s representations and warranties set forth in this Agreement); or (II) the Investor becomes involved in any capacity in any action, proceeding or investigation brought by the SEC against or involving the Company or in connection with or as a result of the consummation of the transactions contemplated by the Equity Line Transaction Documents (other than as a result of a breach of the Investor’s representations and warranties set forth in this Agreement), or if this Investor is impleaded in any such action, proceeding or investigation by any person, then in any such case, the Company will reimburse the Investor for its reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith, as such expenses are incurred. In addition, other than with respect to any matter in which the Investor is a named party, the Company will pay to the Investor the charges, as reasonably determined by the Investor, for the time of any officers or employees of the Investor devoted to appearing and preparing to appear as witnesses, assisting in preparation for hearings, trials or pretrial matters, or otherwise with respect to inquiries, hearing, trials, and other proceedings relating to the subject matter of this Agreement. The reimbursement obligations of the Company under this section shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliates of the Investor that are actually named in such action, proceeding or investigation, and partners, directors, agents, employees, attorneys, accountants, auditors and controlling persons (if any), as the case may be, of Investor and any such affiliate, and shall be binding upon and inure to the benefit of any successors of the Company, the Investor and any such affiliate and any such person.   19 --------------------------------------------------------------------------------   (M) TRANSFER AGENT. Upon effectiveness of the Registration Statement, and for so long as the Registration Statement is effective, the Company shall deliver instructions to its transfer agent to issue Shares to the Investor that are covered for resale by the Registration Statement free of restrictive legends.   SECTION 6. INTENTIONALLY OMITTED    SECTION 7. CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL.   The obligation hereunder of the Company to issue and sell the Securities to the Investor is further subject to the satisfaction, at or before each Closing Date, of each of the following conditions set forth below. These conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion.     (A) The Investor shall have executed this Agreement and the Registration Rights Agreement and delivered the same to the Company.   (B) The Investor shall have delivered to the Company the Purchase Price for the Securities being purchased by the Investor between the end of the Pricing Period and the Closing Date via a Put Settlement Sheet (hereto attached as Exhibit D). After receipt of confirmation of delivery of such Securities to the Investor, the Investor, by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company will disburse the funds constituting the Purchase Amount.   (C) No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.   SECTION 8. FURTHER CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE.   The obligation of the Investor hereunder to purchase Shares is subject to the satisfaction, on or before each Closing Date, of each of the following conditions set forth below.   (A) The Company shall have executed the Equity Line Transaction Documents and delivered the same to the Investor.   (B) The Common Stock shall be authorized for quotation on the Principal Market and trading in the Common Stock shall not have been suspended by the Principal Market or the SEC, at any time beginning on the date hereof and through and including the respective Closing Date (excluding suspensions of not more than one (1) Trading Day resulting from business announcements by the Company, provided that such suspensions occur prior to the Company's delivery of the Put Notice related to such Closing).     20 --------------------------------------------------------------------------------   (C) The representations and warranties of the Company shall be true and correct as of the date when made and as of the applicable Closing Date as though made at that time (except for (l) representations and warranties that speak as of a specific date and (II) with respect to the representations made in Section 4(g), (h) and (j) and the third sentence of Section 4(k) hereof, events which occur on or after the date of this Agreement and are disclosed in SEC filings made by the Company at least ten (10) Trading Days prior to the Applicable Put Notice Date) and the Company shall have performed, satisfied and complied with the covenants, agreements and conditions required by the Equity Line Transaction Documents to be performed, satisfied or complied with by the Company on or before such Closing Date. The Investor may request an update as of such Closing Date regarding the representation contained in Section 4(C) above.   (D) The Company shall have executed and delivered to the Investor the certificates representing, or have executed electronic book-entry transfer of, the Securities (in such denominations as the Investor shall request) being purchased by the Investor at such Closing.   (E) The Board of Directors of the Company shall have adopted resolutions consistent with Section 4(B)(II) above (the "Resolutions") and such Resolutions shall not have been amended or rescinded prior to such Closing Date.   (F) Reserved   (G) No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.   (H) The Registration Statement shall be effective on each Closing Date and no stop order suspending the effectiveness of the Registration statement shall be in effect or to the Company's knowledge shall be pending or threatened. Furthermore, on each Closing Date (I) neither the Company nor the Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to such Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of such Registration Statement, either temporarily or permanently, or intends or has threatened to do so (unless the SEC's concerns have been addressed and Investor is reasonably satisfied that the SEC no longer is considering or intends to take such action), and (II) no other suspension of the use or withdrawal of the effectiveness of such Registration Statement or related prospectus shall exist.   (I) At the time of each Closing, the Registration Statement (including information or documents incorporated by reference therein) and any amendments or supplements thereto shall 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 not misleading or which would require public disclosure or an update supplement to the prospectus.   21 --------------------------------------------------------------------------------   (J) If applicable, the shareholders of the Company shall have approved the issuance of any Shares in excess of the Maximum Common Stock Issuance in accordance with Section 2(H) or the Company shall have obtained appropriate approval pursuant to the requirements of Nevada law and the Company’s Articles of Incorporation and By-laws. (K) The conditions to such Closing set forth in Section 2(E) shall have been satisfied on or before such Closing Date. (L) The Company shall have certified to the Investor the number of Shares of Common Stock outstanding when a Put Notice is given to the Investor. The Company's delivery of a Put Notice to the Investor constitutes the Company's certification of the existence of the necessary number of shares of Common Stock reserved for issuance.   SECTION 9. TERMINATION. This Agreement shall terminate upon any of the following events:     (I) when the Investor has purchased an aggregate of Ten Million dollars ($10,000,000) in the Common Stock of the Company pursuant to this Agreement; or,     (II) on the date which is thirty-six (36) months after the Effective Date.   SECTION 10. SUSPENSION This Agreement shall be suspended upon any of the following events, and shall remain suspended until such event is rectified: (I) the trading of the Common Stock is suspended by the SEC, the Principal Market or the NASD for a period of two (2) consecutive Trading Days during the Open Period; or, (II) The Common Stock ceases to be registered under the 1934 Act or listed or traded on the Principal Market. Immediately upon the occurrence of one of the above-described events, the Company shall send written notice of such event to the Investor.     22 --------------------------------------------------------------------------------   SECTION 11. INDEMNIFICATION.   In consideration of the parties mutual obligations set forth in the Transaction Documents, each of the parties (in such capacity, an "Indemnitor") shall defend, protect, indemnify and hold harmless the other and all of the other party's shareholders, officers, directors, employees, counsel, and direct or indirect investors and any of the foregoing person's agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "Indemnitees") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and reasonable expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or arising out of, or relating to (I) any misrepresentation or breach of any representation or warranty made by the Indemnitor or any other certificate, instrument or document contemplated hereby or thereby; (II) any breach of any covenant, agreement or obligation of the Indemnitor contained in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby; or (III) any cause of action, suit or claim brought or made against such Indemnitee by a third party and arising out of or resulting from the execution, delivery, performance or enforcement of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, except insofar as any such misrepresentation, breach or any untrue statement, alleged untrue statement, omission or alleged omission is made in reliance upon and in conformity with information furnished to Indemnitor which is specifically intended for use in the preparation of any such Registration Statement, preliminary prospectus, prospectus or amendments to the prospectus. To the extent that the foregoing undertaking by the Indemnitor may be unenforceable for any reason, the Indemnitor shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. The indemnity provisions contained herein shall be in addition to any cause of action or similar rights Indemnitor may have, and any liabilities the Indemnitor or the Indemnitees may be subject to.   SECTION 12. GOVERNING LAW; DISPUTES SUBMITTED TO ARBITRATION.   All disputes arising under this agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts, without regard to principles of conflict of laws. The parties to this agreement will submit all disputes arising under this agreement to arbitration in Boston, Massachusetts before a single arbitrator of the American Arbitration Association (“AAA”). The arbitrator shall be selected by application of the rules of the AAA, or by mutual agreement of the parties, except that such arbitrator shall be an attorney admitted to practice law in the Commonwealth of Massachusetts. No party to this agreement will challenge the jurisdiction or venue provisions as provided in this section. No party to this agreement will challenge the jurisdiction or venue provisions as provided in this section. Nothing contained herein shall prevent the party from obtaining an injunction.     23 --------------------------------------------------------------------------------   (B) LEGAL FEES; AND MISCELLANEOUS FEES. Except as otherwise set forth in the Transaction Documents, each party shall pay the fees and expenses of its advisers, counsel, the 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. Any attorneys' fees and expenses incurred by either the Company or the Investor in connection with the preparation, negotiation, execution and delivery of any amendments to this Agreement or relating to the enforcement of the rights of any party, after the occurrence of any breach of the terms of this Agreement by another party or any default by another party in respect of the transactions contemplated hereunder, shall be paid on demand by the party which breached the Agreement and/or defaulted, as the case may be. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of any Securities.   (C) COUNTERPARTS. This Agreement may be executed in two or more identical counterparts, all of which 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; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original signature.   (D) HEADINGS; SINGULAR/PLURAL. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Whenever required by the context of this Agreement, the singular shall include the plural and masculine shall include the feminine.   (E) SEVERABILITY. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.   (F) ENTIRE AGREEMENT; AMENDMENTS. This Agreement is the FINAL AGREEMENT between the Company and the Investor with respect to the terms and conditions set forth herein, and, the terms of this Agreement may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the Parties. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Investor, and no provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. The execution and delivery of the Equity Line Transaction Documents shall not alter the force and effect of any other agreements between the Parties, and the obligations under those agreements.   (G) NOTICES. Any notices or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (I) upon receipt, when delivered personally; (II) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (III) one (1) day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:     24 --------------------------------------------------------------------------------   If to the Company: USCorp 4535 W. Sahara Ave.,, Suite 204 Las Vegas, NV 89102 Telephone: (702) 933-4034 Facsimile: (702) 933-4035 If to the Investor: Dutchess Private Equities Fund, LP, 50 Commonwealth Avenue, Suite 2 Boston, MA 02116 Telephone: 617-301-4700 Facsimile: 617-249-0947   Each party shall provide five (5) days prior written notice to the other party of any change in address or facsimile number.   (H) NO ASSIGNMENT. This Agreement may not be assigned.   (I) NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of the parties hereto and is not for the benefit of, nor may any provision hereof be enforced by, any other person, except that the Company acknowledges that the rights of the Investor may be enforced by its general partner.   (J) SURVIVAL. The representations and warranties of the Company and the Investor contained in Sections 2 and 3, the agreements and covenants set forth in Sections 4 and 5, and the indemnification provisions set forth in Section 11, shall survive each of the Closings and the termination of this Agreement.   (K) PUBLICITY. The Company and the Investor shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and no party shall issue any such press release or otherwise make any such public statement without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other party with prior notice of such public statement. Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Investor without the prior consent of the Investor, except to the extent required by law. The Investor acknowledges that this Agreement and all or part of the Transaction Documents may be deemed to be "material contracts" as that term is defined by Item 601(b)(10) of Regulation S-B, and that the Company may therefore be required to file such documents as exhibits to reports or registration statements filed under the 1933 Act or the 1934 Act. The Investor further agrees that the status of such documents and materials as material contracts shall be determined solely by the Company, in consultation with its counsel.     25 --------------------------------------------------------------------------------   (L) FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.   (M) PLACEMENT AGENT. The Company agrees to pay _____________, a registered broker dealer ____ percent (__%) of the Put Amount on each draw toward the fee. The Investor shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other persons or entities for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents. The Company shall indemnify and hold harmless the Investor, their employees, officers, directors, agents, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney's fees) and expenses incurred in respect of any such claimed or existing fees, as such fees and expenses are incurred.   (N) NO STRICT CONSTRUCTION. 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, as the parties mutually agree that each has had a full and fair opportunity to review this Agreement and seek the advice of counsel on it.   (O) REMEDIES. The Investor shall have all rights and remedies set forth in this Agreement and the Registration Rights Agreement and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which the Investor has by law. Any person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any default or breach of any provision of this Agreement, including the recovery of reasonable attorneys fees and costs, and to exercise all other rights granted by law.     26 --------------------------------------------------------------------------------     (P) PAYMENT SET ASIDE. To the extent that the Company makes a payment or payments to the Investor hereunder or under the Registration Rights Agreement or the Investor 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, 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.   (Q) PRICING OF COMMON STOCK. For purposes of this Agreement, the bid price of the Common Stock shall be as reported on Bloomberg.   SECTION 13. NON-DISCLOSURE OF NON-PUBLIC INFORMATION.   (a) The Company shall not disclose non-public information to the Investor, its advisors, or its representatives.     (b) Nothing herein shall require the Company to disclose non-public information to the Investor or its advisors or representatives, and the Company represents that it does not disseminate non-public information to any investors who purchase stock in the Company in a public offering, to money managers or to securities analysts, provided, however, that notwithstanding anything herein to the contrary, the Company will, as hereinabove provided, immediately notify the advisors and representatives of the Investor and, if any, underwriters, of any event or the existence of any circumstance (without any obligation to disclose the specific event or circumstance) of which it becomes aware, constituting non-public information (whether or not requested of the Company specifically or generally during the course of due diligence by such persons or entities), which, if not disclosed in the prospectus included in the Registration Statement would cause such prospectus to include a material misstatement or to omit a material fact required to be stated therein in order to make the statements, therein, in light of the circumstances in which they were made, not misleading. Nothing contained in this Section 13 shall be construed to mean that such persons or entities other than the Investor (without the written consent of the Investor prior to disclosure of such information) may not obtain non-public information in the course of conducting due diligence in accordance with the terms of this Agreement and nothing herein shall prevent any such persons or entities from notifying the Company of their opinion that based on such due diligence by such persons or entities, that the Registration Statement contains an untrue statement of material fact or omits a material fact required to be stated in the Registration Statement or necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading.     27 --------------------------------------------------------------------------------       SIGNATURE PAGE OF INVESTMENT AGREEMENT   Your signature on this Signature Page evidences your agreement to be bound by the terms and conditions of the Investment Agreement and the Registration Rights Agreement as of the date first written above.     The undersigned signatory hereby certifies that he has read and understands the Investment Agreement, and the representations made by the undersigned in this Investment Agreement are true and accurate, and agrees to be bound by its terms.   DUTCHESS PRIVATE EQUITIES FUND, L.P. BY ITS GENERAL PARTNER, DUTCHESS CAPITAL MANAGEMENT, LLC   By:/s/ Douglas H. Leighton    Douglas H. Leighton, Managing Member   USCorp   By:/s/ Robert Dultz    Robert Dultz, Chief Executive Officer       28 --------------------------------------------------------------------------------        LIST OF EXHIBITS   EXHIBIT A   Registration Rights Agreement EXHIBIT B   Opinion of Company's Counsel EXHIBIT C   Put Notice EXHIBIT D   Put Settlement Sheet       29 --------------------------------------------------------------------------------     LIST OF SCHEDULES   Schedule 4(a) Subsidiaries           30 --------------------------------------------------------------------------------       EXHIBIT A   31 --------------------------------------------------------------------------------     EXHIBIT B FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT   Date: __________   [TRANSFER AGENT] Re: USCorp. Ladies and Gentlemen: We are counsel to USCorp, a Nevada corporation (the "Company"), and have represented the Company in connection with that certain Investment Agreement (the "Investment Agreement") entered into by and among the Company and _________________________ (the "Holder") pursuant to which the Company has agreed to issue to the Holder shares of the Company's common stock, $.01 par value per share (the "Common Stock") on the terms and conditions set forth in the Investment Agreement. Pursuant to the Investment Agreement, the Company also has entered into a Registration Rights Agreement with the Holder (the "Registration Rights Agreement") pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement), including the shares of Common Stock issued or issuable under the Investment Agreement under the Securities Act of 1933, as amended (the "1933 Act"). In connection with the Company's obligations under the Registration Rights Agreement, on ____________ ___, 2006, the Company filed a Registration Statement on Form S- ___ (File No. 333-________) (the "Registration Statement") with the Securities and Exchange Commission (the "SEC") relating to the Registrable Securities which names the Holder as a selling shareholder thereunder. In connection with the foregoing, we advise you that [a member of the SEC's staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective] [the Registration Statement has become effective] under the 1933 Act at [enter the time of effectiveness] on [enter the date of effectiveness] and to the best of our knowledge, after telephonic inquiry of a member of the SEC’s staff, no stop order suspending its effectiveness has been issued and no proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the 1933 Act pursuant to the Registration Statement. Very truly yours, [Company Counsel]     32 --------------------------------------------------------------------------------   EXHIBIT C   Date:     RE: Put Notice Number __   Dear Mr. Leighton,     This is to inform you that as of today, USCorp, a Nevada corporation (the "Company"), hereby elects to exercise its right pursuant to the Investment Agreement to require Dutchess Private Equities Fund, LP to purchase shares of its common stock. The Company hereby certifies that:   The amount of this put is $__________.   The Pricing Period runs from ________ until _______.   The current number of shares issued and outstanding as of the Company are:     --------------------------------------------------------------------------------   The number of shares currently available for issuance on the SB-2 for the Equity Line are:   Regards,   -------------------------------------------------------------------------------- ___________________ Robert Dultz, CEO USCorp   33 --------------------------------------------------------------------------------     EXHIBIT D PUT SETTLEMENT SHEET   Date:   Dear Mr. Dultz,   Pursuant to the Put given by USCorp to Dutchess Private Equities Fund, L.P. on _________________ 200_, we are now submitting the amount of common shares for you to issue to Dutchess.   Please have a certificate bearing no restrictive legend totaling __________ shares issued to Dutchess Private Equities Fund, LP immediately and send via DWAC to the following account:   XXXXXX   If not DWAC eligible, please send FedEx Priority Overnight to:   XXXXXX   Once these shares are received by us, we will have the funds wired to the Company.   Regards,   Douglas H. Leighton     34 --------------------------------------------------------------------------------   DATE. . . . . . . . . . . . . . . . . . . . . PRICE   Date of Day 1 . . . . . . . . . . . . . . . . Closing Bid of Day 1 Date of Day 2 . . . . . . . . . . . . . . . . Closing Bid of Day 2 Date of Day 3 . . . . . . . . . . . . . . . . Closing Bid of Day 3 Date of Day 4 . . . . . . . . . . . . . . . . Closing Bid of Day 4 Date of Day 5 . . . . . . . . . . . . . . . . Closing Bid of Day 5       LOWEST 1 (ONE) CLOSING BID IN PRICING PERIOD ------------   PUT AMOUNT ------------   AMOUNT WIRED TO COMPANY ------------   PURCHASE PRICE (95)% (NINETY-FIVE PERCENT)) ------------   AMOUNT OF SHARES DUE ------------     The undersigned has completed this Put as of this ___th day of _________, 200_.     USCORP   ______________________________ Robert Dultz, CEO     35 --------------------------------------------------------------------------------     SCHEDULE 4(c) CAPITALIZATION   36 --------------------------------------------------------------------------------     SCHEDULE 4(e) CONFLICTS   37 --------------------------------------------------------------------------------       SCHEDULE 4(g) MATERIAL CHANGES   38 --------------------------------------------------------------------------------       SCHEDULE 4(h) LITIGATION   39 --------------------------------------------------------------------------------     SCHEDULE 4(l) INTELLECTUAL PROPERTY   40 --------------------------------------------------------------------------------       SCHEDULE 4(n) LIENS   41 --------------------------------------------------------------------------------         SCHEDULE 4(t) CERTAIN TRANSACTIONS   42 --------------------------------------------------------------------------------    

-------------------------------------------------------------------------------- EXHIBIT 10(y) June 16, 2006     Richard Gunst 411 Ruby Street Clarendon Hills, IL 60514 Dear Rick, I am very pleased to offer you the opportunity to serve as Chief Financial Officer of DeVry Inc. You have impressed everyone you’ve met, and we have the utmost confidence in your abilities. Subject to the specific provisions of the DeVry Inc. compensation policy, the key components of your compensation package are as follows:   1. A base salary of $275,000, to be earned and paid in monthly installments less applicable deductions and withholdings. Your salary will be reviewed annually, based upon a written performance appraisal.   2. Eligibility for a performance bonus with a first year potential of 50% of your base salary. You and I will discuss the specifics and together establish your performance objectives.   3. Options for 35,000 shares of DeVry stock awarded as of the day you start with DeVry, subject to the policies of DeVry’s written incentive plans and approval by the compensation committee of DeVry’s Board. Additional grants may be made available to you annually, based upon your performance, subject to the terms and conditions of the applicable DeVry incentive plans. I would anticipate that annual grants could be in the range of 25,000 shares, based on performance. You have asked about vesting of stock options in the event of a change in control. I have enclosed a memo from our general counsel discussing this for your review.   4. An automobile may be leased under the guidelines of the DeVry Inc. Executive Automobile Program. In addition, you will be reimbursed for the cost of fuel and the maintenance of the vehicle.   5. A benefits program which includes excellent health coverage, a 401(K) retirement and profit sharing plan, which can add an additional 4% to your gross earnings, a newly introduced Employee Stock Purchase Plan, which will permit you to acquire DeVry stock 5% below market price pursuant to the limits of this registered plan, and an opportunity to participate in the DeVry Management Deferred Compensation Plan. Also, you will be enrolled in the Executive Health Program (“Execucare”) at no cost to you. Jack Calabro will discuss the details with you during your orientation. --------------------------------------------------------------------------------   6. Notwithstanding the existing policy, you will receive four (4) weeks of vacation annually, to be scheduled in advance with the approval of the CEO.   7. While we expect a lengthy, mutually satisfactory relationship it is appropriate to clarify (i) that your employment is at will and may be terminated by you or us at any time; and, (ii) the terms of severance should we separate. If your employment is terminated by DeVry other than in the event of your death or disability or for cause, you will receive, upon execution of an appropriate release, continuation of your base salary exclusive of any bonus or benefits for one (1) year past the date of termination of employment, paid in monthly installments, less applicable deductions for tax and other withholdings. In this regard, “for cause” shall generally mean: (a) the willful disregard of a published company policy if such violation continues after written notice to you; (b) the willful and continued failure by you to substantially and satisfactorily perform your duties after a written demand for performance is delivered to you; and, (c) willfully engaging in conduct which is demonstrably and materially injurious to the company’s interests, assets, business, reputation or otherwise. We very much look forward to welcoming you to DeVry and to working closely with you as we pursue many exciting opportunities. We know that you can make a significant contribution to DeVry’s success by providing vision and leadership as we move toward becoming the leader in proprietary education. Sincerely, /s/ Daniel Hamburger   Daniel Hamburger   President and COO   Cc: Ron Taylor Norm Levine Jack Calabro Agreed and accepted effective as of the 24th day of July, 2006. /s/ Richard Gunst   Richard Gunst       --------------------------------------------------------------------------------

Exhibit (10)(c)(4)       AGREEMENT This Agreement, dated January 18, 2006, is made by and between ALLTEL Corporation, a Delaware corporation (as hereinafter defined, the "Corporation"), and Sharilyn Gasaway (as hereinafter defined, the "Executive"). WHEREAS, the Corporation recognizes that the possibility of a Change in Control (as hereinafter defined) of the Corporation exists and that such possibility, and the uncertainty it may cause, may result in the departure or distraction of key management employees of the Corporation or of a Subsidiary to the detriment of the Corporation and its stockholders; and WHEREAS, the Executive is a key management employee of the Corporation or of a Subsidiary; and WHEREAS, the Corporation desires to encourage the continued employment of the Executive by the Corporation or a Subsidiary and the continued dedication of the Executive to the Executive's assigned duties without distraction as a result of the circumstances arising from the possibility of a Change in Control; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Corporation and the Executive hereby agree as follows: 1. Defined Terms. For purposes of this Agreement, the following terms shall have the meanings indicated below: (A) "ALLTEL Group" shall mean, collectively, the Corporation and each Subsidiary of the Corporation from time to time, and a "member" of the ALLTEL Group shall mean the Corporation or any of such entities. (B) "Board" shall mean the Board of Directors of the Corporation, as constituted from time to time. (C) "Cause" for termination by the Corporation of the Executive's employment shall mean (i) the willful failure by the Executive substantially to perform the Executive's duties with the Corporation or a Subsidiary, other than any failure resulting from the Executive's incapacity due to physical or mental illness or any actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive in accordance with paragraph (A) of Section 6, that continues for at least 30 days after the Board delivers to the Executive a written demand for performance that identifies specifically and in detail the manner in which the Board believes that the Executive willfully has failed substantially to perform the Executive's duties, or (ii) the willful engaging by the Executive in misconduct that is demonstrably and materially injurious to the Corporation or any Subsidiary, monetarily or otherwise, or (iii) a breach by the Executive of any of the Executive's covenants set forth in Section 7. For purposes of clause (i) and clause (ii) of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Corporation and its Subsidiaries. (D) A "Change in Control" shall mean, if subsequent to the date of this Agreement: (i) Any "person," as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Corporation, any of its subsidiaries, or any employee benefit plan maintained by the Corporation or any of its subsidiaries, becomes the "beneficial owner" (as defined in Rule l3d-3 under the Exchange Act) of (A) l5% or more, but no greater than 50%, of the outstanding voting capital stock of the Corporation, unless prior thereto, the Continuing Directors approve the transaction that results in the person becoming the beneficial owner of 15% or more, but no greater than 50%, of the outstanding voting capital stock of the Corporation or (B) more than 50% of the outstanding voting capital stock of the Corporation, regardless whether the transaction or event by which the foregoing 50% level is exceeded is approved by the Continuing Directors; (ii) At any time Continuing Directors no longer constitute a majority of the directors of the Corporation; or (iii) The consummation of (A) a merger or consolidation of the Corporation, statutory share exchange, or other similar transaction with another corporation, partnership, or other entity or enterprise in which either the Corporation is not the surviving or continuing corporation or shares of common stock of the Corporation are to be converted into or exchanged for cash, securities other than common stock of the Corporation, or other property, (B) a sale or disposition of all or substantially all of the assets of the Corporation, or (C) the dissolution of the Corporation. (E) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (F) "Continuing Directors" means directors who were directors of the Corporation at the beginning of the 12-month period ending on the date the determination is made or whose election, or nomination for election by the Corporation's stockholders, was approved by at least a majority of the directors who are in office at the time of the election or nomination and who either (i) were directors at the beginning of the period, or (ii) were elected, or nominated for election, by at least a majority of the directors who were in office at the time of the election or nomination and were directors at the beginning of the period. (G) "Corporation" shall mean ALLTEL Corporation and any successor to its business or assets, by operation of law or otherwise. (H) "Date of Termination" shall have the meaning stated in paragraph (B) of Section 6 hereof. (I) "Disability" shall be deemed the reason for the termination by the Corporation of the Executive's employment, if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Corporation or a Subsidiary for a period of six consecutive months, the Corporation shall have given the Executive a Notice of Termination for Disability, and, within 20 business days after the Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (J) "Executive" shall mean the individual named in the first paragraph of this Agreement. (K) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence, without the Executive's express written consent, of any one of the following: (i) a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control; (ii) a reduction by the Corporation in the Executive's annual base salary to any amount less than the Executive's annual base salary as in effect immediately prior to the Change in Control; (iii) the Corporation's requiring the Executive to be based more than 35 miles from the location of the Executive's principal office immediately prior to the Change in Control, except for required business travel to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Change in Control; (iv) if the Executive was based at the principal executive offices of the Corporation or of a Subsidiary, as the case may be, immediately prior to the Change in Control, the Corporation's requiring the Executive to be based anywhere other than the principal executive offices of the Corporation or Subsidiary, as the case may be, except for required business travel to an extent substantially consistent with the Executive's business travel obligations immediately prior to the Change in Control; (v) the failure by the Corporation to pay to the Executive any portion of the Executive's current compensation, or to pay to the Executive any deferred compensation under any deferred compensation program of the Corporation, within five days after the date the compensation is due or to pay or reimburse the Executive for any expenses incurred by the Executive for required business travel; (vi) the failure by the Corporation to continue in effect any compensation plan in which the Executive participates immediately prior to the Change in Control that is material to the Executive's total compensation, including but not limited to, stock option, restricted stock, stock appreciation right, incentive compensation, bonus, and other plans, unless an equitable alternative arrangement embodied in an ongoing substitute or alternative plan has been made, or the failure by the Corporation to continue the Executive's participation therein (or in a substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of compensation provided and the level of the Executive's participation relative to other participants, than existed immediately prior to the Change in Control; (vii) the failure by the Corporation to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Corporation's pension, profit-sharing, life insurance, medical, health and accident, disability, or other employee benefit plans in which the Executive was participating immediately prior to the Change in Control; the failure by the Corporation to continue to provide the Executive any material fringe benefit or perquisite enjoyed by the Executive immediately prior to the Change in Control; or the failure by the Corporation to provide the Executive with the number of paid vacation days to which the Executive is entitled in accordance with the Corporation's normal vacation policy in effect immediately prior to the Change in Control; or (viii) any purported termination by the Corporation of the Executive's employment that is not effected in accordance with a Notice of Termination satisfying the requirements of paragraph (A) of Section 6 hereof. (L) "Notice of Termination" shall have the meaning stated in paragraph (A) of Section 6 hereof. (M) "Payment Trigger" shall mean the occurrence of a Change in Control during the term of this Agreement coincident with or followed at any time before the end of the 12th month immediately following the month in which the Change in Control occurred, by the termination of the Executive's employment with the Corporation or a Subsidiary for any reason other than (A) by the Executive without Good Reason, (B) by the Corporation as a result of the Disability of the Executive or with Cause, or (C) as a result of the death of the Executive. (N) "Person" shall have the meaning given in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended from time to time, as modified and used in Sections 13(d) and 14(d) thereof; except that, a Person shall not include (i) the Corporation or any Subsidiary, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or any Subsidiary, or (iii) an underwriter temporarily holding securities pursuant to an offering of such securities. (O) "Subsidiary" shall mean any corporation or other entity or enterprise, whether incorporated or unincorporated, of which at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others serving similar functions with respect to such corporation or other entity or enterprise is owned by the Corporation or other entity or enterprise of which the Corporation directly or indirectly owns securities or other interests having all the voting power. 2. Term of Agreement. This Agreement shall become effective on the date hereof and, subject to the second sentence of this Section 2, shall continue in effect until the earliest of (i) a Date of Termination in accordance with Section 6 or the death of the Executive shall have occurred prior to a Change in Control, (ii) the reassignment of the Executive prior to a Change in Control to any position with the Corporation whose job grade or classification is less than 90 (or its equivalent in the event the Corporation’s job classification system is changed after the date of this Agreement), (iii) if a Payment Trigger shall have occurred during the term of this Agreement, the performance by the Corporation of all its obligations, and the satisfaction by the Corporation of all its obligations and liabilities, under this Agreement, (iv) any date the Corporation may, in its sole and absolute discretion, designate which is on or after the third year anniversary of the date on which notice in writing is given by ALLTEL to the Executive in accordance with Section 11 that this Agreement will so terminate (hereinafter, the "Nonrenewal Date"), if, as of the Nonrenewal Date, a Change in Control shall not have occurred and be continuing, or (v) in the event, as of the Nonrenewal Date, a Change in Control shall have occurred and be continuing, either the expiration of such period thereafter within which a Payment Trigger does not or can not occur or the ensuing occurrence of a Payment Trigger and the performance by the Corporation of all of its obligations and liabilities under this Agreement. Any Change in Control during the term of this Agreement that for any reason ceases to constitute a Change in Control or is not followed by a Payment Trigger shall not effect a termination or lapse of this Agreement. 3. General Provisions. (A) The Corporation hereby represents and warrants to the Executive as follows: The execution and delivery of this Agreement and the performance by the Corporation of the actions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Corporation. This Agreement is a legal, valid and legally binding obligation of the Corporation enforceable in accordance with its terms. Neither the execution or delivery of this Agreement nor the consummation by the Corporation of the actions contemplated hereby (i) will violate any provision of the certificate of incorporation or bylaws (or other charter documents) of the Corporation, (ii) will violate or be in conflict with any applicable law or any judgment, decree, injunction or order of any court or governmental agency or authority, or (iii) will violate or conflict with or constitute a default (or an event of which, with notice or lapse of time or both, would constitute a default) under or will result in the termination of, accelerate the performance required by, or result in the creation of any lien, security interest, charge or encumbrance upon any of the assets or properties of the Corporation under, any term or provision of the certificate of incorporation or bylaws (or other charter documents) of the Corporation or of any contract, commitment, understanding, arrangement, agreement or restriction of any kind or character to which the Corporation is a party or by which the Corporation or any of its properties or assets may be bound or affected. The Corporation shall not at any time assert that any provision of this Agreement is invalid or unenforceable in any respect or to any extent, irrespective of the outcome of any action, suit, or proceeding. (B) No amount or benefit shall be payable under Section 4 or Section 5 unless there shall have occurred a Payment Trigger during the term of this Agreement. In no event shall payments in accordance with this Agreement be made in respect of more than one Payment Trigger. Any transfer of the Executive's employment from the Corporation to a Subsidiary, from a Subsidiary to the Corporation, or from one Subsidiary to another Subsidiary shall not constitute a termination of the Executive's employment for purposes of this Agreement and shall not limit, reduce or terminate any of the Executive’s rights or benefits under this Agreement. (C) This Agreement shall not be construed as creating an express or implied contract of employment, and, except to the extent (if any) otherwise agreed in writing between the Executive and the Corporation, the Executive shall not have any right to be retained in the employ of the Corporation or of a Subsidiary and the Corporation and any Subsidiary may in its sole and absolute discretion at any time terminate the Executive's employment for any reason (but the Corporation shall be obligated, subject to the provisions of this Agreement, to make the payments described in Section 4 and Section 5 if a Payment Trigger occurred during the term of this Agreement, including, without limitation, a Payment Trigger that occurs as a result of any such termination of the Executive’s employment). Notwithstanding the immediately preceding sentence or any other provision of this Agreement, no purported termination of the Executive's employment that is not effected in accordance with a Notice of Termination satisfying paragraph (A) of Section 6 shall be effective for purposes of this Agreement. The Executive's right, following the occurrence of a Change in Control, to terminate the Executive's employment under this Agreement for Good Reason shall not be affected by the Executive's Disability or incapacity. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason under this Agreement. 4. Payments Due Upon a Payment Trigger. (A) The Corporation shall pay to the Executive the payments described in this Section 4 upon the occurrence of a Payment Trigger during the term of this Agreement. (B) Upon the occurrence of a Payment Trigger during the term of this Agreement, the Corporation shall pay to the Executive a lump sum payment, in cash, equal to the product of: (i) three multiplied by (ii) the sum of -- (a) the higher of the Executive's annual base salary in effect immediately prior to the occurrence of the Change in Control or the Executive's annual base salary in effect immediately prior to the Payment Trigger, plus (b) the higher of the aggregate maximum amounts payable to the Executive pursuant to all incentive compensation plans for the fiscal year or other measuring period commencing coincident with or most recently prior to the date on which the Change in Control occurs or the aggregate maximum amounts payable to the Executive pursuant to all incentive compensation plans for the fiscal year or other measuring period commencing coincident with or most recently prior to the date on which the Payment Trigger occurs, in each case, assuming that the Executive were continuously employed by the Corporation or a Subsidiary on the terms and conditions, including, without limitation, the terms of the incentive plans, in effect immediately prior to the Change in Control or Payment Trigger, whichever applies, until the last day of that fiscal year or other measuring period. The amount determined under the foregoing provisions of this paragraph (B) shall be reduced by any cash severance benefit otherwise paid to the Executive under any applicable severance plan or other severance arrangement. For purposes of this paragraph (B), amounts payable to the Executive pursuant to an incentive compensation plan for the fiscal year or other measuring period commencing coincident with or most recently prior to the date on which the Change of Control or Payment Trigger, as applicable, occurs (the "applicable year/period") shall not include amounts attributable to a fiscal year or other measuring period that commenced prior to the applicable year/period and that become payable during the applicable year/period. For purposes of this paragraph (B), incentive compensation plans shall include, without limitation, the ALLTEL Corporation Performance Incentive Compensation Plan as in effect from time to time, the ALLTEL Corporation Long-Term Performance Incentive Compensation Plan as in effect from time to time, and any incentive bonus plan or arrangement that provides for payment of cash compensation, and shall exclude, without limitation, the ALLTEL Corporation Executive Deferred Compensation Plan as in effect from time to time, any plan qualified or intended to be qualified under Section 401(a) of the Code and any plan supplementary thereto, executive fringe benefits, and any plan or arrangement under which stock, stock options, stock appreciation rights, restricted stock or similar options, stock, or rights are issued. (C) Notwithstanding any provision of any incentive compensation plan, including, without limitation, any provision of any incentive plan requiring continued employment after the completed fiscal year or other measuring period, the Corporation shall pay to the Executive a lump sum amount, in cash, equal to the amount of any incentive compensation that has been allocated or awarded to the Executive for a completed fiscal year or other measuring period preceding the occurrence of a Payment Trigger under any incentive compensation plan but has not yet been paid to the Executive. (D) The payments provided for in paragraphs (B) and (C) of this Section 4 shall be made not later than the fifth day following the occurrence of a Payment Trigger, unless the amounts of such payments cannot be finally determined on or before that day, in which case, the Corporation shall pay to the Executive on that day an estimate, as reasonably determined in good faith by the Corporation, of the minimum amount of the payments to which the Executive is clearly entitled and shall pay the remainder of the payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the occurrence of a Payment Trigger. In the event the amount of the estimated payments exceeds the amount subsequently determined to have been due, the excess shall constitute a loan by the Corporation to the Executive, payable on the fifth business day after demand by the Corporation (together with interest at the rate provided in Section l274(b)(2)(B) of the Code). At the time that payments are made under this Section 4, the Corporation shall provide the Executive with a written statement setting forth the manner in which the payments were calculated and the basis for the calculations including, without limitation, any opinions or other advice the Corporation has received from outside counsel, auditors or consultants (and any opinions or advice that are in writing shall be attached to the statement). 5. Gross-Up Payments. (A) This Section 5 shall apply if a Payment Trigger shall have occurred during the term of this Agreement. (B) In the event it shall be determined that any payment or distribution by the Corporation or other amount with respect to the Corporation to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 5 (a "Payment"), is (or will be) subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are (or will be) incurred by the Executive with respect to the excise tax imposed by Section 4999 of the Code with respect to the Corporation (the excise tax, together with any interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), the Executive shall be entitled to receive an additional cash payment (a "Gross-Up Payment") from the Corporation in an amount equal to the sum of the Excise Tax and an amount sufficient to pay the cumulative Excise Tax and all cumulative income taxes (including any interest and penalties imposed with respect to such taxes) relating to the Gross-Up Payment so that the net amount retained by the Executive is equal to all payments received pursuant to the terms of this Agreement or otherwise less income taxes (but not reduced by the Excise Tax). (C) Subject to the provisions of paragraph (D) of this Section 5, all determinations required to be made under this Section 5, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at the determination, shall be made by a nationally recognized certified public accounting firm designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Corporation and the Executive within 30 days after the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Corporation. In the event that at any time relevant to this Agreement the Accounting Firm is serving as accountant or auditor for the individual, entity or group or Person effecting the Change in Control, the Executive shall appoint another nationally recognized certified public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as determined in accordance with this Section 5, shall be paid by the Corporation to the Executive within five days after the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall so indicate to the Executive in writing. Any determination by the Accounting Firm shall be binding upon the Corporation and the Executive. As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm, it is possible that Gross-Up Payments that the Corporation should have made will not have been made (an "Underpayment"), consistent with the calculations required to be made hereunder. In the event the Corporation exhausts its remedies in accordance with paragraph (D) of this Section 5 and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of Underpayment that has occurred and the Underpayment shall be promptly paid by the Corporation to or for the benefit of the Executive. (D) The Executive shall notify the Corporation in writing of any claim by the Internal Revenue Service that, if successful, would require a Gross-Up Payment (that has not already been paid by the Corporation). The notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of the claim and shall apprize the Corporation of the nature of the claim and the date on which the claim is requested to be paid. The Executive shall not pay the claim prior to the expiration of the 30-day period following the date on which the Executive gives notice to the Corporation or any shorter period ending on the date that any payment of taxes with respect to the claim is due. If the Corporation notifies the Executive in writing prior to the expiration of the 30-day period that it desires to contest the claim, the Executive shall: (i) give the Corporation any information reasonably requested by the Corporation relating to the claim; (ii) take any action in connection with contesting the claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to the claim by an attorney reasonably selected by the Corporation; (iii) cooperate with the Corporation in good faith in order effectively to contest the claim; and (iv) permit the Corporation to participate in any proceedings relating to the claim. The Corporation shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with the contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of the representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 5, the Corporation shall control all proceedings taken in connection with the contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings, and conferences with the taxing authority in respect of the claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute the contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Corporation shall determine. If the Corporation directs the Executive to pay the claim and sue for a refund, the Corporation shall advance the amount of the payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to the advance or with respect to any imputed income with respect to the advance; and any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which the contested amount is claimed to be due shall be limited solely to the contested amount. The Corporation's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (E) If, after the receipt by the Executive of an amount advanced by the Corporation pursuant to paragraph (D) of this Section 5, the Executive becomes entitled to receive any refund with respect to the claim, the Executive shall, subject to the Corporation's compliance with the requirements of paragraph (D) of this Section 5, promptly pay to the Corporation the amount of the refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Corporation pursuant to paragraph (D) of this Section 5, a determination is made that the Executive shall not be entitled to any refund with respect to the claim and the Corporation does not notify the Executive in writing of its intent to contest the denial of refund prior to the expiration of 30 days after the determination, then the advance shall be forgiven and shall not be required to be repaid and the amount of the advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. (F) Notwithstanding any other provision of this Section 5, to the extent that the Executive is entitled to a tax "gross-up" payment with respect to a Payment from the Corporation, any Subsidiary, or any affiliate of the Corporation under any other agreement, the foregoing provisions of this Section 5 shall not apply to that Payment. 6. Termination Procedures. (A) During the term of this Agreement, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 11 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a written notice that sets forth the effective date of termination (subject to the provisions of Section 11(B) below) and, if for Cause, Disability, or Good Reason, the facts and circumstances providing the basis for termination of the Executive’s employment for Cause or for Disability or Good Reason, as the case may be. (B) "Date of Termination" with respect to any purported termination of the Executive's employment during the term of this Agreement (other than by reason of death) shall mean (i) if the Executive's employment is terminated for Disability, 20 business days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during that 20 business day period) and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination, which, in the case of a termination by the Corporation, shall not be less than ten business days except in the case of a termination for Cause, and, in the case of a termination by the Executive, shall not be less than ten business days nor more than 20 business days, respectively, after the date such Notice of Termination is given. 7. Protective Covenants By The Executive. (A) Within five days after the date of termination of the Executive's employment with the ALLTEL Group, the Executive shall deliver to the Corporation all of the ALLTEL Group's property in the Executive's possession, custody or control, including, without limitation, all keys and credit cards, all computers and fax machines, and all files, documents, data and information in any medium relating in any way to the ALLTEL Group or its employees, suppliers, customers or business. (B) The Executive acknowledges that in the course of the Executive's employment with the ALLTEL Group he has had and will have access to confidential information and trade secrets proprietary to ALLTEL Group, including but not limited to, information relating to the ALLTEL Group's products, suppliers, and customers, the sources, nature, processes, costs and prices of the ALLTEL Group's products, the names, addresses, contact persons, purchasing and sales histories, and preference of the ALLTEL Group's suppliers and customers, the ALLTEL Group's business plans and strategies, and the names and addresses of, amounts of compensation paid to, and the trading and sales performance of the ALLTEL Group's employees and agents (hereinafter referred to as the "Confidential Information"). The Executive further acknowledges that the Confidential Information is proprietary to the ALLTEL Group, that the unauthorized disclosure of any of the Confidential Information to any person or entity could result in immediate and irreparable competitive injury to the ALLTEL Group, that could not adequately be remedied by an award of monetary damages. Accordingly, the Executive shall not disclose at any time any Confidential Information to any person or  entity who is not properly authorized by the Corporation to receive the information,  without the prior written permission of the Corporation's Chief Executive Officer. (C) The Executive shall not during the Executive's employment with the ALLTEL Group and thereafter until the expiration of 12 calendar months immediately following the calendar month in which occurs the Executive's termination of employment with the ALLTEL Group knowingly employ, or knowingly assist any person or entity other than the ALLTEL Group in employing, any employee of any member of the ALLTEL Group. The Executive shall not during the term of the Executive's employment with the ALLTEL Group and thereafter until the expiration of 12 calendar months immediately following the calendar month in which occurs the Executive's termination of employment with the ALLTEL Group knowingly solicit, or knowingly assist any person or entity to solicit, any employee of any member of the ALLTEL Group to leave the ALLTEL Group's employment or to become employed by any entity that is not a member of the ALLTEL Group. (D)  The Executive shall not at any time knowingly disseminate any information or knowingly make any statements, whether written, oral or otherwise, that are negative, disparaging or critical of the Corporation, any other member of the ALLTEL Group, or any of their parents, subsidiaries, affiliates, or their respective officers, directors, employees, shareholders, trustees, administrators, or employee benefit plans, or the representatives, employees, agents, predecessors, successors, heirs, or assigns of any of the foregoing (hereinafter, the "ALLTEL Parties"), or their business or operations, or that place any of the ALLTEL Parties in a bad light, other than any such statement or information that is made or disseminated by the Executive in a good faith belief as to their truth or accuracy and is either required by law or is reasonably necessary to the enforcement by the Executive of any right the Executive has related to the Executive's employment with the ALLTEL Group. (E)  Within five days after the termination of the Executive's employment with the ALLTEL Group, the Executive shall execute and deliver to the Chief Executive Officer of the Corporation such resignations as a director and officer of the Corporation and any other members of the ALLTEL Group, in such form, as may be reasonably requested by the Corporation's Chief Executive Officer. (F) The Executive shall not at any time assert that any provision of this Agreement is invalid or unenforceable in any respect or to any extent, irrespective of the outcome of any action, suit or proceeding. (G) If a Payment Trigger occurs during the term of this Agreement and if the Corporation is not in breach of any of the Corporation's covenants set forth in this Agreement, the Executive shall, until the expiration of 12 calendar months immediately following the calendar month in which the Payment Trigger occurred, provide such information and assistance as the Corporation may reasonably request as necessary or appropriate to assist any ALLTEL Group member in the arbitration or litigation or potential arbitration or litigation of any claim, action, suit or proceeding by any person or entity other than the Executive against any ALLTEL Group member arising from events occurring during the Executive's employment with the ALLTEL Group, if the Corporation pays all out-of-pocket expenses incurred by the Executive in complying with this paragraph (G). The Executive shall not, however, be required to provide assistance that would interfere with any activity for remuneration or profit in which the Executive is then actively engaged. 8. No Mitigation. The Executive shall not be required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Corporation pursuant to this Agreement. Further, the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Corporation or a Subsidiary, or otherwise. 9. Disputes; Remedies. (A) If a dispute or controversy arises out of or in connection with this Agreement, the parties shall first attempt in good faith to settle the dispute or controversy by mediation under the Commercial Mediation Rules of the American Arbitration Association before resorting to arbitration or litigation. Thereafter, any remaining unresolved dispute or controversy arising out of or in connection with this Agreement shall, upon a written notice from the Executive to the Corporation either before suit thereupon is filed or within 20 business days thereafter, be settled exclusively by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association in a city located within the continental United States designated by the Executive. Judgment may be entered on the arbitrator's award in any court having jurisdiction. Notwithstanding the foregoing provisions of this paragraph (A): (i) The Executive shall be entitled to seek specific performance of the Corporation's obligations hereunder during the pendency of any dispute or controversy arising under or in connection with this Agreement; and (ii) The Corporation shall be entitled to seek the injunctive relief described in paragraph (E) of this Section 9 during the pendency of any dispute or controversy arising under or in connection with this Agreement. (B) Any legal action concerning this Agreement, other than a mediation or an arbitration described in paragraph (A) of this Section 9, whether instituted by the Corporation or the Executive, shall be brought and resolved only in a state court of competent jurisdiction located in the territory that encompasses the city, county, or parish in which the Executive's principal residence is located at the time such action is commenced. The Corporation hereby irrevocably consents and submits to and shall take any action necessary to subject itself to the personal jurisdiction of that court and hereby irrevocably agrees that all claims in respect of the action shall be instituted, heard, and determined in that court. The Corporation agrees that such court is a convenient forum, and hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of the action. Any final judgment in the action may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (C) The Corporation shall pay all costs and expenses, including attorneys' fees and disbursements, of the Corporation and, at least monthly, all reasonable costs and expenses, including reasonable attorney's fees and disbursements, of the Executive in connection with any legal proceeding (including arbitration), whether or not instituted by the Corporation or the Executive, relating to the interpretation or enforcement of any provision of this Agreement. The Corporation shall pay prejudgment interest on any money judgment obtained by the Executive as a result of any such proceeding, calculated at the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing provisions of this paragraph (C): (i) If the Executive instituted the legal proceeding and the judge, arbitrator, or other individual presiding over the proceeding affirmatively finds that the Executive instituted the proceeding in bad faith, no reimbursement pursuant to this paragraph (C) shall be due to the Executive, the Executive shall repay the Corporation for any amounts previously paid by it pursuant to this paragraph (C), and the Executive shall pay all reasonable costs and expenses, including reasonable attorney's fees and disbursements, of the Corporation in connection with the proceeding; (ii) With respect to any dispute in which the Executive challenges the validity or enforceability of any provision of this Agreement in any respect or to any extent, no reimbursement or no further reimbursement pursuant to this paragraph (C) shall be due to the Executive, and the Executive shall repay the Corporation for any amounts previously paid by it pursuant to this paragraph (C); and (iii) With respect to any dispute or controversy regarding the provisions of Section 7, other than a dispute to which the immediately preceding clause (ii) applies, if the Executive does not prevail (after exhaustion of all available remedies), no further reimbursement pursuant to this paragraph (C) shall be due to the Executive, and the Executive shall repay the Corporation for any amounts previously paid by it pursuant to this paragraph (C) in respect of such dispute. (D) The Executive acknowledges and agrees that the Executive's sole and exclusive remedy with respect to any and all claims arising under this Agreement or for breach hereof by the Corporation shall be the right to receive such amounts as are provided for under Section 4, Section 5, and paragraph (C) of this Section 9, to which the Executive is otherwise entitled pursuant to the terms and conditions of this Agreement. (E) The Executive acknowledges and agrees that each and every covenant contained in Section 7 (hereinafter, the "Protective Covenants ") is reasonable and is necessary to protect the trade secrets, confidential information, and other business interests of the ALLTEL Group and that the Executive's compliance with each of the Protective Covenants is necessary to protect the ALLTEL Group from unfair injury. The Executive acknowledges that the Protective Covenants are a principal inducement for the willingness of the Corporation to enter into this Agreement and make the payments and provide the benefits to the Executive under this Agreement and that the Corporation and the Executive intend the Protective Covenants to be binding upon and enforceable against the Executive in accordance with their terms, notwithstanding any common or statutory law to the contrary. Notwithstanding any other provision of this Agreement, the obligations of the Corporation under this Agreement are conditioned upon compliance by the Executive with each of the Protective Covenants, and failure by the Executive to comply, in all material respects, with the Protective Covenants shall entitle the Corporation to all rights and remedies available at law or in equity. The Executive acknowledges that a breach, in any material respect, of the Protective Covenants could result in irreparable and continuing harm and damage to the ALLTEL Group for which there may be no adequate remedy at law. In the event of a breach, in any material respects, of any of the Protective Covenants, each and every member of the ALLTEL Group shall be entitled to injunctive relief in addition to any other remedy or relief to which any of them may be entitled.   10. Successors; Binding Agreement (A) In addition to any obligations imposed by law upon any successor to the Corporation, the Corporation 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 Corporation expressly to 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 the assumption and agreement prior to the effectiveness of any succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Corporation in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason immediately after a Change in Control and during the term of this Agreement, except that, for purposes of implementing the foregoing, the date on which any succession becomes effective shall be deemed the Payment Trigger occasioned by the foregoing deemed termination of employment for Good Reason immediately following a Change in Control. The provisions of this Section 10 shall continue to apply to each subsequent employer of the Executive bound by this Agreement in the event of any merger, consolidation, or transfer of all or substantially all of the business or assets of that subsequent employer. (B) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive shall die while any amount would be payable to the Executive hereunder if the Executive had continued to live, the amount, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives, or administrators of the Executive's estate. 11. Notices. For the purpose of this Agreement, notices and all other communications provided for in the 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 below, 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 actual receipt: To the Corporation: ALLTEL Corporation One Allied Drive Little Rock, Arkansas 72202 Attention: Corporate Secretary To the Executive: 2200 Riverfront Drive, Apt. 5106 Little Rock, AR 72202 12. 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 the Executive and an officer of the Corporation specifically designated by the Board. 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. 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 State of Delaware. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state, or local law and any additional withholding to which the Executive has agreed. 13. 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. 14. 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. IN WITNESS WHEREOF, the parties have signed this Agreement as of the date set forth above.     ALLTEL CORPORATION      Attest:   /s/ C.J. Duvall, Jr.                                          By:   /s/ Scott T. Ford                         Name: C.J. Duvall, Jr. Name: Scott T. Ford Title: Executive Vice-President - Human Resources Title: President and Chief Executive Officer     Witness:   /s/ Jolene Ware                                            /s/ Sharilyn Gasaway                                     Sharilyn Gasaway                

STOCK PLEDGE AGREEMENT This Agreement is made and entered into as of the 18th day of August, 2006, by and between HEARTLAND BANK, a federal savings bank (“Pledgee”), and Freedom Financial Group, Inc., a Delaware corporation (“Pledgor”).   Recitals   A. Pledgee, T.C.G. - The Credit Group Inc., a Manitoba, Canada corporation (the “Company”), and Pledgor have entered into that certain Loan and Security Agreement of even date herewith (as the same may be renewed, extended, amended, restated, replaced or otherwise modified from time to time, the “Loan Agreement”) whereby Pledgee has extended a revolving credit facility available to the Company and Pledgor in the principal face amount of $3,000,000.   B. Pledgor owns 1,100 shares of common stock, par value $ N/A per share, of the Company, representing on the date hereof 100% of the issued and outstanding voting common stock of the Company.   C. Pledgor and Pledgee desire to secure the payment of all of the obligations of the Company and Pledgor to Pledgee arising from time to time under the Loan Agreement (collectively, the “Secured Obligations”).   In consideration of the foregoing, the agreements below and other sufficient consideration, the receipt of which is hereby acknowledged, Pledgor and Pledgee agree as follows:   1. Pledge and Grant of Security Interest.   a. To secure the due and punctual payment and performance of all the Secured Obligations, Pledgor hereby grants to Pledgee a security interest in 1,100 shares of voting common stock of the Company (said interests of Pledgor in the voting stock of the Company, together with such additional shares of common stock of the Company as may from time to time be pledged by Pledgor hereunder as provided by the Loan Agreement, are hereinafter collectively called the “Shares” and individually a “Share”). Delivered herewith are the original certificates for the Shares and stock powers for the Shares executed in blank by Pledgor.   b. In addition, Pledgor hereby grants to Pledgee a security interest in the following (which shall be deemed included in the term “Shares”): (i) all dividends, cash, securities, distributions, instruments and other property from time to time paid, payable or otherwise distributed in respect of or in exchange for any or all of such Shares, (ii) any and all distributions made in respect to the Shares, whether in cash or in kind, by way of dividends or stock splits, or pursuant to a merger or consolidation or otherwise, or any substitute security issued upon conversion, reorganization or otherwise, (iii) any and all other property hereafter delivered to Pledgor or Pledgee in substitution for or in addition to any of the foregoing (including without limitation all securities issued pursuant to any shareholder agreement, stock purchase agreement, stock purchase rights or other agreement with respect to Shares to which the Pledgor may now or hereafter be a party), all certificates and instruments representing or evidencing such property and all cash, securities, interest, dividends, rights, promissory notes and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all thereof, and (iv) any and all proceeds of any of the foregoing. If any of the foregoing shall be received by Pledgor, contrary to the terms hereof or the Loan Agreement, or during the continuance of an Event of Default, they shall immediately deliver the same to Pledgee or its designated nominee, accompanied, if appropriate, by proper instruments of assignment and/or stock powers executed by Pledgor in accordance with Pledgee’s instructions, to be held subject to the terms of this Agreement. --------------------------------------------------------------------------------     2. Representations and Warranties. Pledgor represents and warrants that:   a. Pledgor owns the Shares, free of all Liens (as those terms are defined in the Loan Agreement) and shareholders’ agreements, cross-sell agreements, buy-sell agreements and similar contractual restrictions concerning the sale, assignment or pledge of the Shares, except for the restrictions applicable under Rule 144 of the General Rules and Regulations under the Securities Exchange Act of 1933. The information concerning the capital structure of the Company as shown on Schedule 1 attached is accurate.   b. The delivery of the original certificates for the Shares to Pledgee concurrently with the execution of this Agreement shall create a valid and fully perfected security interest in the Shares, securing the payment of the Secured Obligations.   c. No consent of any third party (including, without limitation, any stockholder or creditor of Pledgor) and no governmental approval is required for the exercise by Pledgee of the voting or other rights provided for in this Agreement or the remedies in respect of the Shares pursuant to this Agreement (except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally).   3. Additional Liens. Pledgor agrees that he will not (i) sell or otherwise dispose of, or grant any option with respect to, any of the Shares, (ii) create or permit to exist any Lien upon or with respect to any of the Shares, except for the security interest under this Agreement, or (iii) enter into any other contractual obligations which may restrict or inhibit Pledgee’s rights or ability to sell or otherwise dispose of the Shares or any part thereof after the occurrence and during the continuance of an Event of Default hereunder.   4. Default. Any one or more of the following shall constitute a default hereunder (an “Event of Default”):   a. An Event of Default under the Loan Agreement; or   b. A violation by Pledgor of any of the provisions or conditions of this Agreement.   5. Custody and Preservation of the Collateral. Pledgee shall be deemed to have exercised reasonable care in the custody and preservation of any Shares in its possession (even if it fails to sell or convert Shares which are falling in market value) provided the Pledgee acts in a commercially reasonable manner. The failure of Pledgee to preserve or protect any rights with respect to any of the Shares against other parties shall not be deemed a failure to exercise reasonable care in the custody or preservation of such Shares.   2 --------------------------------------------------------------------------------     6. Remedies. Upon the occurrence and during the continuance of an Event of Default:   a. Pledgee may at any time exercise the rights and pursue the remedies provided under Article 9 of the Uniform Commercial Code as currently effective in, or as hereafter amended by, the State of Missouri, including but not limited to selling the Shares at any public sale or at private sale without advertisement if in Pledgee’s reasonable judgment such private sale would result in a greater sale price than a public sale. The parties agree that in the event Pledgee elects to proceed with respect to the Shares, whenever applicable provisions of the Uniform Commercial Code require that notice be reasonable, ten (10) days’ notice shall be deemed reasonable. Pledgee shall not be obligated to make any sale of the Shares regardless of notice of sale having been given. Pledgee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Pledgee may bid and become a purchaser at any such sale, if public, and upon any such sale Pledgee may collect, receive, and hold and apply, as provided herein, the proceeds thereof to the payment of the Secured Obligations, and assign and deliver the Shares and the certificate therefor to the purchaser at any such sale. The proceeds from any such sale shall be applied first to the payment of all legal and other costs and expenses incurred in connection with the sale and next to the payment of the Secured Obligations. The balance, if any, of such proceeds remaining after such application shall be paid as provided by law.   b. Upon the occurrence and continuation of an Event of Default, in the event that Pledgee determines that it is advisable to register under or otherwise comply in any way with the Securities Act of 1933 or any similar federal or state law, or if such registration or compliance is required with respect to the Shares prior to the sale thereof by Pledgee, Pledgor will use its best efforts to cause such registration to be effectively made, at no expense to Pledgee, and to continue such registration effective for such time as may be reasonably necessary in the opinion of Pledgee, and will reimburse Pledgee for any reasonable expense incurred by Pledgee including, without limitation, reasonable attorneys’ and accountants’ fees and expenses in connection therewith; and should Pledgee determine that, prior to any public offering of any of the Shares, such securities should be registered under the Securities Act of 1933 and/or registered or qualified under any other federal or state law, and that such registration and/or qualification is not practical, then the Pledgor agrees that it will be commercially reasonable to arrange a private sale so as to avoid a public offering, even though the sales price established and/or obtained may be substantially less than might have been obtained through a public offering. The Pledgor further acknowledges the impossibility of ascertaining the amount of damages which would be suffered by Pledgee by reason of the failure by the Pledgor to perform any of the covenants contained in this paragraph and, consequently, agrees that, if the Pledgor shall fail to perform any of such covenants, Pledgor shall pay, as damages and not as a penalty, an amount equal to the value of the Shares on the date Pledgee shall demand compliance herewith.   3 --------------------------------------------------------------------------------     7. Right to Vote Shares. Until the Secured Obligations are fully paid, Pledgee shall have the right to vote the Shares with regard to any proposed amendment to the articles of incorporation or by-laws of Company which would result in a change in the voting rights and power of the Shares. Otherwise, Pledgor shall have the sole right to vote the Shares unless there is an Event of Default that is continuing hereunder, in which event Pledgee shall have the sole right to vote the Shares.   8. Preservation and Perfection of Liens. Pledgor shall promptly, upon the request of Pledgee and at Pledgor’s expense, execute, acknowledge and deliver, or cause the execution, acknowledgment and delivery of, and thereafter, if applicable, register, file or record in an appropriate governmental office, any document or instrument supplemental to or confirmatory of this Agreement, and give such further assurances as may otherwise be necessary or desirable for the creation, preservation and/or perfection of the liens created by this Agreement.   9. Release of Shares. Whenever the full amount of the Secured Obligations have been finally and unconditionally paid to Pledgee, Pledgee shall return to Borrower any certificates representing the Shares held by Pledgee with the stock powers or assignments executed by Pledgor attached, and such Shares shall be deemed released from any Lien hereunder.   10. Counterparts. This Agreement may be executed in one or more counterparts (including by facsimile), each of which shall be deemed to be an original, but all of which shall be deemed to be one and the same instrument.   11. Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction unless the ineffectiveness of such provision would result in such a material change as to cause completion of the transactions contemplated hereby to be unreasonable.   12. Notices. All notices, consents, requests and demands to or upon the respective parties hereto shall be given in the manner required for notices under the Loan Agreement.   13. Dividends. So long as no Event of Default has occurred and is continuing, Pledgor shall be entitled to receive ordinary cash dividends declared and paid by the Company from time to time.   14. Attorney-In-Fact. Pledgor hereby irrevocably appoints Pledgee as Pledgor’s attorney-in-fact effective during the continuance of an Event of Default, with full authority in the place and stead of Pledgor and in the name of Pledgor, Pledgee or otherwise, from time to time in Pledgee’s sole discretion to take any action (including completion and presentation of any proxy) and to execute any instrument that Pledgee may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation (but subject to the other provisions hereof), to (i) receive, endorse and collect all instruments made payable to Pledgor representing any dividend or other distribution in respect of the Shares or any part thereof; (ii) exercise the voting and other consensual rights pertaining to the Shares; and (iii) sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Shares as fully and completely as though Pledgee was the absolute owner thereof for all purposes, and to do, at Pledgee’s option and Pledgor’s expense, at any time or from time to time, all acts and things that Pledgee reasonably deems necessary to protect, preserve or realize upon the Shares. Pledgor hereby ratifies and approves all acts of Pledgee made or taken pursuant to this Section 14. This power of attorney, being coupled with an interest, shall be irrevocable until all Secured Obligations shall have been paid in full and the Loan Agreement shall have been terminated.   4 --------------------------------------------------------------------------------   15. Governing Law. This Agreement shall be governed and construed under the internal laws of the State of Missouri.   IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.             PLEDGOR        Freedom Financial Group, Inc., a Delaware corporation,           By:   /s/ Jerald L. Fenstermaker   Name: --------------------------------------------------------------------------------  Jerald L. Fenstermaker   Title:  President         PLEDGEE       HEARTLAND BANK               By:   /s/ Kenneth C. MacDonell     --------------------------------------------------------------------------------   Name:  Kenneth MacDonell   Title:  Senior Vice President         5 --------------------------------------------------------------------------------   Schedule 1 T.C.G. - The Credit Group Inc.     Total Shares of Common Stock Outstanding (as of 7/31/06):   -------------------------------------------------------------------------------- 1,100 shares   Total Shares of Common Stock Owned by Pledgor  -------------------------------------------------------------------------------- 1,100 shares     % of Outstanding Shares of Common Stock Owned by Pledgor -------------------------------------------------------------------------------- 100%   Certificate Nos. for Shares of Common Stock Owned by Pledgor and Pledged to Pledgee  -------------------------------------------------------------------------------- #1C/03   6 --------------------------------------------------------------------------------

  Exhibit 10.1 Fourth Amendment to the I-SECTOR CORP. INCENTIVE PLAN (As Amended and Restated Effective July 28, 2003) WHEREAS, the I-Sector Corp. Incentive Plan as amended and restated effective July 28, 2003, (the “Plan”) was adopted by the Board of Directors of INX Inc. and approved by shareholders on July 28, 2003; and WHEREAS, under Section 7.7 of the Plan the Board has the authority to amend the Plan subject to certain shareholder approval requirements; and WHEREAS, the Board has authorized this Fourth Amendment of the Plan subject to stockholder approval as provided herein. NOW THEREFORE, the Plan is hereby amended as follows: Section 1.4 shall be amended in its entirety to read as follows: 1.4 Shares of Common Stock Available for Incentive Awards Subject to adjustment under Section 6.5, there shall be available for Incentive Awards that are granted wholly or partly in Common Stock (including rights or Options that may be exercised for or settled in Common Stock) 2,473,103 Shares of Common Stock. The total number of Shares reserved for issuance under the Plan (pursuant to the previous sentence) shall be available for any one of the following types of grants: Incentive Stock Options, Nonstatutory Stock Options, SAR, Restricted Stock, a payment of a Performance Share in Shares, a payout of a Performance Unit in Shares, a payout of an Other Stock-Based Award in Shares described in Section 5 which includes, without limitation, Deferred Stock, purchase rights, shares of Common Stock awarded which are not subject to any restrictions or conditions, convertible or exchangeable debentures, other rights convertible into Shares, Incentive Awards valued by reference to the value of securities of or the performance of a specified Subsidiary, division or department, and settlement in cancellation of rights of any person with a vested interest in any other plan, fund, program or arrangement that is or was sponsored, maintained or participated in by the Company or any Parent or Subsidiary. The number of Shares of Common Stock that are the subject of Incentive Awards under this Plan, that are forfeited or terminated, expire unexercised, are settled in cash in lieu of Common Stock or in a manner such that all or some of the Shares covered by an Incentive Award are not issued to a Grantee or are exchanged for Incentive Awards that do not involve Common Stock, shall again immediately become available for Incentive Awards hereunder. The Committee may from time to time adopt and observe such procedures concerning the counting of Shares against the Plan maximum as it may deem appropriate. The Board and the appropriate officers of the Company shall from time to time take whatever actions are necessary to file any required documents with governmental authorities, stock exchanges and transaction reporting systems to ensure that Shares are available for issuance pursuant to Incentive Awards. During any period that the Company is a Publicly Held Corporation, then unless and until the Committee determines that a particular Incentive Award granted to a Covered Employee is not intended to comply with the Performance-Based Exception, the following rules shall apply to grants of Incentive Awards to Covered Employees:      (a) Subject to adjustment as provided in Section 6.5, the maximum aggregate number of Shares of Common Stock (including Stock Options, SARs, Restricted Stock, Performance Units and Performance Shares paid out in Shares, or Other Stock-Based Awards paid out in Shares) that may be granted or that may vest, as applicable, in any calendar year pursuant to any Incentive Award held by any individual Employee shall be 2,473,103 Shares.      (b) The maximum aggregate cash payout (including SARs, Performance Units and Performance Shares paid out in cash, or Other Stock-Based Awards paid out in cash) with respect to Incentive Awards granted in any calendar year which may be made to any individual Employee shall be Twenty Million dollars ($20,000,000).   --------------------------------------------------------------------------------        (c) With respect to any Stock Option or Stock Appreciation Right granted to a Covered Employee that is canceled or repriced, the number of Shares subject to such Stock Option or Stock Appreciation Right shall continue to count against the maximum number of Shares that may be the subject of Stock Options or Stock Appreciation Rights granted to such Employee hereunder to the extent such is required in accordance with Section 162(m) of the Code.      (d) The limitations of subsections (a), (b) and (c) above shall be construed and administered so as to comply with the Performance-Based Exception. The Plan as amended hereby is effective on April 28, 2006, subject to approval of the stockholders of the Company within one year from April 28, 2006. Incentive Awards may be granted under the Plan pursuant to this amendment prior to the receipt of such stockholder approval; provided however, that if the requisite stockholder approval is not obtained then any such Incentive Awards granted hereunder shall automatically become null and void and have no force and effect.             INX Inc.       By:   /s/ JAMES H. LONG         James H. Long, Chairman of the Board        and Chief Executive Officer       

EX-10.1     OMI CORPORATION 2006 Incentive Compensation Plan     -------------------------------------------------------------------------------- TABLE OF CONTENTS ARTICLE I. ESTABLISHMENT; PURPOSES; AND DURATION     Page  1.1 .  Establishment of the Plan  1  1.2 .  Purposes of the Plan  1  1.3 .  Duration of the Plan  1      ARTICLE II. DEFINITIONS 2.1 .  “Affiliate”  1  2.2 .  “Award”  2  2.3 .  “Award Agreement”  2  2.4 .  “Beneficial Ownership”  2  2.5 .  “Board” or “Board of Directors”  2  2.6 .  “Cash-Based Award”  2  2.7 .  “Cause”  2  2.8 .  “Change of Control”  2  2.9 .  “Code”  3  2.10 .  “Committee”  3  2.11 .  “Consultant”  3  2.12 .  “Director”  3  2.13 .  “Disability”  3  2.14 .  “Dividend Equivalents”  3  2.15 .  “Effective Date”  3  2.16 .  “Employee”  3  2.17 .  “Exchange Act”  3  2.18 .  “Fair Market Value”  3  2.19 .  “Fiscal Year”  4  2.20 .  “Freestanding SAR”  4  2.21 .  “Grant Price”  4  2.22 .  “Incentive Stock Option” or “ISO”  4  2.23 .  “Insider”  4  2.24 .  “Non-Employee Director”  4  2.25 .  “Nonqualified Stock Option” or “NQSO”  4  2.26 .  “Notice”  4  2.27 .  “Option” or “Stock Option”  4  2.28 .  “Option Price”  4  2.29 .  “Other Stock-Based Award”  4  2.30 .  “Participant”  4  2.31 .  “Performance Period”  4  2.32 .  “Performance Share”  4  i --------------------------------------------------------------------------------     Page  2.33 .  “Performance Unit”  4  2.34 .  “Period of Restriction”  4  2.35 .  “Person”  4  2.36 .  “Qualified Change of Control”  4  2.37 .  “Restricted Stock”  4  2.38 .  “Restricted Stock Unit”  5  2.39 .  “Retirement”  5  2.40 .  “Rule 16b-3”  5  2.41 .  “Securities Act”  5  2.42 .  “Share”  5  2.43 .  “Stock Appreciation Right” or “SAR”  5  2.44 .  “Subsidiary”  5  2.45 .  “Substitute Awards”  5  2.46 .  “Tandem SAR”  5  2.47 .  “Termination”  5      ARTICLE III. ADMINISTRATION 3.1 .  General  5  3.2 .  Committee  6  3.3 .  Authority of the Committee  6  3.4 .  Award Agreements  7  3.5 .  Discretionary Authority; Decisions Binding  7  3.6 .  Attorneys; Consultants  8  3.7 .  Delegation of Administration  8      ARTICLE IV. SHARES SUBJECT TO THE PLAN         4.1 .  Number of Shares Available for Grants  8  4.2 .  Adjustments in Authorized Shares  9  4.3 .  No Limitation on Corporate Actions  9      ARTICLE V. ELIGIBILITY AND PARTICIPATION         5.1 .  Eligibility  10  5.2 .  Actual Participation  10      ARTICLE VI. STOCK OPTIONS 6.1 .  Grant of Options  10  6.2 .  Award Agreement  10  6.3 .  Option Price  10    ii --------------------------------------------------------------------------------     Page  6.4 .  Duration of Options  10  6.5 .  Exercise of Options  10  6.6 .  Payment  11  6.7 .  Rights as a Shareholder  11  6.8 .  Termination of Employment or Service  11  6.9 .  Limitations on Incentive Stock Options  12      ARTICLE VII. STOCK APPRECIATION RIGHTS         7.1 .  Grant of SARs  12  7.2 .  Grant Price  13  7.3 .  Exercise of Tandem SARs  13  7.4 .  Exercise of Freestanding SARs  13  7.5 .  Award Agreement  13  7.6 .  Term of SARs  13  7.7 .  Payment of SAR Amount  13  7.8 .  Rights as a Shareholder  14  7.9 .  Termination of Employment or Service  14      ARTICLE VIII. RESTRICTED STOCK AND RESTRICTED STOCK UNITS         8.1 .  Awards of Restricted Stock and Restricted Stock Units  14  8.2 .  Award Agreement  14  8.3 .  Nontransferability of Restricted Stock  14  8.4 .  Period of Restriction and Other Restrictions  14  8.5 .  Delivery of Shares, Payment of Restricted Stock Units  15  8.6 .  Forms of Restricted Stock Awards  15  8.7 .  Voting Rights  15  8.8 .  Dividends and Other Distributions  15  8.9 .  Termination of Employment or Service  16  8.10 .  Compliance With Section 409A  16      ARTICLE IX. PERFORMANCE UNITS, PERFORMANCE SHARES, AND CASH-BASED AWARDS         9.1 .  Grant of Performance Units, Performance Shares and Cash-Based Awards  16  9.2 .  Value of Performance Units, Performance Shares and Cash-Based Awards  16  9.3 .  Earning of Performance Units, Performance Shares and Cash-Based Awards  16  9.4 .  Form and Timing of Payment of Performance Units, Performance Shares and Cash-Based Awards  17  9.5 .  Rights as a Shareholder  17  9.6 .  Termination of Employment or Service  17  9.7 .  Compliance With Section 409A  17  iii -------------------------------------------------------------------------------- ARTICLE X. OTHER STOCK-BASED AWARDS       Page  10.1 .  Other Stock-Based Awards  17  10.2 .  Value of Other Stock-Based Awards  17  10.3 .  Payment of Other Stock-Based Awards  18  10.4 .  Termination of Employment or Service  18  10.5 .  Compliance With Section 409A  18      ARTICLE XI. DIVIDEND EQUIVALENTS 11.1 .  Dividend Equivalents   18      ARTICLE XII. TRANSFERABILITY OF AWARDS; BENEFICIARY DESIGNATION 12.1 .  Transferability of Incentive Stock Options  19  12.2 .  All Other Awards  19  12.3 .  General  19      ARTICLE XIII. RIGHTS OF PARTICIPANTS 13.1 .  Rights or Claims  19  13.2 .  Adoption of the Plan  20  13.3 .  Vesting  20  13.4 .  No Effects on Benefits  20  13.5 .  One or More Types of Awards  20      ARTICLE XIV. CHANGE OF CONTROL 14.1 .  Treatment of Outstanding Awards  20  14.2 .  No Implied Rights; Other Limitations  22  14.3 .  Termination, Amendment, and Modifications of Change of Control Provisions  22  14.4 .  Compliance with Section 409A  22      ARTICLE XV. AMENDMENT, MODIFICATION, AND TERMINATION 15.1 .  Amendment, Modification, and Termination  23  15.2 .  Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events  23  iv -------------------------------------------------------------------------------- ARTICLE XVI. TAX WITHHOLDING AND OTHER TAX MATTERS       Page  16.1 .  Tax Withholding  24  16.2 .  Withholding or Tendering Shares  24  16.3 .  Restrictions  24  16.4 .  Special ISO Obligations  24  16.5 .  Section 83(b) Election  24  16.6 .  No Guarantee of Favorable Tax Treatment  25      ARTICLE XVII. LIMITS OF LIABILITY; INDEMNIFICATION 17.1 .  Limits of Liability  25  17.2 .  Indemnification  25      ARTICLE XVIII. SUCCESSORS 18.1 .  General  26      ARTICLE XIX. MISCELLANEOUS 19.1 .  Drafting Context  26  19.2 .  Forfeiture Events  26  19.3 .  Severability  26  19.4 .  Transfer, Leave of Absence  26  19.5 .  Exercise and Payment of Awards  27  19.6 .  Deferrals  27  19.7 .  Loans  27  19.8 .  No Effect on Other Plans  27  19.9 .  Section 16 of Exchange Act  27  19.10 .  Requirements of Law; Limitations on Awards  28  19.11 .  Participants Deemed to Accept Plan  28  19.12 .  Governing Law  28  19.13 .  Plan Unfunded  29  19.14 .  Administration Costs  29  19.15 .  Uncertificated Shares  29  19.16 .  No Fractional Shares  29  19.17 .  Deferred Compensation  29  19.18 .  Participants Based Outside of the United States  29  v -------------------------------------------------------------------------------- OMI CORPORATION 2006 INCENTIVE COMPENSATION PLAN      OMI Corporation, a Marshall Islands corporation (the “Company”), has adopted the OMI Corporation 2006 Incentive Compensation Plan (the “Plan”) for the benefit of non-employee directors of the Company, officers and eligible employees and consultants of the Company and any Subsidiaries and Affiliates (as each term defined below), as follows: ARTICLE I ESTABLISHMENT; PURPOSES; AND DURATION      1.1. Establishment of the Plan. The Company hereby establishes this incentive compensation plan to be known as the “OMI Corporation 2006 Incentive Compensation Plan”, as set forth in this document. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares, Cash-Based Awards and Other Stock-Based Awards. The Plan was adopted by the Board of Directors (as defined below) on February 16, 2006. The Plan shall become effective upon approval by the shareholders of the Company, which approval must occur within the period beginning on such adoption date and ending on April 26, 2007 (the “Effective Date”). The Plan shall remain in effect as provided in Section 1.3.      1.2. Purposes of the Plan. The purposes of the Plan are to provide additional incentives to non-employee directors of the Company and to those officers, employees and consultants of the Company, Subsidiaries and Affiliates whose substantial contributions are essential to the continued growth and success of the business of the Company and the Subsidiaries and Affiliates, in order to strengthen their commitment to the Company and the Subsidiaries and Affiliates, and to attract and retain competent and dedicated individuals whose efforts will result in the long-term growth and profitability of the Company and to further align the interests of such non-employee directors, officers, employees and consultants with the interests of the shareholders of the Company. To accomplish such purposes, the Plan provides that the Company may grant Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares, Cash-Based Awards and Other Stock-Based Awards.      1.3. Duration of the Plan. The Plan shall commence on the Effective Date, as described in Section 1.1, and shall remain in effect, subject to the right of the Board of Directors to amend or terminate the Plan at any time pursuant to Article XV, until all Shares subject to it shall have been delivered, and any restrictions on such Shares have lapsed, pursuant to the Plan’s provisions. However, in no event may an Award be granted under the Plan on or after ten years from the Effective Date. ARTICLE II DEFINITIONS      Whenever used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized:      2.1. “Affiliate” means any entity other than the Company and any Subsidiary that is affiliated with the Company through stock or equity ownership or otherwise and is designated as an Affiliate for purposes of the Plan by the Committee; provided, however, that, notwithstanding any other provisions of the Plan to the contrary, for purposes of NQSOs and SARs, if an individual who otherwise qualifies as an Employee or Non-Employee Director provides services to such an entity and not to the Company or a Subsidiary, such entity may only be designated an Affiliate if the Company qualifies as a “service recipient,” within the meaning of Code Section 409A, with respect to such individual; provided further that such definition 1 -------------------------------------------------------------------------------- of “service recipient” shall be determined by (a) applying Code Section 1563(a)(1), (2) and (3), for purposes of determining a controlled group of corporations under Code Section 414(b), using the language “at least 50 percent” instead of “at least 80 percent” each place it appears in Code Section 1563(a)(1), (2) and (3), and by applying Treasury Regulations Section 1.414(c) -2, for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Code Section 414(c), using the language “at least 50 percent” instead of “at least 80 percent” each place it appears in Treasury Regulations Section 1.414(c) -2, and (b) where the use of Shares with respect to the grant of an Option or SAR to such an individual is based upon legitimate business criteria, by applying Code Section 1563(a)(1), (2) and (3), for purposes of determining a controlled group of corporations under Code Section 414(b), using the language “at least 20 percent” instead of “at least 80 percent” at each place it appears in Code Section 1563(a)(1), (2) and (3), and by applying Treasury Regulations Section 1.414(c) -2, for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Code Section 414(c), using the language “at least 20 percent” instead of “at least 80 percent” at each place it appears in Treasury Regulations Section 1.414(c) -2.      2.2. “Award” means, individually or collectively, a grant under the Plan of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, and Other Stock-Based Awards.      2.3. “Award Agreement” means either: (a) a written agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award granted under the Plan, or (b) a written or electronic statement issued by the Company to a Participant describing the terms and provisions of such Award, including any amendment or modification thereof. The Committee may provide for the use of electronic, internet or other non-paper Award Agreements, and the use of electronic, internet or other non-paper means for the acceptance thereof and actions thereunder by a Participant.      2.4. “Beneficial Ownership” (including correlative terms) shall have the meaning given such term in Rule 13d-3 promulgated under the Exchange Act.      2.5. “Board” or “Board of Directors” means the Board of Directors of the Company.      2.6. “Cash-Based Award” means an Award granted to a Participant, as described in Article IX.      2.7. “Cause” shall have the definition given such term in a Participant’s Award Agreement, or in the absence of any such definition, as determined in good faith by the Committee.      2.8. “Change of Control” means:   (a) a “change in control” with respect to the Company that would be required to be reported in response to Item 1(a) of the Company’s current report on Form 8-K, pursuant to Section 13 or 15(d) of the Exchange Act, or equivalent for foreign filers; provided that, without limitation, a “Change of Control” shall be deemed to have occurred at such time as any Person is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of twenty percent (20%) or more of the combined voting power of the then outstanding securities of the Company (other than, in any such event, a sale or other disposition to or for the benefit of any employee benefit plan (or related trust) of the Company or a subsidiary of the Company, or acquisition or offer to acquire, by or on behalf of, the Company or a Subsidiary or any group comprised solely of such entities, of Shares); provided, however, that a “Change of Control” shall not be deemed to have occurred if such a Person files and maintains a Schedule 13G pursuant to Rule 13d-1 under the Exchange Act in connection with its purchase of such securities; provided further, however, that upon the filing of a Schedule 13D pursuant to such rule by such Person in connection with such securities, there shall be deemed to be an immediate “Change of Control”; or         (b) the individuals who constitute the “Incumbent Board” cease for any reason to constitute at least a majority of the Board. The “Incumbent Board” shall mean those individuals who constitute the Board immediately following the Effective Date, or any additional individual who becomes a member of the Board and whose election, or nomination for election, by the                 2 --------------------------------------------------------------------------------     shareholders of the Company was approved by a vote of at least three-fourths of the members of the Board comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such individual was named as a nominee for member of the Board without objection to such nomination); provided however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened “Election Contest” (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a “Proxy Contest”) including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest.      2.9. “Code” means the Internal Revenue Code of 1986, as it may be amended from time to time, including rules and regulations promulgated thereunder and successor provisions and rules and regulations thereto.      2.10. “Committee” means the Compensation Committee of the Board of Directors or a subcommittee thereof, or such other committee designated by the Board to administer the Plan.      2.11. “Consultant” means an independent contractor who performs services for the Company or a Subsidiary or Affiliate in a capacity other than as an Employee or Director.      2.12. “Director” means any individual who is a member of the Board of Directors of the Company.      2.13. “Disability” means the inability to engage in any substantial gainful occupation to which the relevant individual is suited by education, training or experience, by reason of any medically determinable physical or mental impairment, which condition can be expected to result in death or continues for a continuous period of not less than twelve (12) months; provided, however, that, for purposes of ISOs, “Disability” shall mean “permanent and total disability” as set forth in Section 22(e)(3) of the Code.      2.14. “Dividend Equivalents” means the equivalent value (in cash or Shares) of dividends that would otherwise be paid on the Shares subject to an Award but that have not been issued or delivered, as described in Article XI.      2.15.“Effective Date” shall have the meaning ascribed to such term in Section 1.1.      2.16. “Employee” means any person designated as an employee of the Company, a Subsidiary and/or an Affiliate on the payroll records thereof. An Employee shall not include any individual during any period he or she is classified or treated by the Company, a Subsidiary or an Affiliate as an independent contractor, a consultant, or any employee of an employment, consulting, or temporary agency or any other entity other than the Company, a Subsidiary and/or an Affiliate without regard to whether such individual is subsequently determined to have been, or is subsequently retroactively reclassified as a common-law employee of the Company, a Subsidiary and/or an Affiliate during such period. As further provided in Section 19.4, for purposes of the Plan, upon approval by the Committee, the term Employee may also include Employees whose employment with the Company, a Subsidiary or an Affiliate has been terminated subsequent to being granted an Award under the Plan. For the avoidance of doubt, a Director who would otherwise be an “Employee” within the meaning of this Section.      2.17. “Exchange Act” means the Securities Exchange Act of 1934, as it may be amended from time to time, including the rules and regulations promulgated thereunder and successor provisions and rules and regulations thereto.      2.18. “Fair Market Value” means the fair market value of the Shares as determined by the Committee by the reasonable application of such reasonable valuation method, consistently applied, as the Committee deems appropriate; provided, however, that, with respect to ISOs, for purposes of Section 6.3 and 6.9(c), such fair market value shall be determined subject to Section 422(c)(7) of the Code; provided further, however, that if the Shares are readily tradable on an established securities market, Fair Market Value on any date shall be the last sale price reported for the Shares on such market on such date or, if no sale is reported on such date, on the last date preceding such date on which a sale was reported. In each case, the Committee shall determine Fair Market Value in a manner that satisfies the applicable requirements of Code Section 409A. 3 --------------------------------------------------------------------------------      2.19. “Fiscal Year” means the calendar year, or such other consecutive twelve-month period as the Committee may select.      2.20. “Freestanding SAR” means an SAR that is granted independently of any Options, as described in Article VII.      2.21. “Grant Price” means the price established at the time of grant of an SAR pursuant to Article VII, used to determine whether there is any payment due upon exercise of the SAR.      2.22. “Incentive Stock Option” or “ISO” means a right to purchase Shares under the Plan in accordance with the terms and conditions set forth in Article VI and which is designated as an Incentive Stock Option and which is intended to meet the requirements of Section 422 of the Code.      2.23. “Insider” means an individual who is, on the relevant date, an officer, director or ten percent (10%) Beneficial Owner of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Committee in accordance with Section 16 of the Exchange Act.      2.24. “Non-Employee Director” means a Director who is not an Employee.      2.25. “Nonqualified Stock Option” or “NQSO” means a right to purchase Shares under the Plan in accordance with the terms and conditions set forth in Article VI and which is not intended to meet the requirements of Section 422 of the Code or otherwise does not meet such requirements.      2.26. “Notice” means notice provided by a Participant to the Company in a manner prescribed by the Committee.      2.27. “Option” or “Stock Option” means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article VI.      2.28. “Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.      2.29. “Other Stock-Based Award” means an equity-based or equity-related Award described in Section 10.1, granted in accordance with the terms and conditions set forth in Article X.      2.30. “Participant” means any eligible individual as set forth in Article V who holds one or more outstanding Awards.      2.31. “Performance Period” means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with respect to, or the amount or entitlement to, an Award.      2.32. “Performance Share” means an Award of a performance share granted to a Participant, as described in Article IX.      2.33. “Performance Unit” means an Award of a performance unit granted to a Participant, as described in Article IX.      2.34. “Period of Restriction” means the period during which Shares of Restricted Stock or Restricted Stock Units are subject to a substantial risk of forfeiture, and, in the case of Restricted Stock, the transfer of Shares of Restricted Stock is limited in some way, as provided in Article VIII.      2.35. “Person” means “person” as such term is used for purposes of Section 13(d) or 14(d) of the Exchange Act, including any individual, corporation, limited liability company, partnership, trust, unincorporated organization, government or any agency or political subdivision thereof, or any other entity or any group of persons.      2.36. “Qualified Change of Control” means a Change of Control that qualifies as 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 of Section 409A(a)(2)(A)(v) of the Code.      2.37. “Restricted Stock” means an Award granted to a Participant pursuant to Article VIII. 4 --------------------------------------------------------------------------------      2.38. “Restricted Stock Unit” means an Award, whose value is equal to a Share, granted to a Participant pursuant to Article VIII.      2.39. “Retirement” means Termination of a Participant due to either (a) retirement in accordance with any employee pension benefit plan maintained by the Company that is intended to satisfy the requirements of Section 401(a) of the Code entitling such Participant to a full pension under such plan or (b) retirement with the consent of the Committee.      2.40. “Rule 16b-3” means Rule 16b-3 under the Exchange Act, or any successor rule, as the same may be amended from time to time.      2.41. “Securities Act” means the Securities Act of 1933, as it may be amended from time to time, including the rules and regulations promulgated thereunder and successor provisions and rules and regulations thereto.      2.42. “Share” means a share of common stock, par value $0.50 per share, of the Company (including any new, additional or different stock or securities resulting from any change in corporate capitalization as listed in Section 4.2) .      2.43. “Stock Appreciation Right” or “SAR” means an Award, granted alone (a “Freestanding SAR”) or in connection with a related Option (a “Tandem SAR”), designated as an SAR, pursuant to the terms of Article VII.      2.44. “Subsidiary” means any present or future corporation which is or would be a “subsidiary corporation” of the Company as the term is defined in Section 424(f) of the Code.      2.45. “Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, options or other awards previously granted, or the right or obligation to grant future options or other awards, by a company acquired by the Company, a Subsidiary and/or an Affiliate or with which the Company, a Subsidiary and/or an Affiliate combines, or otherwise in connection with any merger, consolidation, acquisition of property or stock, or reorganization involving the Company, a Subsidiary or an Affiliate, including a transaction described in Code Section 424(a).      2.46. “Tandem SAR” means a SAR that is granted in connection with a related Option pursuant to Article VII.      2.47. “Termination” means the time when a Participant ceases the performance of services for the Company, any Affiliate or Subsidiary, as applicable, for any reason, with or without Cause, including a Termination by resignation, discharge, death, Disability or Retirement, but excluding (a) a Termination where there is a simultaneous reemployment (or commencement of service) or continuing employment (or service) of a Participant by the Company, Affiliate or any Subsidiary, (b) at the discretion of the Committee, a Termination that results in a temporary severance, and (c) at the discretion of the Committee, a Termination of an Employee that is immediately followed by the Participant’s service as a Non-Employee Director. ARTICLE III ADMINISTRATION      3.1. General. The Committee shall have exclusive authority to operate, manage and administer the Plan in accordance with its terms and conditions. Notwithstanding the foregoing, in its absolute discretion, the Board may at any time and from time to time exercise any and all rights, duties and responsibilities of the Committee under the Plan, including establishing procedures to be followed by the Committee, but excluding matters which under any applicable law, regulation or rule, including any exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3), are required to be determined in the sole discretion of the Committee. If and to the extent that the Committee does not exist or cannot function, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee, subject to the limitations set forth in the immediately preceding sentence. 5 --------------------------------------------------------------------------------      3.2. Committee. The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board of Directors. The Committee shall consist of not less than two (2) non-employee members of the Board, each of whom satisfies such criteria of independence as the Board may establish and such additional regulatory or listing requirements as the Board may determine to be applicable or appropriate. Appointment of Committee members shall be effective upon their acceptance of such appointment. Committee members may be removed by the Board at any time either with or without cause, and such members may resign at any time by delivering notice thereof to the Board. Any vacancy on the Committee, whether due to action of the Board or any other reason, shall be filled by the Board. The Committee shall keep minutes of its meetings. A majority of the Committee shall constitute a quorum and a majority of a quorum may authorize any action. Any decision reduced to writing and signed by a majority of the members of the Committee shall be fully effective as if it has been made at a meeting duly held.      3.3. Authority of the Committee. The Committee shall have full discretionary authority to grant, pursuant to the terms of the Plan, Awards to those individuals who are eligible to receive Awards under the Plan. Except as limited by law or by the Certificate of Incorporation or By-Laws of the Company, and subject to the provisions herein, the Committee shall have full power, in accordance with the other terms and provisions of the Plan, to: (a) Select Employees, Non-Employee Directors and Consultants who may receive Awards under the Plan and become Participants;         (b) Determine eligibility for participation in the Plan and decide all questions concerning eligibility for, and the amount of, Awards under the Plan;   (c) Determine the sizes and types of Awards;   (d) Determine the terms and conditions of Awards, including the Option Prices of Options and the Grant Prices of SARs;   (e) Grant Awards as an alternative to, or as the form of payment for grants or rights earned or payable under, other bonus or compensation plans, arrangements or policies of the Company or a Subsidiary or Affiliate;   (f) Grant Substitute Awards on such terms and conditions as the Committee may prescribe, subject to compliance with the ISO rules under Code Section 422 and the nonqualified deferred compensation rules under Code Section 409A, where applicable;   (g) Make all determinations under the Plan concerning Termination of any Participant’s employment or service with the Company or a Subsidiary or Affiliate, including whether such Termination occurs by reason of Cause, Disability or Retirement or in connection with a Change of Control and whether a leave constitutes a Termination;   (h) Construe and interpret the Plan and any agreement or instrument entered into under the Plan, including any Award Agreement;   (i) Establish and administer any terms, conditions, restrictions, limitations, forfeiture, vesting or exercise schedule, and other provisions of or relating to any Award;   (j) Establish and administer any performance goals in connection with any Awards, including performance criteria and applicable Performance Periods, determine the extent to which any performance goals and/or other terms and conditions of an Award are attained or are not attained;   (k) Construe any ambiguous provisions, correct any defects, supply any omissions and reconcile any inconsistencies in the Plan and/or any Award Agreement or any other instrument relating to any Awards;   6 -------------------------------------------------------------------------------- (l) Establish, adopt, amend, waive and/or rescind rules, regulations, procedures, guidelines, forms and/or instruments for the Plan’s operation or administration;   (m) Make all valuation determinations relating to Awards and the payment or settlement thereof;   (n) Grant waivers of terms, conditions, restrictions and limitations under the Plan or applicable to any Award, or accelerate the vesting or exercisability of any Award;   (o) Subject to the provisions of Article XV, amend or adjust the terms and conditions of any outstanding Award and/or adjust the number and/or class of shares of stock subject to any outstanding Award;   (p) At any time and from time to time after the granting of an Award, specify such additional terms, conditions and restrictions with respect to such Award as may be deemed necessary or appropriate to ensure compliance with any and all applicable laws or rules, including terms, restrictions and conditions for compliance with applicable securities laws or listing rules, methods of withholding or providing for the payment of required taxes and restrictions regarding a Participant’s ability to exercise Options through a cashless (broker-assisted) exercise;   (q) Offer to buy out an Award previously granted, based on such terms and conditions as the Committee shall establish with and communicate to the Participant at the time such offer is made;   (r) Determine whether, and to what extent and under what circumstances Awards may be settled in cash, Shares or other property or canceled or suspended; and   (s) Exercise all such other authorities, take all such other actions and make all such other determinations as it deems necessary or advisable for the proper operation and/or administration of the Plan.      3.4. Award Agreements. The Committee shall, subject to applicable laws and rules, determine the date an Award is granted. Each Award shall be evidenced by an Award Agreement; however, two or more Awards granted to a single Participant may be combined in a single Award Agreement. An Award Agreement shall not be a precondition to the granting of an Award; provided, however, that (a) the Committee may, but need not, require as a condition to any Award Agreement’s effectiveness, that such Award Agreement be executed on behalf of the Company and/or by the Participant to whom the Award evidenced thereby shall have been granted (including by electronic signature or other electronic indication of acceptance), and such executed Award Agreement be delivered to the Company, and (b) no person shall have any rights under any Award unless and until the Participant to whom such Award shall have been granted has complied with the applicable terms and conditions of the Award. The Committee shall prescribe the form of all Award Agreements, and, subject to the terms and conditions of the Plan, shall determine the content of all Award Agreements. Any Award Agreement may be supplemented or amended in writing from time to time as approved by the Committee; provided that the terms and conditions of any such Award Agreement as supplemented or amended are not inconsistent with the provisions of the Plan. In the event of any dispute or discrepancy concerning the terms of an Award, the records of the Committee or its designee shall be determinative.      3.5. Discretionary Authority; Decisions Binding. The Committee shall have full discretionary authority in all matters related to the discharge of its responsibilities and the exercise of its authority under the Plan. All determinations, decisions, actions and interpretations by the Committee with respect to the Plan and any Award Agreement, and all related orders and resolutions of the Committee shall be final, conclusive and binding on all Participants, the Company and its shareholders, any Subsidiary or Affiliate and all persons having or claiming to have any right or interest in or under the Plan and/or any Award Agreement. The Committee shall consider such factors as it deems relevant to making or taking such decisions, determinations, actions and interpretations, including the recommendations or advice of any Director or officer or employee of the Company, any director, officer or employee of a Subsidiary or Affiliate and such attorneys, consultants and accountants as the Committee may select. A Participant or other holder of an Award may contest a decision or action by the Committee with respect to such person or Award only on the grounds that such decision or action was arbitrary or capricious or was unlawful, and any review 7 -------------------------------------------------------------------------------- of such decision or action shall be limited to determining whether the Committee’s decision or action was arbitrary or capricious or was unlawful.      3.6. Attorneys; Consultants. The Committee may consult with counsel who may be counsel to the Company. The Committee may, with the approval of the Board, employ such other attorneys and/or consultants, accountants, appraisers, brokers, agents and other persons, any of whom may be an Employee, as the Committee deems necessary or appropriate. The Committee, the Company and its officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. The Committee shall not incur any liability for any action taken in good faith in reliance upon the advice of such counsel or other persons.      3.7. Delegation of Administration. Except to the extent prohibited by applicable law, including any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3), or the applicable rules of a stock exchange, the Committee may, in its discretion, allocate all or any portion of its responsibilities and powers under this Article III to any one or more of its members and/or delegate all or any part of its responsibilities and powers under this Article III to any person or persons selected by it; provided, however, that the Committee may not delegate its authority to correct defects, omissions or inconsistencies in the Plan. Any such authority delegated or allocated by the Committee under this Section 3.7 shall be exercised in accordance with the terms and conditions of the Plan and any rules, regulations or administrative guidelines that may from time to time be established by the Committee, and any such allocation or delegation may be revoked by the Committee at any time. ARTICLE IV SHARES SUBJECT TO THE PLAN      4.1. Number of Shares Available for Grants. The shares of stock subject to Awards granted under the Plan shall be Shares. Such Shares subject to the Plan may be either authorized and unissued shares (which will not be subject to preemptive rights) or previously issued shares acquired by the Company or any Subsidiary. Subject to adjustment as provided in Section 4.2, the total number of Shares that may be delivered pursuant to Awards under the Plan shall be five million (5,000,000) Shares (the “Share Reserve”). For purposes of this Section 4.1, (a) each Share delivered pursuant to an Option shall reduce the Share Reserve by one (1) Share; (b) each Share subject to the exercised portion of a SAR (whether the distribution upon exercise is made in cash, Shares or a combination of cash and Shares) shall reduce the Share Reserve by one (1) Share; (c) each Share delivered pursuant to a Restricted Stock Unit Award, Performance Share Award, Performance Unit Award, or Other Stock-Based Award shall reduce the Share Reserve by one and one-half (1.5) Shares; (c) each Share delivered pursuant to a Restricted Stock Award without a purchase price, or with a per-share purchase price lower than one hundred percent (100%) of the Fair Market Value of a Share on the grant date of such Restricted Stock Award, shall reduce the Share Reserve by one and one-half (1.5) Shares; (d) each Share delivered pursuant to a Restricted Stock Award with a per-share purchase price at least equal to one hundred percent (100%) of the Fair Market Value of a Share on the grant date of such Restricted Stock Award shall reduce the Share Reserve by one (1) Share; and (e) to the extent that a distribution pursuant to an Award is made in cash, the Share Reserve shall be reduced by the number of Shares subject to the redeemed, paid or exercised portion of such Award. Subject to the immediately preceding sentence and, in the case of ISOs, any limitations applicable thereto under the Code, if any Shares are subject to an Option, SAR, or other Award which for any reason expires or is terminated or canceled without having been fully exercised or satisfied, or are subject to any Restricted Stock Award (including any Shares subject to a Participant’s Restricted Stock Award that are repurchased by the Company at the Participant’s cost), Restricted Stock Unit Award or other Award granted under the Plan which are forfeited, the Shares subject to such Award shall, to the extent of any such expiration, termination, cancellation or forfeiture, be available for delivery in connection with future Awards under the Plan. However, notwithstanding any other provisions of this Section 4.1 to the contrary, (i) Shares withheld or tendered to pay the exercise price or withholding taxes with respect to an outstanding Award shall not again be made available for issuance 8 -------------------------------------------------------------------------------- pursuant to Awards under the Plan, and (ii) the payment of cash dividends or Dividend Equivalents (whether in cash or Shares) in connection with Awards shall not reduce the Share Reserve. Any Shares delivered under the Plan upon exercise or satisfaction of Substitute Awards shall not reduce the Shares available for delivery under the Plan; provided, however, that the total number of Shares that may be delivered pursuant to Incentive Stock Options granted under the Plan shall be equal to the Share Reserve, as adjusted pursuant to this Section 4.1, but without application of the foregoing provisions of this sentence.      4.2. Adjustments in Authorized Shares. In the event of any corporate event or transaction (including a change in the Shares or the capitalization of the Company), such as a reclassification, recapitalization, merger, consolidation, reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code), issuance of warrants or rights, dividend or other distribution (whether in the form of cash, stock or other property), stock split or reverse stock split, spin-off, split-up, combination or exchange of shares, repurchase of shares, or other like change in corporate structure, partial or complete liquidation of the Company or distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or transaction, the Committee, in its discretion, in order to prevent dilution or enlargement of Participants’ rights under the Plan, shall substitute or adjust, as applicable, the number, class and kind of securities which may be delivered under Section 4.1; the number, class and kind, and/or price (such as the Option Price of Options or the Grant Price of SARs) of securities subject to outstanding Awards; and other value determinations applicable to outstanding Awards; provided, however, that the number of Shares subject to any Award shall always be a whole number. The Committee, in its sole discretion, may also make appropriate adjustments and modifications in the terms of any outstanding Awards to reflect or related to any such events, adjustments, substitutions or changes, including modifications of performance goals and changes in the length of Performance Periods. Any adjustment, substitution or change pursuant to this Section 4.2 made with respect to an Award intended to be an Incentive Stock Option shall be made only to the extent consistent with such intent, unless the Committee determines otherwise. The Committee shall not make any adjustment pursuant to this Section 4.2 that would cause an Award that is otherwise exempt from Code Section 409A to become subject to Code Section 409A, or that would cause an Award that is subject to Code Section 409A to fail to satisfy the requirements of Code Section 409A. All determinations of the Committee as to adjustments or changes, if any, under this Section 4.2 shall be conclusive and binding on the Participants.      4.3. No Limitation on Corporate Actions. The existence of the Plan and any Awards granted hereunder shall not affect in any way the right or power of the Company, any Subsidiary or any Affiliate to make or authorize any adjustment, recapitalization, reorganization or other change in its capital structure or business structure, any merger or consolidation, any issuance of debt, preferred or prior preference stock ahead of or affecting the Shares, additional shares of capital stock or other securities or subscription rights thereto, any dissolution or liquidation, any sale or transfer of all or part of its assets or business or any other corporate act or proceeding. Further, except as expressly provided herein or by the Committee, (i) the issuance by the Company of Shares or any class of securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, (ii) the payment of a dividend in property other than Shares, (iii) the occurrence of any capital change described in Section 4.2 or (iv) the occurrence of any similar transaction, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares subject to Awards theretofore granted or the Option Price, Grant Price or purchase price per share applicable to any Award, unless the Committee shall determine, in its discretion, that an adjustment is necessary or appropriate. 9 -------------------------------------------------------------------------------- ARTICLE V ELIGIBILITY AND PARTICIPATION      5.1. Eligibility. Employees, Non-Employee Directors and Consultants shall be eligible to become Participants and receive Awards in accordance with the terms and conditions of the Plan, subject to the limitations on the granting of ISOs set forth in Section 6.9(a).      5.2. Actual Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select Participants from all eligible Employees, Non-Employee Directors and Consultants and shall determine the nature and amount of each Award. ARTICLE VI STOCK OPTIONS      6.1. Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee. The Committee may grant an Option or provide for the grant of an Option, either from time to time in the discretion of the Committee or automatically upon the occurrence of specified events, including the achievement of performance goals, the satisfaction of an event or condition within the control of the recipient of the Option or within the control of others. The granting of an Option shall take place when the Committee by resolution, written consent or other appropriate action determines to grant such Option for a particular number of Shares to a particular Participant at a particular Option Price.      6.2. Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the maximum duration of the Option, the number of Shares to which the Option pertains, the conditions upon which the Option shall become exercisable and such other provisions as the Committee shall determine, which are not inconsistent with the terms of the Plan; provided that if an Award Agreement does not contain exercisability criteria, the Option governed by such Award Agreement shall become exercisable in equal parts on each of the first five (5) anniversaries of the date on which the Option was granted, subject to the other terms and conditions of the Award Agreement and the Plan. The Award Agreement also shall specify whether the Option is intended to be an ISO or an NQSO. To the extent that any Option does not qualify as an ISO (whether because of its provisions or the time or manner of its exercise or otherwise), such Option, or the portion thereof which does not so qualify, shall constitute a separate NQSO.      6.3. Option Price. The Option Price for each Option shall be determined by the Committee and set forth in the Award Agreement; provided that, subject to Section 6.9(c), the Option Price of an Option shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted; provided further, that Substitute Awards or Awards granted in connection with an adjustment provided for in Section 4.2, in the form of stock options, shall have an Option Price per Share that is intended to maintain the economic value of the Award that was replaced or adjusted, as determined by the Committee.      6.4. Duration of Options. Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant and set forth in the Award Agreement; provided, however, that no Option shall be exercisable later than the tenth (10th) anniversary of its date of grant, subject to the respective last sentences of Sections 6.5 and 6.9(c) .      6.5. Exercise of Options. Options shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance determine and set forth in the Award Agreement, which need not be the same for each grant or for each Option or Participant; provided, however, that no Option (unless it is a Substitute Award) may (a) become exercisable until the expiration of a period of at least six (6) months after the grant date of such Option or (b) become exercisable in full prior to three (3) years from the grant date of such Option, except in the event of the Optionee’s death, Disability or 10 -------------------------------------------------------------------------------- Retirement or a Change of Control, or, with respect to clause (b) immediately preceding, other circumstances specified by the Committee. An Agreement may provide that the period of time over which an Option other than an ISO may be exercised shall be automatically extended if on the scheduled expiration date of such Option the Optionee’s exercise of such Option would violate applicable securities laws; provided, however, that during such extended exercise period the Option may only be exercised to the extent the Option was exercisable in accordance with its terms immediately prior to such scheduled expiration date; provided further, however, that such extended exercise period shall end not later than thirty (30) days after the exercise of such Option first would no longer violate such laws.      6.6. Payment. Options shall be exercised by the delivery of a written notice of exercise to the Company, in a form specified or accepted by the Committee, or by complying with any alternative exercise procedures that may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for such Shares, which shall include applicable taxes, if any, in accordance with Article XVI. The Option Price upon exercise of any Option shall be payable to the Company in full either: (a) in cash or its equivalent; (b) subject to such terms, conditions and limitations as the Committee may prescribe, by tendering (either by actual delivery or attestation) unencumbered Shares previously acquired by the Participant exercising such Option having an aggregate Fair Market Value at the time of exercise equal to the total Option Price, (c) by a combination of (a) and (b); or (d) by any other method approved or accepted by the Committee in its sole discretion, including, if the Committee so determines, a cashless (broker-assisted) exercise that complies with all applicable laws. Subject to any governing rules or regulations, as soon as practicable after receipt of a written notification of exercise and full payment in accordance with the preceding provisions of this Section 6.6, the Company shall deliver to the Participant exercising an Option, in the Participant’s name, evidence of book entry Shares, or, upon the Participant’s request, Share certificates, in an appropriate amount based upon the number of Shares purchased under the Option, subject to Section 19.10. Unless otherwise determined by the Committee, all payments under all of the methods described above shall be paid in United States dollars.      6.7. Rights as a Shareholder. No Participant or other person shall become the beneficial owner of any Shares subject to an Option, nor have any rights to dividends or other rights of a shareholder with respect to any such Shares, until the Participant has actually received such Shares following exercise of his or her Option in accordance with the provisions of the Plan and the applicable Award Agreement.      6.8. Termination of Employment or Service. Except as otherwise provided in the Award Agreement, an Option may be exercised only to the extent that it is then exercisable, and if at all times during the period beginning with the date of granting of such Option and ending on the date of exercise of such Option the Participant is an Employee or Non-Employee Director, and shall terminate immediately upon a Termination of the Participant. An Option shall cease to become newly exercisable upon a Termination of the holder thereof. Notwithstanding the immediately foregoing sentences, an Option may be exercised following Termination as provided below in this Section 6.8, unless otherwise provided in the Award Agreement: (a) In the event a Participant ceases to be an Employee because of Retirement or ceases to be a Non-Employee Director because of voluntary resignation, the Participant shall have the right to exercise his or her Option, to the extent exercisable as of the date of such Retirement or voluntary resignation, respectively, at any time within one (1) year after Retirement or voluntary resignation, respectively.   (b) In the event a Participant ceases to be an Employee or Non-Employee Director due to Disability, the Option held by the Participant may be exercised, to the extent exercisable as of the date of such Termination, at any time within one (1) year after such Termination.    (c) In the event a Participant’s employment with or rendering of services as a Consultant to the Company or any Affiliate or Subsidiary or a Participant’s rendering of services as a Non-Employee Director to the Company ceases for reasons other than those described in subsections (a) or (b) immediately above and not due to Termination for  11 --------------------------------------------------------------------------------         Cause, his or her Option, to the extent exercisable as of the date of such Termination, may be exercised at any time prior to the first (1st) anniversary of the date of such Termination.     (d) In the event a Participant dies either while an Employee, Consultant or Non-Employee Director or after Termination under circumstances described in subsections (a), (b) or (c) immediately above within the applicable time period described therein, any Options held by such Participant, to the extent such Options would have been exercisable in accordance with the applicable subsection of this Section 6.8 as of the date of the Participant’s death, may be exercised at any time within one (1) year after the Participant’s death by the Participant’s beneficiary or the executors or administrators of the Participant’s estate or by any person or persons who shall have acquired the Option directly from the Participant by bequest or inheritance, in accordance herewith.       Notwithstanding the foregoing provisions of this Section 6.8 to the contrary, the Committee may determine in its discretion that an Option may be exercised following any such Termination, whether or not exercisable at the time of such Termination. Subsections (a), (b), (c) and (d) of this Section 6.8, and the immediately preceding sentence, shall be subject to the condition that in no event may an Option be exercised after a Participant’s Termination for Cause or after the expiration date of such Option specified in the applicable Award Agreement.      6.9. Limitations on Incentive Stock Options. (a) General. No ISO shall be granted to any individual otherwise eligible to participate in the Plan who is not an Employee of the Company or a Subsidiary on the date of granting of such Option. Any ISO granted under the Plan shall contain such terms and conditions, consistent with the Plan, as the Committee may determine to be necessary to qualify such Option as an “incentive stock option” under Section 422 of the Code. Any ISO granted under the Plan may be modified by the Committee to disqualify such Option from treatment as an “incentive stock option” under Section 422 of the Code.   (b) $100,000 Per Year Limitation. Notwithstanding any intent to grant ISOs, an Option granted under the Plan will not be considered an ISO to the extent that it, together with any other “incentive stock options” (within the meaning of Section 422 of the Code, but without regard to subsection (d) of such Section) under the Plan and any other “incentive stock option” plans of the Company, any Subsidiary and any “parent corporation” of the Company within the meaning of Section 424(e) of the Code, are exercisable for the first time by any Participant during any calendar year with respect to Shares having an aggregate Fair Market Value in excess of $100,000 (or such other limit as may be required by the Code) as of the time the Option with respect to such Shares is granted. The rule set forth in the preceding sentence shall be applied by taking Options into account in the order in which they were granted.   (c) Options Granted to Certain Shareholders. No ISO shall be granted to an individual otherwise eligible to participate in the Plan who owns (within the meaning of Section 424(d) of the Code), at the time the Option is granted, more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or a Subsidiary or any “parent corporation” of the Company within the meaning of Section 424(e) of the Code. This restriction does not apply if at the time such ISO is granted the Option Price of the ISO is at least 110% of the Fair Market Value of a Share on the date such ISO is granted, and the ISO by its terms is not exercisable after the expiration of five years from such date of grant. ARTICLE VII STOCK APPRECIATION RIGHTS      7.1. Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee. The Committee may grant an SAR (a) in connection and 12 -------------------------------------------------------------------------------- simultaneously with the grant of an Option (a Tandem SAR) or (b) independent of, and unrelated to, an Option (a Freestanding SAR). The Committee shall have complete discretion in determining the number of Shares to which a SAR pertains (subject to Article IV) and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to any SAR.      7.2. Grant Price. The Grant Price for each SAR shall be determined by the Committee and set forth in the Award Agreement, subject to the limitations of this Section 7.2. The Grant Price for each Freestanding SAR shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the date such Freestanding SAR is granted, except in the case of Substitute Awards or Awards granted in connection with an adjustment provided for in Section 4.2. The Grant Price of a Tandem SAR shall be equal to the Option Price of the related Option.      7.3. Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR shall be exercisable only when and to the extent the related Option is exercisable and may be exercised only with respect to the Shares for which the related Option is then exercisable. A Tandem SAR shall entitle a Participant to elect, in the manner set forth in the Plan and the applicable Award Agreement, in lieu of exercising his or her unexercised related Option for all or a portion of the Shares for which such Option is then exercisable pursuant to its terms, to surrender such Option to the Company with respect to any or all of such Shares and to receive from the Company in exchange therefor a payment described in Section 7.7. An Option with respect to which a Participant has elected to exercise a Tandem SAR shall, to the extent of the Shares covered by such exercise, be canceled automatically and surrendered to the Company. Such Option shall thereafter remain exercisable according to its terms only with respect to the number of Shares as to which it would otherwise be exercisable, less the number of Shares with respect to which such Tandem SAR has been so exercised. Notwithstanding any other provision of the Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (a) the Tandem SAR will expire no later than the expiration of the related ISO; (b) the value of the payment with respect to the Tandem SAR may not exceed the difference between the Fair Market Value of the Shares subject to the related ISO at the time the Tandem SAR is exercised and the Option Price of the related ISO; and (c) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Price of the ISO.      7.4. Exercise of Freestanding SARs. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, in accordance with the Plan, determines and sets forth in the Award Agreement; provided, however, that no SAR (unless it is a Substitute Award) may (a) become exercisable until the expiration of a period of at least six (6) months after the grant date of such SAR or (b) become exercisable in full prior to three (3) years from the grant date of such SAR, except in the event of the holder’s death, Disability or Retirement or a Change of Control, or, with respect to clause (b) immediately preceding, other circumstances specified by the Committee.      7.5. Award Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall specify the number of Shares to which the SAR pertains, the Grant Price, the term of the SAR, and such other terms and conditions as the Committee shall determine in accordance with the Plan.      7.6. Term of SARs. The term of a SAR granted under the Plan shall be determined by the Committee, in its sole discretion; provided, however, that the term of any Tandem SAR shall be the same as the related Option and no SAR shall be exercisable more than ten (10) years after it is granted, subject to the last sentence of Section 6.5 in the case of a Tandem SAR.      7.7. Payment of SAR Amount. An election to exercise SARs shall be deemed to have been made on the date of Notice of such election to the Company. Upon exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:                     The excess of the Fair Market Value of a Share on the date of exercise over the Grant Price of the SAR; by                     The number of Shares with respect to which the SAR is exercised. 13 --------------------------------------------------------------------------------      Notwithstanding the foregoing provisions of this Section 7.7 to the contrary, the Committee may establish and set forth in the applicable Award Agreement a maximum amount per Share that will be payable upon the exercise of a SAR. At the discretion of the Committee, such payment upon exercise of a SAR shall be in cash, in Shares of equivalent Fair Market Value, or in some combination thereof.      7.8. Rights as a Shareholder. A Participant receiving a SAR shall have the rights of a Shareholder only as to Shares, if any, actually issued to such Participant upon satisfaction or achievement of the terms and conditions of the Award, and in accordance with the provisions of the Plan and the applicable Award Agreement, and not with respect to Shares to which such Award relates but which are not actually issued to such Participant.      7.9. Termination of Employment or Service. Each SAR Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following such Participant’s Termination, subject to Section 6.8, as applicable to any Tandem SAR. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all SARs issued pursuant to the Plan, and may reflect distinctions based on the reasons for Termination. ARTICLE VIII RESTRICTED STOCK AND RESTRICTED STOCK UNITS      8.1. Awards of Restricted Stock and Restricted Stock Units. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts as the Committee shall determine. Subject to the terms and conditions of this Article VIII and the Award Agreement, upon delivery of Shares of Restricted Stock to a Participant, or creation of a book entry evidencing a Participant’s ownership of Shares of Restricted Stock, pursuant to Section 8.6, the Participant shall have all of the rights of a shareholder with respect to such Shares, subject to the terms and restrictions set forth in this Article VIII or the applicable Award Agreement or as determined by the Committee. Restricted Stock Units shall be similar to Restricted Stock, except no Shares are actually awarded to a Participant who is granted Restricted Stock Units on the date of grant, and such Participant shall have no rights of a shareholder with respect to such Restricted Stock Units.      8.2. Award Agreement. Each Restricted Stock and/or Restricted Stock Unit Award shall be evidenced by an Award Agreement that shall specify the Period of Restriction, the number of Shares of Restricted Stock or the number of Restricted Stock Units granted, and such other provisions as the Committee shall determine in accordance with the Plan. Any Restricted Stock Award must be accepted by the Participant within a period of ninety (90) days (or such shorter period as determined by the Committee at the time of award) after the award date, by executing such Restricted Stock Award Agreement and providing the Committee or its designee a copy of such executed Award Agreement and payment of the applicable purchase price of such Shares of Restricted Stock, if any, as determined by the Committee.      8.3. Nontransferability of Restricted Stock. Except as provided in this Article VIII, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, encumbered, alienated, hypothecated or otherwise disposed of until the end of the applicable Period of Restriction established by the Committee and specified in the Restricted Stock Award Agreement.      8.4. Period of Restriction and Other Restrictions. The Period of Restriction shall lapse based on continuing service as a Non-Employee Director or Consultant or continuing employment with the Company, a Subsidiary or an Affiliate, the achievement of performance goals, the satisfaction of other conditions or restrictions or upon the occurrence of other events, in each case, as determined by the Committee, at its discretion, and stated in the Award Agreement. The Period of Restriction applicable to any Shares of Restricted Stock or Restricted Stock Units, which do not constitute a Substitute Award, shall not lapse in full earlier than three (3) years from the date of grant of such Award, or, in the case of any Shares of Restricted Stock or Restricted Stock Units subject to performance-based conditions determining the entitlement to the Award or restricting the 14 -------------------------------------------------------------------------------- grant size, or the transfer or vesting of the Award, one (1) year from the date of grant, except in the event of the Participant’s death, Disability or Retirement or a Change of Control, or other circumstances specified by the Committee.      8.5. Delivery of Shares, Payment of Restricted Stock Units. Subject to Section 19.10, after the last day of the Period of Restriction applicable to a Participant’s Shares of Restricted Stock, and after all conditions and restrictions applicable to such Shares of Restricted Stock have been satisfied or lapse (including satisfaction of any applicable withholding tax obligations), pursuant to the applicable Award Agreement, such Shares of Restricted Stock shall become freely transferable by such Participant. After the last day of the Period of Restriction applicable to a Participant’s Restricted Stock Units, and after all conditions and restrictions applicable to Restricted Stock Units have been satisfied or lapse (including satisfaction of any applicable withholding tax obligations), pursuant to the applicable Award Agreement, such Restricted Stock Units shall be settled by delivery of Shares, a cash payment determined by reference to the then-current Fair Market Value of Shares or a combination of Shares and such cash payment as the Committee, in its sole discretion, shall determine, either by the terms of the Award Agreement or otherwise.      8.6. Forms of Restricted Stock Awards. Each Participant who receives an Award of Shares of Restricted Stock shall be issued a stock certificate or certificates evidencing the Shares covered by such Award registered in the name of such Participant, which certificate or certificates may contain an appropriate legend. The Committee may require a Participant who receives a certificate or certificates evidencing a Restricted Stock Award to immediately deposit such certificate or certificates, together with a stock power or other appropriate instrument of transfer, endorsed in blank by the Participant, with signatures guaranteed in accordance with the Exchange Act if required by the Committee, with the Secretary of the Company or an escrow holder as provided in the immediately following sentence. The Secretary of the Company or such escrow holder as the Committee may appoint shall retain physical custody of each certificate representing a Restricted Stock Award until the Period of Restriction and any other restrictions imposed by the Committee or under the Award Agreement with respect to the Shares evidenced by such certificate expire or shall have been removed. The foregoing to the contrary notwithstanding, the Committee may, in its discretion, provide that a Participant’s ownership of Shares of Restricted Stock prior to the lapse of the Period of Restriction or any other applicable restrictions shall, in lieu of such certificates, be evidenced by a “book entry” (i.e., a computerized or manual entry) in the records of the Company or its designated agent in the name of the Participant who has received such Award. Such records of the Company or such agent shall, absent manifest error, be binding on all Participants who receive Restricted Stock Awards evidenced in such manner. The holding of Shares of Restricted Stock by the Company or such an escrow holder, or the use of book entries to evidence the ownership of Shares of Restricted Stock, in accordance with this Section 8.6, shall not affect the rights of Participants as owners of the Shares of Restricted Stock awarded to them, nor affect the restrictions applicable to such shares under the Award Agreement or the Plan, including the Period of Restriction.      8.7. Voting Rights. Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, to the extent permitted or required by law, as determined by the Committee, Participants holding Shares of Restricted Stock may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction. A Participant shall have no voting rights with respect to any Restricted Stock Units.      8.8. Dividends and Other Distributions. During the Period of Restriction, Participants holding Shares of Restricted Stock shall be credited with any cash dividends paid with respect to such Shares while they are so held, unless determined otherwise by the Committee and set forth in the Award Agreement. The Committee may apply any restrictions to such dividends that the Committee deems appropriate. Except as set forth in the Award Agreement, in the event of (a) any adjustment as provided in Section 4.2, or (b) any shares or securities are received as a dividend, or an extraordinary dividend is paid in cash, on Shares of Restricted Stock, any new or additional Shares or securities or any extraordinary dividends paid in cash received by a recipient of Restricted Stock shall be subject to the same terms and conditions, including the Period of Restriction, as relate to the original Shares of Restricted Stock. 15 --------------------------------------------------------------------------------      8.9. Termination of Employment or Service. Except as otherwise provided in this Section 8.9, during the Period of Restriction, any Restricted Stock Units and/or Shares of Restricted Stock held by a Participant shall be forfeited and revert to the Company (or, if Shares of Restricted Sock were sold to the Participant, the Participant shall be required to resell such Shares to the Company at cost) upon the Participant’s Termination or the failure to meet or satisfy any applicable performance goals or other terms, conditions and restrictions to the extent set forth in the applicable Award Agreement. Each applicable Award Agreement shall set forth the extent to which, if any, the Participant shall have the right to retain Restricted Stock Units and/or Shares of Restricted Stock following such Participant’s Termination. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the applicable Award Agreement, need not be uniform among all such Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for, or circumstances of, such Termination.      8.10. Compliance With Section 409A. Unless the Committee provides otherwise in an Award Agreement, each Restricted Stock Unit shall be paid in full to the Participant no later than the fifteenth day of the third month after the end of the first calendar year in which the Restricted Stock Unit is no longer subject to a “substantial risk of forfeiture” within the meaning of Code Section 409A. If the Committee provides in an Award Agreement that a Restricted Stock Unit is intended to be subject to Code Section 409A, the Award Agreement shall include terms that are intended to satisfy the requirements of Section 409A. ARTICLE IX PERFORMANCE UNITS, PERFORMANCE SHARES, AND CASH-BASED AWARDS      9.1. Grant of Performance Units, Performance Shares and Cash-Based Awards. Subject to the terms of the Plan, Performance Units, Performance Shares, and/or Cash-Based Awards may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee, in accordance with the Plan. A Performance Unit, Performance Share or Cash-Based Award entitles the Participant who receives such Award to receive Shares or cash upon the attainment of performance goals and/or satisfaction of other terms and conditions determined by the Committee when the Award is granted and set forth in the Award Agreement. Such entitlements of a Participant with respect to his or her outstanding Performance Unit, Performance Share or Cash-Based Award shall be reflected by a bookkeeping entry in the records of the Company, unless otherwise provided by the Award Agreement. The terms and conditions of such Awards shall be consistent with the Plan and set forth in the Award Agreement and need not be uniform among all such Awards or all Participants receiving such Awards.      9.2. Value of Performance Units, Performance Shares and Cash-Based Awards. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. Each Cash-Based Award shall have a value as shall be determined by the Committee. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units and Performance Shares and Cash-Based Awards that will be paid out to the Participant.      9.3. Earning of Performance Units, Performance Shares and Cash-Based Awards. Subject to the terms of the Plan, after the applicable Performance Period has ended, the holder of Performance Units, Performance Shares or Cash-Based Awards shall be entitled to receive payment on the number and value of Performance Units, Performance Shares or Cash-Based Awards earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals and/or other terms and conditions have been achieved or satisfied. The Committee shall determine the extent to which any such pre-established performance goals and/or other terms and conditions of a Performance Unit, Performance Share or Cash-Based Award are attained or not attained following conclusion of the applicable Performance Period. The Committee may, in its discretion, waive any such performance goals and/or other terms and conditions relating to any such Award. No Performance Units, Performance Shares or Cash-Based Awards shall be fully earned prior to one (1) year from 16 -------------------------------------------------------------------------------- the date of grant of any such Award, except in the event of the Participant’s death, Disability or Retirement or a Change of Control, or other circumstances specified by the Committee.      9.4. Form and Timing of Payment of Performance Units, Performance Shares and Cash-Based Awards. Payment of earned Performance Units, Performance Shares and Cash-Based Awards shall be as determined by the Committee and as set forth in the Award Agreement. Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Performance Units, Performance Shares and Cash-Based Awards in the form of cash or in Shares (or in a combination thereof) which have an aggregate Fair Market Value equal to the value of the earned Performance Units, Performance Shares or Cash-Based Awards as soon as practicable after the end of the Performance Period and following the Committee’s determination of actual performance against the performance goals and/or other terms and conditions established by the Committee. Such Shares may be granted subject to any restrictions imposed by the Committee, including pursuant to Section 19.10. The determination of the Committee with respect to the form of payment of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.      9.5. Rights as a Shareholder. A Participant receiving a Performance Unit, Performance Share or Cash-Based Award shall have the rights of a shareholder only as to Shares, if any, actually received by the Participant upon satisfaction or achievement of the terms and conditions of such Award and not with respect to Shares subject to the Award but not actually issued to such Participant.      9.6. Termination of Employment or Service. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Performance Units, Performance Shares and/or Cash-Based Award following such Participant’s Termination. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the applicable Award Agreement, need not be uniform among all such Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for Termination.      9.7. Compliance With Section 409A. Unless the Committee provides otherwise in an Award Agreement, each Performance Unit, Performance Share and/or Cash-Based Award shall be paid in full to the Participant no later than the fifteenth day of the third month after the end of the first calendar year in which such Award is no longer subject to a “substantial risk of forfeiture” within the meaning of Code Section 409A. If the Committee provides in an Award Agreement that a Performance Share, Performance Unit or Cash-Based Award is intended to be subject to Code Section 409A, the Award Agreement shall include terms that are intended to satisfy the requirements of Section 409A. ARTICLE X OTHER STOCK-BASED AWARDS      10.1. Other Stock-Based Awards. The Committee may grant types of equity-based or equity-related Awards not otherwise described by the terms of the Plan (including the grant or offer for sale of unrestricted Shares), in such amounts (subject to Article IV) and subject to such terms and conditions, as the Committee shall determine. Such Other Stock-Based Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares and may include Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.      10.2. Value of Other Stock-Based Awards. Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares, as determined by the Committee. The Committee may establish performance goals in its discretion, and any such performance goals shall be set forth in the applicable Award Agreement. If the Committee exercises its discretion to establish performance goals, the number and/or value of Other Stock-Based Awards that will be paid out to the Participant will depend on the extent to which such performance goals are met. 17 --------------------------------------------------------------------------------      10.3. Payment of Other Stock-Based Awards. Payment, if any, with respect to an Other Stock-Based Award shall be made in accordance with the terms of the Award, as set forth in the Award Agreement, in cash or Shares as the Committee determines. The full vesting or lapse of restrictions and limitations applicable to any Other Stock-Based Award shall not occur more rapidly than during the three (3) year period immediately following the date of grant of such Award, or, in the case of any Other Stock-Based Award subject to performance-based conditions determining the entitlement to the Award or restricting the grant size, the transfer of Shares or the vesting of the Award, one (1) year from the date of grant, except in the event of the Participant’s death, Disability or Retirement or a Change of Control, or other circumstances specified by the Committee.      10.4. Termination of Employment or Service. The Committee shall determine the extent to which the Participant shall have the right to receive Other Stock-Based Awards following the Participant’s Termination. Such provisions shall be determined in the sole discretion of the Committee, such provisions may be included in the applicable Award Agreement, but need not be uniform among all Other Stock-Based Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for Termination.      10.5. Compliance With Section 409A. Unless the Committee provides otherwise in an Award Agreement, each Other Stock-Based Award shall be paid in full to the Participant no later than the fifteenth day of the third month after the end of the first calendar year in which the Other Stock-Based Award is no longer subject to a “substantial risk of forfeiture” within the meaning of Code Section 409A. If the Committee provides in an Award Agreement that a Cash-Based Award or Other Stock-Based Award is intended to be subject to Code Section 409A, the Award Agreement shall include terms that are intended to satisfy the requirements of Section 409A. ARTICLE XI DIVIDEND EQUIVALENTS      11.1. Dividend Equivalents . Unless otherwise provided by the Committee, no adjustment shall be made in the Shares issuable or taken into account under Awards on account of cash dividends that may be paid or other rights that may be issued to the holders of Shares prior to issuance of such Shares under such Award. The Committee may grant Dividend Equivalents based on the dividends declared on Shares that are subject to any Award, including any Award the payment or settlement of which is deferred pursuant to Section 19.6. Dividend Equivalents may be credited as of the dividend payment dates, during the period between the date the Award is granted and the date the Award becomes payable or terminates or expires. Dividend Equivalents may be subject to any limitations and/or restrictions determined by the Committee. Dividend Equivalents shall be converted to cash or additional Shares by such formula and at such time, and shall be paid at such times, as may be determined by the Committee. Unless the Award Agreement provides otherwise, Dividend Equivalents shall be paid to the Participant at least annually, not later than the fifteenth day of the third month following the end of the calendar year in which the Dividend Equivalents are credited (or, if later, the fifteenth day of the third month following the end of the calendar year in which the Dividend Equivalents are no longer subject to a substantial risk of forfeiture within the meaning of Code Section 409A). Any Dividend Equivalents that are accumulated and paid after the date specified in the preceding sentence shall be explicitly set forth in a separate arrangement that provides for the payment of the dividend equivalents at a time and in a manner that satisfies the requirements of Code Section 409A. No Dividend Equivalents shall relate to Shares underlying an Option or SAR unless such Dividend Equivalent rights are explicitly set forth as a separate arrangement and do not cause any such Option or SAR to be subject to Code Section 409A. 18 -------------------------------------------------------------------------------- ARTICLE XII TRANSFERABILITY OF AWARDS; BENEFICIARY DESIGNATION      12.1. Transferability of Incentive Stock Options. No ISO or Tandem SAR granted in connection with an ISO may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or in accordance with Section 12.3. Further, all ISOs and Tandem SARs granted in connection with ISOs granted to a Participant shall be exercisable during his or her lifetime only by such Participant.      12.2. All Other Awards. Except as otherwise provided in Section 8.5 or Section 12.3 or a Participant’s Award Agreement or otherwise determined at any time by the Committee, no Award granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution; provided that the Committee may permit further transferability, on a general or a specific basis, and may impose conditions and limitations on any permitted transferability, subject to Section 12.1 and any applicable Period of Restriction; provided further, however, that no Award may be transferred for value or other consideration without first obtaining approval thereof by the shareholders of the Company. Further, except as otherwise provided in a Participant’s Award Agreement or otherwise determined at any time by the Committee, or unless the Committee decides to permit further transferability, subject to Section 12.1 and any applicable Period of Restriction, all Awards granted to a Participant under the Plan, and all rights with respect to such Awards, shall be exercisable or available during his or her lifetime only by or to such Participant. With respect to those Awards, if any, that are permitted to be transferred to another individual, references in the Plan to exercise or payment related to such Awards by or to the Participant shall be deemed to include, as determined by the Committee, the Participant’s permitted transferee. In the event any Award is exercised by or otherwise paid to the executors, administrators, heirs or distributees of the estate of a deceased Participant, or such a Participant’s beneficiary, or the transferee of an Award, in any such case, pursuant to the terms and conditions of the Plan and the applicable Agreement and in accordance with such terms and conditions as may be specified from time to time by the Committee, the Company shall be under no obligation to issue Shares thereunder unless and until the Company is satisfied, as determined in the discretion of the Committee, that the person or persons exercising such Award, or to receive such payment, are the duly appointed legal representative of the deceased Participant’s estate or the proper legatees or distributees thereof or the named beneficiary of such Participant, or the valid transferee of such Award, as applicable. Any purported assignment, transfer or encumbrance of an Award that does not comply with this Section 12.2 shall be void and unenforceable against the Company.      12.3. General. Each Participant may, from time to time, name any beneficiary or beneficiaries who shall be permitted to exercise his or her Option or SAR or to whom any benefit under the Plan is to be paid in case of the Participant’s death before he or she fully exercises his or her Option or SAR or receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. In the absence of any such beneficiary designation, a Participant’s unexercised Option or SAR, or amounts due but remaining unpaid to such Participant, at the Participant’s death, shall be exercised or paid as designated by the Participant by will or by the laws of descent and distribution. ARTICLE XIII RIGHTS OF PARTICIPANTS      13.1. Rights or Claims. No individual shall have any rights or claims under the Plan except in accordance with the provisions of the Plan and any applicable Award Agreement. The grant of an Award under the Plan shall not confer any rights upon the Participant holding such Award other than such terms, and subject to such conditions, as are specified in the Plan as being applicable to such type of Award, or to all Awards, or as are expressly set forth in the Award Agreement evidencing such Award. Without limiting the generality of the foregoing, nothing contained in the Plan or in any Award Agreement shall be deemed to: 19 --------------------------------------------------------------------------------   (a)      Give any Employee or Non-Employee Director the right to be retained in the service of the Company, an Affiliate and/or a Subsidiary, whether in any particular position, at any particular rate of compensation, for any particular period of time or otherwise;     (b)      Restrict in any way the right of the Company, an Affiliate and/or a Subsidiary to terminate, change or modify any Employee’s employment or any Non-Employee Director’s service as a Director at any time with or without Cause;     (c)      Confer on any Consultant any right of continued relationship with the Company, an Affiliate and/or a Subsidiary, or alter any relationship between them, including any right of the Company or an Affiliate or Subsidiary to terminate, change or modify its relationship with a Consultant;     (d)      Give any Employee, Non-Employee Director or Consultant the right to receive any bonus, whether payable in cash or in Shares, or in any combination thereof, from the Company, an Affiliate and/or a Subsidiary, nor be construed as limiting in any way the right of the Company, an Affiliate and/or a Subsidiary to determine, in its sole discretion, whether or not it shall pay any Employee, Non-Employee Director or Consultant bonuses, and, if so paid, the amount thereof and the manner of such payment; or     (e)      Give any Participant any rights whatsoever with respect to an Award except as specifically provided in the Plan and the Award Agreement.      13.2. Adoption of the Plan. The adoption of the Plan shall not be deemed to give any Employee, Non-Employee Director or Consultant or any other individual any right to be selected as a Participant or to be granted an Award, or, having been so selected, to be selected to receive a future Award.      13.3. Vesting. Notwithstanding any other provision of the Plan, a Participant’s right or entitlement to exercise or otherwise vest in any Award not exercisable or vested at the time of grant shall only result from continued services as a Non-Employee Director or Consultant or continued employment, as the case may be, with the Company or any Subsidiary or Affiliate, or satisfaction of any other performance goals or other conditions or restrictions applicable, by its terms, to such Award.      13.4. No Effects on Benefits. Payments and other compensation received by a Participant under an Award are not part of such Participant’s normal or expected compensation or salary for any purpose, including calculating termination, indemnity, severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments under any laws, plans, contracts, arrangements or otherwise. No claim or entitlement to compensation or damages arises from the termination of the Plan or diminution in value of any Award or Shares purchased or otherwise received under the Plan.      13.5. One or More Types of Awards. A particular type of Award may be granted to a Participant either alone or in addition to other Awards under the Plan. ARTICLE XIV CHANGE OF CONTROL      14.1. Treatment of Outstanding Awards. In the event of a Change of Control, unless otherwise specifically prohibited by any applicable laws, rules or regulations or otherwise provided in any applicable Award Agreement, as in effect prior to the occurrence of the Change of Control, specifically with respect to a Change of Control: (a) Immediately prior to the occurrence of such Change of Control, any and all Options, SARs and Other Stock-Based Awards (if applicable) which are outstanding shall immediately become fully exercisable as to all Shares covered thereby, notwithstanding anything to the contrary in the Plan or the Award Agreement, and, in the event of a Participant’s Termination (including termination of employment or services with any successor of the Company, a Subsidiary 20 --------------------------------------------------------------------------------      or an Affiliate) under any circumstances during the one year period following the Change of Control, all Options, SARs and Other Stock-Based Awards (if applicable) held by such Participant (or such Participant’s beneficiary or transferee) shall remain exercisable at least until the first anniversary of such Termination or the expiration of the term of such Option, SAR or Other Stock-Based Award, if earlier.   (b) Immediately prior to the occurrence of such Change of Control, any restrictions, performance goals or other conditions applicable to Restricted Stock Units, Shares of Restricted Stock and Other Stock-Based Awards previously awarded to Participants shall be immediately canceled or deemed achieved, the Period of Restriction applicable thereto shall immediately terminate, and all restrictions on transfer, sale, assignment, pledge or other disposition applicable to any such Shares of Restricted Stock shall immediately lapse, notwithstanding anything to the contrary in the Plan or the Award Agreement.   (c) Immediately prior to the occurrence of such Change of Control, all Awards which are outstanding shall immediately become fully vested and nonforfeitable.   (d) The target payment opportunities attainable under any outstanding Awards of Performance Units, Performance Shares, Cash-Based Awards and other Awards shall be deemed to have been fully earned for the entire Performance Period(s) immediately prior to the effective date of the Change of Control, unless actual performance exceeds the target, in which case actual performance shall be used. There shall be paid out to each Participant holding such an Award denominated in Shares, not later than five (5) days prior to the effective date of the Change of Control, a pro rata number of Shares (or the equivalent Fair Market Value thereof, as determined by the Committee, in cash) based upon an assumed achievement of all relevant targeted performance goals, unless actual performance exceeds the target, in which case actual performance shall be used, and upon the length of time within the Performance Period which has elapsed prior to the Change of Control. Awards denominated in cash shall be paid pro rata to applicable Participants in cash within thirty (30) days following the effective date of the Change of Control, with the pro-ration determined as a function of the length of time within the Performance Period which has elapsed prior to the Change of Control, and based on an assumed achievement of all relevant targeted performance goals, unless actual performance exceeds the target, in which case actual performance shall be used.   (e) Any Award the payment or settlement of which was deferred under Section 19.6 or otherwise shall be paid or distributed immediately prior to the Change of Control, except as otherwise provided by the Committee in accordance with Section 14.1(f) .   (f) In its discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of the Award Agreement applicable to any Award or by resolution adopted prior to the occurrence of the Change of Control, that any outstanding Award shall be adjusted by substituting for each Share subject to such Award immediately prior to the transaction resulting in the Change of Control the consideration (whether stock or other securities of the surviving corporation or any successor corporation to the Company, or a parent or subsidiary thereof, or that may be issuable by another corporation that is a party to the transaction resulting in the Change of Control) received in such transaction by holders of Shares for each Share held on the closing or effective date of such transaction, in which event the aggregate Option Price or Grant Price, as applicable, of the Award shall remain the same; provided, however, that if such consideration received in such transaction is not solely stock of a successor, surviving or other corporation, the Committee may provide for the consideration to be received upon exercise or payment of an Award, for each Share subject to such Award, to be solely stock or other securities of the successor, surviving or other corporation, as applicable, equal in fair market value, as determined by the Committee, to the per-Share consideration received by holders of Shares in such transaction. 21 -------------------------------------------------------------------------------- (g) In its discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of the Award Agreement applicable to any Award or by resolution adopted prior to the occurrence of the Change of Control, that any outstanding Award (or portion thereof) shall be converted into a right to receive cash, on or as soon as practicable following the closing date or expiration date of the transaction resulting in the Change of Control in an amount equal to the highest value of the consideration to be received in connection with such transaction for one Share, or, if higher, the highest Fair Market Value of a Share during the thirty (30) consecutive business days immediately prior to the closing date or expiration date of such transaction, less the per-Share Option Price, Grant Price or outstanding unpaid purchase price, as applicable to the Award, multiplied by the number of Shares subject to such Award, or the applicable portion thereof.   (h) The Committee may, in its discretion, provide that an Award can or cannot be exercised after, or will otherwise terminate or not terminate as of, a Change of Control.      14.2. No Implied Rights; Other Limitations. No Participant shall have any right to prevent the consummation of any of the acts described in Section 4.2 or 14.1 affecting the number of Shares available to, or other entitlement of, such Participant under the Plan or such Participant’s Award. Any actions or determinations of the Committee under this Article XVI need not be uniform as to all outstanding Awards, nor treat all Participants identically. Notwithstanding the adjustments described in Section 14.1, in no event may any Option or SAR be exercised after ten (10) years from the date it was originally granted, and any changes to ISOs pursuant to this Article XIV shall, unless the Committee determines otherwise, only be effective to the extent such adjustments or changes do not cause a “modification” (within the meaning of Section 424(h)(3) of the Code) of such ISOs or adversely affect the tax status of such ISOs.      14.3. Termination, Amendment, and Modifications of Change of Control Provisions. Notwithstanding any other provision of the Plan (but subject to the limitations of Section 14.1(h), the last sentence of Section 15.1 and Section 15.2) or any Award Agreement provision, the provisions of this Article XIV may not be terminated, amended, or modified on or after the date of a Change of Control to materially impair any Participant’s Award theretofore granted and then outstanding under the Plan without the prior written consent of such Participant.      14.4. Compliance with Section 409A. Notwithstanding any other provisions of the Plan or any Award Agreement to the contrary, if a Change of Control that is not a Qualified Change of Control occurs, and payment or distribution of an Award constituting deferred compensation subject to Section 409A of the Code would otherwise be made or commence on the date of such Change of Control (pursuant to the Plan, the Award Agreement or otherwise), (a) the vesting of such Award shall accelerate in accordance with the Plan and the Award Agreement, (b) such payment or distribution shall not be made or commence prior to the earliest date on which Code Section 409A permits such payment or distribution to be made or commence without additional taxes or penalties under Section 409A, and (c) in the event any such payment or distribution is deferred in accordance with the immediately preceding clause (b), such payment or distribution that would have been made prior to the deferred payment or commencement date, but for Code Section 409A, shall be paid or distributed on such earliest payment or commencement date, together, if determined by the Committee, with interest at the rate established by the Committee. The Committee shall not extend the period to exercise an Option or Stock Appreciation Right to the extent that such extension would cause the Option or Stock Appreciation Right to become subject to Code Section 409A. Additionally, the Committee shall not take any action pursuant to this Article XIV that would cause an Award that is otherwise exempt from Code Section 409A to become subject to Code Section 409A, or that would cause an Award that is subject to Code Section 409A to fail to satisfy the requirements of Code Section 409A. 22 -------------------------------------------------------------------------------- ARTICLE XV AMENDMENT, MODIFICATION, AND TERMINATION      15.1. Amendment, Modification, and Termination. The Board may, at any time and with or without prior notice, amend, alter, suspend, or terminate the Plan, and the Committee may, to the extent permitted by the Plan, amend the terms of any Award theretofore granted, including any Award Agreement, in each case, retroactively or prospectively; provided, however, that no such amendment, alteration, suspension, or termination of the Plan shall be made which, without first obtaining approval of the shareholders of the Company (where such approval is necessary to satisfy (i) the then-applicable requirements of Rule 16b-3, (ii) any requirements under the Code relating to ISOs, or (iii) any applicable law, regulation or rule (including the applicable regulations and rules of the SEC and any national securities exchange)), would:   (a)      Except as is provided in Section 4.2, increase the maximum number of Shares which may be sold or awarded under the Plan;     (b)      Except as is provided in Section 4.2, decrease the minimum Option Price or Grant Price requirements of Sections 6.3 and 7.2, respectively;     (c)      Change the class of persons eligible to receive Awards under the Plan;     (d)      Extend the duration of the Plan or the period during which Options or SARs may be exercised under Section 6.4 or 7.6, as applicable; or     (e)      Otherwise require shareholder approval to comply with any applicable law, regulation or rule (including the applicable regulations and rules of the SEC and any national securities exchange).      In addition, (A) no such amendment, alteration, suspension or termination of the Plan or any Award theretofore granted, including any Award Agreement, shall be made which would materially impair the previously accrued rights of a Participant under any outstanding Award without the written consent of such Participant, provided, however, that the Board may amend or alter the Plan and the Committee may amend or alter any Award, including any Agreement, either retroactively or prospectively, without the consent of the applicable Participant, (x) so as to preserve or come within any exemptions from liability under Section 16(b) of the Exchange Act, pursuant to the rules and releases promulgated by the SEC (including Rule 16b-3), or (y) if the Board or the Committee determines in its discretion that such amendment or alteration either (I) is required or advisable for the Company, the Plan or the Award to satisfy, comply with or meet the requirements of any law, regulation, rule or accounting standard or (II) is not reasonably likely to significantly diminish the benefits provided under such Award, or that such diminishment has been or will be adequately compensated, and (B) except as is provided in Section 4.2, but notwithstanding any other provisions of the Plan, neither the Board nor the Committee may take any action: (1) to amend the terms of an outstanding Option or SAR to reduce the Option Price or Grant Price thereof, cancel an Option or SAR and replace it with a new Option or SAR with a lower Option Price or Grant Price, or that has an economic effect that is the same as any such reduction or cancellation; (2) to cancel an outstanding Option or SAR having an Option Price or Grant Price above the then-current Fair Market Value of the Shares in exchange for the grant of another type of Award or (3) to amend the minimum exercisability or vesting provisions of Sections 6.5, 7.4, 8.4, 9.3 and 10.3 to shorten or decrease such provisions, without, in each such case, first obtaining approval of the shareholders of the Company of such action.      15.2. Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Board or the Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including the events described in Section 4.2) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. Any such adjustment with respect to an Award intended to be an ISO shall be made only to the extent consistent with such intent, unless the Board or the Committee determines otherwise. Additionally, 23 -------------------------------------------------------------------------------- neither the Board nor the Committee shall not make any adjustment pursuant to this Article XV that would cause an Award that is otherwise exempt from Code Section 409A to become subject to Code Section 409A, or that would cause an Award that is subject to Code Section 409A to fail to satisfy the requirements of Code Section 409A. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan. ARTICLE XVI TAX WITHHOLDING AND OTHER TAX MATTERS      16.1. Tax Withholding. The Company and/or any Subsidiary or Affiliate are authorized to withhold from any Award granted or payment due under the Plan the amount of all Federal, state, local and non-United States taxes due in respect of such Award or payment and take any such other action as may be necessary or appropriate, as determined by the Committee, to satisfy all obligations for the payment of such taxes. The recipient of any payment or distribution under the Plan shall make arrangements satisfactory to the Company, as determined in the Committee’s discretion, for the satisfaction of any tax obligations that arise by reason of any such payment or distribution. The Company shall not be required to make any payment or distribution under or relating to the Plan or any Award until such obligations are satisfied or such arrangements are made, as determined by the Committee in its discretion.      16.2. Withholding or Tendering Shares. Without limiting the generality of Section 16.1, the Committee may in its discretion permit a Participant to satisfy or arrange to satisfy, in whole or in part, the tax obligations incident to an Award by: (a) electing to have the Company withhold Shares or other property otherwise deliverable to such Participant pursuant to his or her Award (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) and/or (b) tendering to the Company Shares owned by such Participant (or by such Participant and his or her spouse jointly) and purchased or held for the requisite period of time as may be required to avoid the Company’s or the Affiliates’ or Subsidiaries’ incurring an adverse accounting charge, based, in each case, on the Fair Market Value of the Shares on the payment date as determined by the Committee. All such elections shall 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.      16.3. Restrictions. The satisfaction of tax obligations pursuant to this Article XVI shall be subject to such restrictions as the Committee may impose, including any restrictions required by applicable law or the rules and regulations of the SEC, and shall be construed consistent with an intent to comply with any such applicable laws, rule and regulations.      16.4. Special ISO Obligations. The Committee may require a Participant to give prompt written notice to the Company concerning any disposition of Shares received upon the exercise of an ISO within: (i) two (2) years from the date of granting such ISO to such Participant or (ii) one (1) year from the transfer of such Shares to such Participant or (iii) such other period as the Committee may from time to time determine. The Committee may direct that a Participant with respect to an ISO undertake in the applicable Award Agreement to give such written notice described in the preceding sentence, at such time and containing such information as the Committee may prescribe, and/or that the certificates evidencing Shares acquired by exercise of an ISO refer to such requirement to give such notice.      16.5. Section 83(b) Election. If a Participant makes an election under Section 83(b) of the Code to be taxed with respect to an Award as of the date of transfer of Shares rather than as of the date or dates upon which the Participant would otherwise be taxable under Section 83(a) of the Code, such Participant shall deliver a copy of such election to the Company immediately after filing such election with the Internal Revenue Service. Neither the Company nor any Subsidiary or Affiliate shall have any liability or responsibility relating to or arising out of the filing or not filing of any such election or any defects in its construction. 24 --------------------------------------------------------------------------------      16.6. No Guarantee of Favorable Tax Treatment. Although the Company intends to administer the Plan so that Awards will be exempt from, or will comply with, the requirements of Code Section 409A, the Company does not warrant that any Award under the Plan will qualify for favorable tax treatment under Code Section 409A or any other provision of federal, state, local, or non-United States law. The Company shall not be liable to any Participant for any tax, interest, or penalties the Participant might owe as a result of the grant, holding, vesting, exercise, or payment of any Award under the Plan. ARTICLE XVII LIMITS OF LIABILITY; INDEMNIFICATION      17.1. Limits of Liability.   (a)      Any liability of the Company or a Subsidiary or Affiliate to any Participant with respect to any Award shall be based solely upon contractual obligations created by the Plan and the Award Agreement.     (b)      None of the Company, any Subsidiary, any Affiliate, any member of the Board or the Committee or any other person participating in any determination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any liability, in the absence of bad faith, to any party for any action taken or not taken in connection with the Plan, except as may expressly be provided by statute.     (c)      Each member of the Committee, while serving as such, shall be considered to be acting in his or her capacity as a director of the Company. Members of the Board of Directors and members of the Committee acting under the Plan shall be fully protected in relying in good faith upon the advice of counsel and shall incur no liability except for gross negligence or willful misconduct in the performance of their duties.     (d)      The Company shall not be liable to a Participant or any other person as to: (i) the non-issuance of Shares as to which the Company has been unable to obtain from any regulatory body having relevant jurisdiction the authority deemed by the Committee or the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, and (ii) any tax consequence expected, but not realized, by any Participant or other person due to the receipt, exercise or settlement of any Option or other Award.        17.2. Indemnification. Subject to the requirements of Marshall Islands law, each individual who is or shall have been a member of the Committee or of the Board, or an officer of the Company to whom authority was delegated in accordance with Article III, shall be indemnified and held harmless by the Company against and from 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 and against and 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 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, unless such loss, cost, liability, or expense is a result of the individual’s own willful misconduct or except as provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such individual may be entitled under the Company’s Certificate of Incorporation or By-Laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify or hold harmless such individual. 25 -------------------------------------------------------------------------------- ARTICLE XVIII SUCCESSORS      18.1. General. 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 and/or assets of the Company. ARTICLE XIX MISCELLANEOUS      19.1. Drafting Context. 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. The words “Article,” “Section,” and “paragraph” herein shall refer to provisions of the Plan, unless expressly indicated otherwise. The words “include,” “includes,” and “including” herein shall be deemed to be followed by “without limitation” whether or not they are in fact followed by such words or words of similar import, unless the context otherwise requires.      19.2. Forfeiture Events. (a)       Notwithstanding any provision of the Plan to the contrary, the Committee shall have the authority to determine (and may so provide in any Agreement) that a Participant’s (including his or her estate’s, beneficiary’s or transferee’s) rights (including the right to exercise any Option or SAR), payments and benefits with respect to any Award shall be subject to reduction, cancellation, forfeiture or recoupment in the event of the Participant’s Termination for Cause or due to voluntary resignation; serious misconduct; violation of the Company’s or a Subsidiary’s or Affiliate’s policies; breach of fiduciary duty; unauthorized disclosure of any trade secret or confidential information of the Company or a Subsidiary or Affiliate; breach of applicable noncompetition, nonsolicitation, confidentiality or other restrictive covenants; or other conduct or activity that is in competition with the business of the Company or any Subsidiary or Affiliate, or otherwise detrimental to the business, reputation or interests of the Company and/or any Subsidiary or Affiliate; or upon the occurrence of certain events specified in the applicable Award Agreement (in any such case, whether or not the Participant is then an Employee, Non-Employee Director or Consultant). The determination of whether a Participant’s conduct, activities or circumstances are described in the immediately preceding sentence shall be made by the Committee in its good faith discretion, and pending any such determination, the Committee shall have the authority to suspend the exercise, payment, delivery or settlement of all or any portion of such Participant’s outstanding Awards pending an investigation of the matter.     (b)       If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, if the Participant knowingly or grossly negligently engaged in the misconduct, or knowingly or grossly negligently failed to prevent the misconduct, or if the Participant is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the Participant shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the twelve- (12-) month period following the first public issuance or filing with the SEC (whichever just occurred) of the financial document embodying such financial reporting requirement.      19.3. 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.      19.4. Transfer, Leave of Absence. For purposes of the Plan, a transfer of an Employee from the Company to an Affiliate or Subsidiary (or, for purposes of any ISO granted under the Plan, only a Subsidiary), or vice versa, or from one Affiliate or 26 -------------------------------------------------------------------------------- Subsidiary to another (or in the case of an ISO, only from one Subsidiary to another), and a leave of absence, duly authorized in writing by the Company or a Subsidiary or Affiliate, shall not be deemed a Termination of the Employee for purposes of the Plan or with respect to any Award (in the case of ISOs, to the extent permitted by the Code). The Committee shall have the discretion to determine the effects upon any Award, upon an individual’s status as an Employee, Non-Employee Director or Consultant for purposes of the Plan (including whether a Participant shall be deemed to have experienced a Termination or other change in status) and upon the exercisability, vesting, termination or expiration of any Award in the case of: (a) any Participant who is employed by an entity that ceases to be an Affiliate or Subsidiary (whether due to a spin-off or otherwise), (b) any transfer of a Participant between locations of employment with the Company, an Affiliate, and/or Subsidiary or between the Company, an Affiliate or Subsidiary or between Affiliates or Subsidiaries, (c) any leave of absence of a Participant, (d) any change in a Participant’s status from an Employee to a Consultant or a Non-Employee Director, or vice versa; and (e) upon approval by the Committee, any Employee who experiences a Termination but becomes employed by a partnership, joint venture, corporation or other entity not meeting the requirements of an Affiliate or Subsidiary, subject, in each case, to the requirements of Code Section 422 applicable to any ISOs and Code Section 409A applicable to any Options and SARs.      19.5. Exercise and Payment of Awards. An Award shall be deemed exercised or claimed when the Secretary of the Company or any other Company official or other person designated by the Committee for such purpose receives appropriate written notice from a Participant, in form acceptable to the Committee, together with payment of the applicable Option Price, Grant Price or other purchase price, if any, and compliance with Article XVI, in accordance with the Plan and such Participant’s Award Agreement.      19.6. Deferrals. To the extent provided in the Award Agreement, the Committee may permit or require a Participant to defer such Participant’s receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the lapse or waiver of the Period of Restriction or other restrictions with respect to Restricted Stock or the payment or satisfaction of Restricted Stock Units, Performance Units, Performance Shares, Cash-Based Awards or Other Stock-Based Awards. If any such deferral election is required or permitted, (a) such deferral shall represent an unfunded and unsecured obligation of the Company and shall not confer the rights of a shareholder unless and until Shares are issued thereunder; (b) the number of Shares subject to such deferral shall, until settlement thereof, be subject to adjustment pursuant to Section 4.2; and (c) the Committee shall establish rules and procedures for such deferrals and payment or settlement thereof, which may be in cash, Shares or any combination thereof, and such deferrals may be governed by the terms and conditions of any deferred compensation plan of the Company or Affiliate specified by the Committee for such purpose. Notwithstanding any provisions of the Plan to the contrary, in no event shall any deferral under this Section 19.6 be permitted if the Committee determines that such deferral would result in the imposition of additional tax under Code Section 409A of the Code.      19.7. Loans. The Company may, in the discretion of the Committee, extend one or more loans to Participants in connection with the exercise or receipt of an Award granted to any such Participant; provided, however, that the Company shall not extend loans to any Participant if prohibited by law or the rules of any stock exchange or quotation system on which the Company’s securities are listed. The terms and conditions of any such loan shall be established by the Committee.      19.8. No Effect on Other Plans. Neither the adoption of the Plan nor anything contained herein shall affect any other compensation or incentive plans or arrangements of the Company or any Subsidiary or Affiliate, or prevent or limit the right of the Company or any Subsidiary or Affiliate to establish any other forms of incentives or compensation for their directors, officers, eligible employees or consultants or grant or assume options or other rights otherwise than under the Plan.      19.9. Section 16 of Exchange Act. Unless otherwise stated in the Award Agreement, notwithstanding any other provision of the Plan, any Award granted to an Insider shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3) that are requirements for the application of such exemptive rule, and the Plan and the Award Agreement shall be deemed amended to the extent necessary to conform to such limitations. 27 --------------------------------------------------------------------------------      19.10. Requirements of Law; Limitations on Awards. (a)       The granting of Awards and the issuance of Shares 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.     (b)       If at any time the Committee shall determine, in its discretion, that the listing, registration and/or qualification of Shares upon any securities exchange or under any state, Federal or non-United States law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the sale or purchase of Shares hereunder, the Company shall have no obligation to allow the grant, exercise or payment of any Award, or to issue or deliver evidence of title for Shares issued under the Plan, in whole or in part, unless and until such listing, registration, qualification, consent and/or approval shall have been effected or obtained, or otherwise provided for, free of any conditions not acceptable to the Committee.     (c)        If at any time counsel to the Company shall be of the opinion that any sale or delivery of Shares pursuant to an Award is or may be in the circumstances unlawful or result in the imposition of excise taxes on the Company or any Subsidiary or Affiliate under the statutes, rules or regulations of any applicable jurisdiction, the Company shall have no obligation to make such sale or delivery, or to make any application or to effect or to maintain any qualification or registration under the Securities Act, or otherwise with respect to Shares or Awards and the right to exercise or payment of any Option or Award shall be suspended until, in the opinion of such counsel, such sale or delivery shall be lawful or will not result in the imposition of excise taxes on the Company or any Subsidiary or Affiliate.     (d)       Upon termination of any period of suspension under this Section 19.10, any Award affected by such suspension which shall not then have expired or terminated shall be reinstated as to all Shares available before such suspension and as to the Shares which would otherwise have become available during the period of such suspension, but no suspension shall extend the term of any Award.     (e)       The Committee may require each person receiving Shares in connection with any Award under the Plan to represent and agree with the Company in writing that such person is acquiring such Shares for investment without a view to the distribution thereof, and/or provide such other representations and agreements as the Committee may prescribe. The Committee, in its absolute discretion, may impose such restrictions on the ownership and transferability of the Shares purchasable or otherwise receivable by any person under any Award as it deems appropriate. Any such restrictions shall be set forth in the applicable Award Agreement, and the certificates evidencing such shares may include any legend that the Committee deems appropriate to reflect any such restrictions.     (f)       An Award and any Shares received upon the exercise or payment of an Award shall be subject to such other transfer and/or ownership restrictions and/or legending requirements as the Committee may establish in its discretion and may be referred to on the certificates evidencing such Shares, including restrictions under applicable Federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares.      19.11. Participants Deemed to Accept Plan. By accepting any benefit under the Plan, each Participant and each person claiming under or through any such Participant shall be conclusively deemed to have indicated their acceptance and ratification of, and consent to, all of the terms and conditions of the Plan and any action taken under the Plan by the Board, the Committee or the Company, in any case in accordance with the terms and conditions of the Plan.      19.12. Governing Law. Except as to matters concerning the issuance of Shares or other matters of corporate governance, which shall be determined, and related Plan and Award provisions shall be construed, under the laws of the Marshall Islands, the Plan and each Award Agreement shall be governed by the laws of the State of New York, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another 28 -------------------------------------------------------------------------------- jurisdiction. Unless otherwise provided in the Award Agreement, Participants are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of the State of New York, to resolve any and all issues that may arise out of or relate to the Plan or any related Award Agreement.      19.13. Plan Unfunded. The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the issuance of Shares or the payment of cash upon exercise or payment of any Award. Proceeds from the sale of Shares pursuant to Options or other Awards granted under the Plan shall constitute general funds of the Company.      19.14. Administration Costs. The Company shall bear all costs and expenses incurred in administering the Plan, including expenses of issuing Shares pursuant to any Options or other Awards granted hereunder.      19.15. Uncertificated Shares. To the extent that the Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may nevertheless be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange.      19.16. No Fractional Shares. An Option or other Award shall not be exercisable with respect to a fractional Share or the lesser of fifty (50) shares or the full number of Shares then subject to the Option or other Award. No fractional Shares shall be issued upon the exercise or payment of an Option or other Award.      19.17. Deferred Compensation. If any Award would be considered deferred compensation as defined under Code Section 409A and would fail to meet the requirements of Code Section 409A, then such Award shall be null and void; provided, however, that the Committee may permit deferrals of compensation pursuant to the terms of a Participant’s Award Agreement, a separate plan, or a subplan which (in each case) meets the requirements of Code Section 409A. Additionally, to the extent any Award is subject to Code Section 409A, notwithstanding any provision herein to the contrary, the Plan does not permit the acceleration of the time or schedule of any distribution related to such Award, except as permitted by Code Section 409A.      19.18. Participants Based Outside of the United States. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws or practices of countries other than the United States in which the Company, any Affiliate, and/or any Subsidiary operates or has Employees, Non-Employee Directors or Consultants, the Committee, in its sole discretion, shall have the power and authority to:   (a)      Determine which Affiliates and Subsidiaries shall be covered by the Plan;     (b)      Determine which Employees, Non-Employee Directors and/or Consultants outside the United States are eligible to participate in the Plan;     (c)      Grant Awards (including substitutes for Awards), and modify the terms and conditions of any Awards, on such terms and conditions as the Committee determines necessary or appropriate to permit participation in the Plan by individuals otherwise eligible to so participate who are non-United States nationals or employed outside the United States, or otherwise to comply with applicable non-United States laws or conform to applicable requirements or practices of jurisdictions outside the United States;     (d)      Establish subplans and adopt or modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable. Any subplans and modifications to Plan terms and procedures established under this Section 19.18 by the Committee shall be attached to the Plan as appendices; and     (e)      Take any action, before or after an Award is made, that the Committee, in its discretion, deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approvals.   29 --------------------------------------------------------------------------------      Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate any applicable law. * * *     30 --------------------------------------------------------------------------------

Exhibit 10.102 CONTENT AGREEMENT This Content Agreement, dated as of September 29, 2006 (the “Agreement Date”), is by and between Worldspan L.P., a limited partnership organized and existing under the laws of Delaware, USA (“Worldspan”), and Delta Air Lines, Inc., a corporation organized and existing under the laws of Delaware, USA (“Delta”). RECITALS WHEREAS, Worldspan and Delta are parties to a Participating Carrier Agreement dated as of February 1, 1991, (as otherwise amended, supplemented, or replaced from time to time, the “PCA”) pursuant to which Worldspan distributes Delta’s products and services to travel agencies and other organizations that subscribe with Worldspan for that service (the “Worldspan Agency Base”); and WHEREAS, Delta and Worldspan desire to create a long-term distribution arrangement that will provide the Worldspan Agency Base with the ability to access content regarding Delta’s products and services and access enhanced content and merchandising capabilities in order to consistently serve the traveling public; and WHEREAS, the Parties desire to provide Worldspan with the capability to offer optional products providing access to enhanced content to the Worldspan Agency Base and Delta with the ability to reduce its distribution costs; NOW, THEREFORE, in consideration of their respective undertakings hereunder, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, Worldspan and Delta hereby agree as follows: ARTICLE 1 TERM AND DEFINITIONS 1.1           Term.  The term of this Agreement (the “Term”) will commence on October 1, 2006 (the “Effective Date”) and will continue until (i) June 30, 2013 or such later date to which the Term may be extended by mutual agreement of the Parties, or (ii) any earlier date upon which this Agreement may be terminated in accordance with the provisions hereof or termination of the PCA.  In the event of termination of the PCA, then this Agreement shall also automatically terminate effective at the same time as the PCA is terminated.  Except as expressly provided herein, the PCA remains in full force and effect. 1.2           Definitions.  For purposes of this Agreement, each of the terms listed in Appendix A will have the meaning set forth therein.  Other terms used in this Agreement are defined in the context in which they are used and will have the respective meanings specified there. -------------------------------------------------------------------------------- [**]     Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission.   1 --------------------------------------------------------------------------------   ARTICLE 2 DELTA CONTENT 2.1           Delta Content Availability in the Territory.  During the Term, and subject to the provisions of this Agreement, Delta will provide to Worldspan, directly or indirectly, for distribution via the Worldspan GDS to applicable Worldspan Agencies in the Territory, at no additional charge to Worldspan or, except as specified in this Agreement, to any such Worldspan Agency, timely and complete access to, and the ability to generate Bookings from (except as provided in the PCA and Section 5.7 of this Agreement), each of the following types of Delta Content: (a)           “General Content”, which consists of such Delta Content as Delta designates from time to time in its sole discretion for distribution to the Worldspan Agencies then participating in the General Access Product. (b)           “Full Content”, which consists of all Publicly Available Fares [**] available in the Territory for Delta Flights and related schedule information and access to inventory.  However, the Delta Content made available to any Worldspan Agency then participating in the Subscription Access Product may include, in addition to Full Content, any [**] if and to the extent agreed to by Delta in its sole discretion.  Any distribution restrictions associated with any [**] included in such Delta Content, if any at Delta’s sole and absolute discretion, will be provided to Worldspan by Delta, and Worldspan will make such Fares available only in accordance with the applicable restrictions, including, without limitation, which Worldspan Agency may access any such Fares.  The Full Content available through the Worldspan GDS for any Worldspan Agency will include all Publicly Available Fares [**], related schedule information and access to inventory that Delta makes available for that Travel Agency [**]. (c)           “Super Content”, which consists of Full Content plus the following: (1)           Additional Delta Content.  Delta will provide as part of Super Content the Delta [**], and Opaque Fares.  Delta will provide such [**] and Opaque Fares and related schedule information and access to inventory, together with any associated distribution restrictions, to Worldspan, and Worldspan will make such Fares available only in accordance with the applicable restrictions, including, without limitation, which Worldspan Agency may access any such Fares. (2)           Merchandising and Functionality.  Delta[**], may from time to time provide to Worldspan for access by Eligible Worldspan Agencies participating in the Super Access Product (i) [**], and (ii) certain new functionality that facilitates the user’s ability -------------------------------------------------------------------------------- [**]     Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission.   2 --------------------------------------------------------------------------------   to transact business with the Delta Group, all in accordance with and subject to the provisions of Section 5.2. (3)           Compensation Parity.  Delta will offer each Eligible Worldspan Agency participating in the Super Access Product the opportunity to receive compensation and benefits (including commissions and incentives) [**].  In addition, Delta will offer each customer of the Eligible Worldspan Agencies participating in the Super Access Product benefit opportunities [**].  If Delta offers any such opportunities to receive compensation or benefits to any Eligible Worldspan Agency or customer in accordance with the above, the Eligible Worldspan Agency or customer, as applicable, must accept such offer under the terms and conditions thereof, taken as a whole, [**]. The Parties will meet on an ongoing basis to review Delta’s provisioning of any product or services with its Super Content and any proposed enhancements thereto that will make Super Content more attractive to the Eligible Worldspan Agencies. Delta agrees that it has and will maintain sufficient authorization and approvals to provide such information, access, and inventory on behalf of the Delta Group.  Delta, at its discretion, will make its applicable Fares to be provided pursuant to this Agreement available to Worldspan through the automated filing services provided by Airline Tariff Publishing Company (ATPCO), Worldspan’s internal Private Fare product (which is an Internet-based system used to input Private Fares and associated rules directly into the Worldspan GDS), or other standard industry procedures mutually agreed to by Delta and Worldspan that do not impose significant additional operating or other costs upon Worldspan or Delta.  For the avoidance of doubt, Delta’s provision of Delta Content to Worldspan includes the polling of availability information [**]. 2.2           Delta Content Availability Outside the Territory.  During the Term, Delta will provide to Worldspan for distribution via the Worldspan GDS to applicable Worldspan Agencies outside of the Territory, at no additional charge to Worldspan, [**] located outside the Territory in accordance with the terms and conditions of the PCA. 2.3           Distribution Parity.  In general and except as otherwise specified in this Agreement, in connection with the distribution of Delta Content, [**].  For purposes of the foregoing, (i) Worldspan Agencies participating in the Super Access Product [**] -------------------------------------------------------------------------------- [**]     Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission.   3 -------------------------------------------------------------------------------- [**].  With respect to each of the following types of Delta Content and the Worldspan Distribution Products offered to the Worldspan Agency Base within the Territory, [**] (except as provided in [**]: (a)           Delta will make General Content available to Worldspan for distribution to the Worldspan Agencies in the Territory [**]. (b)           Delta will make Full Content available to Worldspan for distribution to the Worldspan Agencies in the Territory [**]. (c)           Delta will make Super Content available to Worldspan for distribution to the Worldspan Agencies in the Territory [**]. The factors with respect to which Delta will provide distribution parity for each type of Delta Content as set forth in paragraphs (a), (b), and (c) above will include [**]. ARTICLE 3 WORLDSPAN DISTRIBUTION PRODUCTS 3.1           General Access Product.  At all times during the Term, Worldspan shall offer to the Worldspan Agencies in the Territory a generally available distribution product (the “General Access Product”) that provides access only to Delta’s General Content (as it may be modified by Delta from time to time in accordance with the terms of this Agreement) to the Worldspan Agencies who elect to participate in the General Access Product. -------------------------------------------------------------------------------- [**]     Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission.   4 -------------------------------------------------------------------------------- 3.2           Optional New Distribution Products.  In addition to the General Access Product, [**], Worldspan shall offer to the Worldspan Agencies in the Territory two new optional Worldspan Distribution Products, in accordance with and subject to the provisions of Sections 3.3 and 3.5, respectively.  A Worldspan Agency, including all branches thereof, shall [**]. 3.3           Subscription Access Product.  Commencing as soon after the Agreement Date as Worldspan determines it to be feasible, but in any event no later than September 30, 2006, and continuing throughout the Term [**], Worldspan will make available to Worldspan Agencies in the Territory a new optional distribution product (the “Subscription Access Product”) that provides access to Delta’s Full Content (as it may be modified by Delta from time to time in accordance with the terms of this Agreement) to the Worldspan Agencies who elect to participate in the Subscription Access Product. 3.4           Content Access Fee.  Delta retains the right to, and nothing in this Agreement or the PCA shall preclude Delta from, charging any Worldspan Agency participating in either the General Access Product or the Subscription Access Product a Content Access Fee; provided, however, that [**].  Worldspan agrees that it will not add any such Content Access Fee to the Fares displayed by the Worldspan GDS for any Delta Flight.  Worldspan will cooperate with and assist Delta in connection with its activities relating to the Content Access Fee, including without limitation assisting Delta in invoicing and collecting any Content Access Fees. 3.5           Super Access Product.  Commencing as soon after the Agreement Date as Worldspan determines it to be feasible, but in any event no later than September 30, 2006, and continuing throughout the Term, Worldspan will make available to Worldspan Agencies in the Territory [**] a new optional distribution product (the “Super Access Product”) that provides access to Delta’s Super Content to the Worldspan Agencies who elect to participate in the Super Access Product.  Delta agrees not to charge any Worldspan Agency participating in the Super Access Product a Content Access Fee. 3.6           Implementation Plan.  Within thirty days after the Agreement Date, appropriate representatives of the Parties will begin meeting to establish procedures, and estimate the resources required, for implementing the arrangements contemplated by this Agreement. 3.7            Agency Classifications.  In the Billing Information Data Tapes (BIDT) provided to Delta each month during the Term, or via some other commercially reasonable method mutually acceptable to the Parties (such acceptance not to be unreasonably withheld or delayed), -------------------------------------------------------------------------------- [**]     Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission.   5 -------------------------------------------------------------------------------- Worldspan shall indicate, for each Worldspan Agency generating Bookings in the Territory during such month, [**] the Worldspan Distribution Product in which each such Worldspan Agency participated during such month, together with the Bookings generated in the Territory by each such Worldspan Agency. 3.8           [**].  Subject to the following provisions of this Section 3.8, Worldspan covenants and agrees not to provide any Delta Fares or inventory to any Worldspan Agency that is not authorized, in accordance with the terms of this Agreement, to have access to such Fares or inventory.  In furtherance, and not in limitation, of the preceding sentence, [**] such that each Worldspan Agency shall be able to access only the applicable Fares and inventory to which that Worldspan Agency is entitled.  The Parties will also develop and implement reasonable operating procedures to support and effectuate such [**].  In connection with the implementation of the content controls described above, the Parties agree as follows: (a)           [**]. (b)           [**]. (c)           [**]. (d)           [**]. If, at any time during the Term, Worldspan Agencies are repeatedly being provided access to Delta Fares or inventory to which the Worldspan Agencies are respectively not entitled, and Worldspan does not resolve the problem within a reasonable time after becoming aware of the problem, then [**].  With respect to any Booking generated by a Worldspan Agency on the basis of a Fare or inventory to which that Worldspan Agency is not entitled, [**].  However, otherwise and notwithstanding anything herein to the contrary, [**] in connection with the provisions of this Section 3.8. -------------------------------------------------------------------------------- [**]     Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission.   6 --------------------------------------------------------------------------------   ARTICLE 4 FEE ARRANGEMENTS 4.1           Booking Fees in the Territory.  The Booking Fees for Bookings generated in the Territory by Worldspan Agencies during the Term will be as provided in Appendix B-1. 4.2           Booking Fees Outside the Territory.  During the Term, the Booking Fees for Bookings generated by Worldspan Agencies located outside of the Territory [**], which [**]. 4.3           [**].  [**]. ARTICLE 5 GENERAL PROVISIONS 5.1           [**].  [**] 5.2           [**] and Functionality.  [**] or functionality, as -------------------------------------------------------------------------------- [**]     Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission.   7 -------------------------------------------------------------------------------- contemplated by Section 2.1(c)(2) of this Agreement, the Parties will use commercially reasonable efforts to agree upon the terms and conditions (including, without limitation, the associated costs or fees, if any, for any such opportunity or functionality) relating to any such [**] and functionality, as well as any development or other work that may be required in connection therewith, and the Parties will take all commercially reasonable actions necessary to implement any such mutually agreed upon [**] or any such functionality as mutually determined by the Parties.  However, the Parties agree that (i) any delay in Worldspan’s ability to implement any new [**] or functionality will not require Delta to delay the implementation of the opportunity or functionality for any other Distribution Channel, (ii) if the implementation of any new [**] functionality for Worldspan for access via the Worldspan GDS by the applicable Eligible Worldspan Agencies participating in the Super Access Product would create additional costs for Delta, then Delta will promptly notify Worldspan of those costs and the Parties will [**], and (iii) if the implementation of any new opportunity or functionality for Worldspan for access via the Worldspan GDS by the applicable Eligible Worldspan Agencies participating in the Super Access Product would [**]. 5.3           Other Business Opportunities.  At least once during each calendar quarter during the Term, appropriate representatives of Delta and Worldspan will meet to discuss the Delta Group’s distribution requirements and objectives and any ways in which Worldspan can assist Delta with respect to those requirements and objectives.  If [**]. 5.4           Improper Use of Delta Content.  In the event that either Party becomes aware that a Worldspan Agency is improperly using, or failing to use, the Delta Content provided by Worldspan, then that Party shall promptly bring such fact to the attention of the other Party, and the Parties will reasonably cooperate with each other with respect to causing the termination of any such improper use of, or failure to use, such Delta Content. 5.5           Abusive [**].  Worldspan will use commercially reasonable efforts to eliminate abusive Booking action by Worldspan Agencies.  In addition, Worldspan agrees that it will [**].  Delta and Worldspan will work together to identify, and -------------------------------------------------------------------------------- [**]     Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission.   8 -------------------------------------------------------------------------------- implement mutually developed best practices to reduce, any erroneous or abusive Booking practices and behaviors by Worldspan Agencies. 5.6           [**].  Worldspan covenants and agrees that at all times during the Term during which Delta is in material compliance with its obligations under Article 2 of this Agreement, [**]. 5.7           Agency Accreditation.  The Parties acknowledge and agree that Delta retains the right at all times (i) to remove or withhold ticketing authority and/or accreditation to act on its behalf from any Worldspan Agency, and (ii) to limit point of sale booking capabilities of any Worldspan Agency.  Nothing in this Agreement or the PCA shall be interpreted as limiting (a) Delta’s rights under the Airline Reporting Corporation agency appointment agreement with respect to any Worldspan Agency, or (b) Delta’s rights under any agreement or arrangement between Delta and any Worldspan Agency.  If Delta removes or withholds ticketing authority or accreditation from any Worldspan Agency, then Delta shall promptly give Worldspan notice thereof and Worldspan shall restrict that Worldspan Agency’s ability to issue tickets for which Delta is the validating air carrier until Delta reinstates that Worldspan Agency’s ticketing authority and accreditation. 5.8           [**].  [**]. 5.9           [**].  [**]: [**] -------------------------------------------------------------------------------- [**]     Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission.   9 -------------------------------------------------------------------------------- [**] [**] 5.10         [**].  During the Term, (i) Delta’s publicly announced policy will be that the Worldspan Super Access Product is a preferred distribution product of the Delta Group in the Territory and (ii) [**]. 5.11         [**].  [**]. 5.12         [**].  [**] -------------------------------------------------------------------------------- [**]     Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission.   10 -------------------------------------------------------------------------------- [**]. 5.13         PNR Sync Agreement.  The term and effectiveness of the PNR Sync Agreement will be extended until the end of the Term of this Agreement, [**]. 5.14         [**].  Notwithstanding anything in this Agreement to the contrary, the Parties acknowledge and agree that, except as provided in the remainder of this Section 5.14, [**]. -------------------------------------------------------------------------------- [**]     Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission.   11 -------------------------------------------------------------------------------- 5.15         [**].  With respect to any [**] this Agreement, Worldspan agrees that it shall use such [**]. 5.16         Auto Pricing Errors.  Notwithstanding anything herein or in the PCA to the contrary, the Parties agree that if Worldspan cannot accurately auto price specific Fares according to Delta’s specifications, Delta may instruct Worldspan to inhibit auto-pricing such Fares, and Worldspan agrees to use commercially reasonable efforts to comply with such instructions unless and until it can demonstrate to Delta Worldspan’s ability to correctly auto-price such Fares.  Delta agrees that it will comply with industry-standard pricing practices and will file its pricing specifications in automated rules data in accordance with ATPCO standards.  If [**].  Nothing else in this Agreement or the PCA shall be interpreted to prohibit Delta from debiting a Worldspan Agency in connection with auto-pricing errors or from pursuing other available remedies against a Worldspan Agency. ARTICLE 6 TERMINATION AND DISPUTES 6.1           Termination for Cause.  If either Party defaults in the performance of any of its material obligations (or repeatedly defaults in the performance of any of its other obligations) under this Agreement and, after receipt of a written notice specifying the default in reasonable detail, does not substantially cure the default within [**] then the non-defaulting Party may, by giving written notice of termination to the defaulting Party, terminate this Agreement effective as of the termination date specified in the notice of termination. 6.2           Termination due to Force Majeure Event.  If a Force Majeure Event substantially prevents one Party’s performance of its obligations pursuant to this Agreement for a period of [**] or more consecutive days, then the other Party may terminate this Agreement upon [**] days prior written notice to the affected Party. 6.3           Remedies.  If either Party breaches, or threatens to breach, any of its obligations in Article 2, Article 3, Article 4, Article 5 or Article 8, then the other Party may seek equitable relief, including, without limitation, injunctive relief, in any jurisdiction or court of competent authority, without being required to go through the dispute resolution process set forth in Section 6.4 below, to preserve the status quo or prevent irreparable injury while the resolution of any related Dispute is being pursued through such dispute resolution process. -------------------------------------------------------------------------------- [**]     Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission.   12 -------------------------------------------------------------------------------- 6.4           Dispute Resolution.  Any dispute, claim or controversy arising out of or relating in any way to this Agreement, or the relationship or rights and obligations of the Parties resulting from this Agreement, including any dispute as to the existence, validity, construction, interpretation, negotiation, performance, non-performance, breach, termination, or enforceability of this Agreement, (a “Dispute”) will be resolved in accordance with the following procedures: (a)           Upon the request of either Party, the Parties will promptly exercise reasonable business efforts to resolve the Dispute at the operational level. (b)           If the Parties have not been able to resolve the Dispute at the operational level with twenty-four hours after the request described in subsection (a), then, upon the written request of either Party, which request must identify the Dispute in reasonable detail, each Party will designate a senior executive officer who will negotiate in good faith with the senior executive officer designated by the other Party in an effort to resolve the Dispute. (c)           If the senior executive officers do not resolve the Dispute within fifteen days after the request described in subsection (b), then, upon the written request of either Party, the Dispute will be settled through final, binding and confidential arbitration in accordance with the then-current Commercial Arbitration Rules of the American Arbitration Association.  The arbitration tribunal will consist of a single arbitrator agreed upon by the Parties or, in the absence of agreement, appointed in accordance with such Rules.  The venue for the arbitration will be Atlanta, Georgia, and the award of the arbitrator will be final and binding.  Each Party retains the right to seek judicial assistance (i) to compel arbitration; (ii) to obtain interim measures to preserve the status quo or prevent irreparable injury pending arbitration; and (iii) to enforce any decision of the arbitrator, including the final award. (d)           Notwithstanding the existence of any Dispute or the fact that the dispute resolution procedures set forth in this Section 6.4 have been or may be invoked, each Party will continue to perform its obligations under this Agreement, unless and until this Agreement is terminated in accordance with the provisions of this Agreement. ARTICLE 7 REPRESENTATIONS AND WARRANTIES 7.1           Representations and Warranties of Worldspan.  Worldspan represents and warrants to Delta as of the Agreement Date as follows: (a)           Organization and Qualification.  Worldspan is a duly organized and validly existing limited partnership in good standing under the laws of the State of Delaware and has the general partnership power and authority to own, operate and use its assets and operate its business as contemplated by this Agreement. (b)           Authority Relative to this Agreement.  Worldspan has the power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby in accordance with the terms hereof.  The execution and delivery of this Agreement and the consummation of the transactions contemplated   -------------------------------------------------------------------------------- [**]     Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission.   13 -------------------------------------------------------------------------------- hereby have been duly authorized by all necessary partnership action on the part of Worldspan.  This Agreement has been duly and validly executed and delivered by Worldspan and is, assuming due execution and delivery thereof by Delta, a valid and binding obligation of Worldspan, enforceable against Worldspan in accordance with its terms. (c)           Compliance.  All services performed by Worldspan pursuant to this Agreement or otherwise shall be conducted in compliance in all material respects with all applicable statutes, orders, rules, regulations and notifications, whether now in effect or hereafter promulgated, of all governmental agencies having jurisdiction over its operations, including, but not limited to, the U.S. Department of Transportation. (d)           No Conflict.  The execution, delivery and performance by Worldspan of this Agreement do not and will not (i) contravene or conflict with the limited partnership agreement of Worldspan; (ii) contravene or conflict with or constitute a violation of any provision of any law, statute, judgment, decree, order, rule or regulation of any governmental authority binding upon or applicable to Worldspan or any of its properties or assets; (iii) result in a violation or a breach of, or constitute a default or require any consent under or give rise to a right of termination, cancellation or acceleration of any right or obligation of Worldspan or to a loss of any benefit to which Worldspan is entitled under any provision of any note, bond, mortgage, indenture, lease, agreement, contract, obligation or other instrument to which the Worldspan is bound, or any license, franchise, permit or other similar authorization held by Worldspan; (iv) result in the creation or imposition of any liens in favor of any third person or entity; or (v) constitute any event which, after notice or lapse of time or both, would result in such violation, breach, conflict, default, acceleration or creation or imposition of liens. 7.2           Representations and Warranties of Delta.  Delta represents and warrants to Worldspan as of the Agreement Date as follows: (a)           Organization and Qualification.  Delta is a duly incorporated and validly existing corporation in good standing under the laws of the State of Delaware and has the general corporate power and authority to own, operate and use its assets and operate its business as contemplated by this Agreement. (b)           Authority Relative to this Agreement.  Delta has the corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby in accordance with the terms hereof.  The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Delta.  This Agreement has been duly and validly executed and delivered by Delta and is, assuming due execution and delivery thereof by Worldspan, a valid and binding obligation of Delta, enforceable against Delta in accordance with its terms. -------------------------------------------------------------------------------- [**]     Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission.   14 -------------------------------------------------------------------------------- (c)           No Conflict.  The execution, delivery and performance by Delta of this Agreement do not and will not (i) contravene or conflict with the articles of incorporation of Delta; (ii) contravene or conflict with or constitute a violation of any provision of any law, statute, judgment, decree, order, rule or regulation of any governmental authority binding upon or applicable to Delta or any of its properties or assets; (iii) result in a violation or a breach of, or constitute a default or require any consent under or give rise to a right of termination, cancellation or acceleration of any right or obligation of Delta or to a loss of any benefit to which Delta is entitled under any provision of any note, bond, mortgage, indenture, lease, agreement, contract, obligation or other instrument to which the Delta is bound, or any license, franchise, permit or other similar authorization held by Delta; (iv) result in the creation or imposition of any liens in favor of any third person or entity; or (v) constitute any event which, after notice or lapse of time or both, would result in such violation, breach, conflict, default, acceleration or creation or imposition of liens. (d)           Bankruptcy.  The Parties acknowledge that Delta and certain of its Affiliates (collectively, the “Debtors”) filed for bankruptcy protection pursuant to chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) on September 14, 2005, in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”).  [**] ARTICLE 8 MISCELLANEOUS PROVISIONS 8.1           Prior Agreement.  This Agreement is intended to be a supplement to the PCA, which will continue in full force and effect during the Term of this Agreement.  To the extent that there is any inconsistency between the terms and conditions of this Agreement and the terms and conditions of the PCA, the terms and conditions of this Agreement will prevail.  During [**].  [**]. 8.2           Successors and Assigns.  This Agreement will survive any change of control of either Party and will be binding upon, inure to the benefit of, and be enforceable by and against each Party and any successor thereto.  However, neither Party may, without the prior written consent of the other, assign this Agreement or any rights or obligations hereunder to any other   -------------------------------------------------------------------------------- [**]         Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 15 --------------------------------------------------------------------------------   entity unless that other entity (i) acquires all or substantially all of the assets of the assigning Party, and (ii) either agrees, or by operation of law is required, to comply with and be bound by the provisions of this Agreement to the same extent as the assigning Party.  In connection therewith, the Parties agree as follows: [**]. [**]. 8.3           Confidentiality.  Each Party agrees that all proprietary and confidential information of the other, including information relating to the negotiation and the terms and conditions of this Agreement, will be held in strict confidence and protected by the same degree of care as such Party uses to protect the confidentiality of its own information of a similar nature, but no less than a reasonable degree of care, will be used only for purposes of this Agreement, and will not be disclosed to any third party by such Party without the prior written consent of the other, except as may be required by legal, accounting, or regulatory requirements.  If a Party is required to disclose the other Party’s confidential information by legal, accounting or regulatory requirements, then the receiving Party must (a) notify the disclosing Party of any actual or threatened disclosure of which the receiving Party has knowledge, of any legal compulsion of disclosure, and of any actual legal obligation of disclosure immediately upon becoming so obligated and (b) cooperate with the disclosing Party’s reasonable, lawful efforts to resist, limit or delay disclosure.       -------------------------------------------------------------------------------- [**]         Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 16 --------------------------------------------------------------------------------   8.4           Public Communications.  Worldspan and Delta will jointly prepare one or more press releases regarding the general subject matter of this Agreement, including the provision of Delta Content for Worldspan Agencies.  Notwithstanding the provisions of Section 8.3, each Party may make announcements intended for internal distribution within that Party’s organization and any disclosures required by legal, accounting, or regulatory requirements, and may publicly disclose the existence and general provisions, including the term, of this Agreement, including the fact that Worldspan Agencies may obtain access to certain Delta Content described in this Agreement through the Worldspan GDS. 8.5           Severability.  If any court of competent jurisdiction, arbitrator, regulatory body, or other legal authority, as the case may be, determines that any provision of this Agreement violates any applicable statute, law, rule, or regulation, whether now in existence or enacted or adopted at a later date, or is otherwise unlawful, invalid or unenforceable for any reason, it is the intention of the Parties that such authority will have the power to modify such provision to the extent necessary to render the provision enforceable, and such provision as so modified will be enforced.  Any such findings of invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of the other provisions of this Agreement, which will remain in full force and effect. 8.6           Waiver.  No waiver of any breach of this Agreement by either Party shall constitute a waiver of any subsequent breach of the same or any other provisions hereof, and no waiver shall be effective unless made in writing. 8.7           Force Majeure.  Neither Party will be deemed in default of this Agreement as a result of any failure to perform its obligations that is caused by an act of God or governmental authority, a strike or labor dispute, fire, war, failure of the other Party or third party suppliers, or for any other cause beyond the reasonable control of that Party (a “Force Majeure Event”). 8.8.          No Agency.  Nothing in this Agreement is intended to or will be construed to create or establish an agency, partnership, or joint venture relationship between the Parties. 8.9           Counterparts.  This Agreement may be executed in two or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, shall be deemed to constitute one and the same agreement. 8.10         Governing Law.  This Agreement shall be governed by, construed and enforced according to the laws of the State of Georgia, without regard to its principles of conflicts of laws. Subject to the provisions of Section 6.4, any judicial action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may only be brought in the courts of the State of Georgia in Fulton County, or, if it has or can acquire jurisdiction, in the United States District Court for the Northern District of Georgia, and each of the Parties hereto irrevocably consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives, to the fullest extent permitted by law, any objection to venue laid therein.  Process in any action or proceeding referred to in the proceeding       -------------------------------------------------------------------------------- [**]         Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 17 --------------------------------------------------------------------------------   sentence may be served on any party anywhere in the world.  Each Party further agrees to waive any right to a trial by jury. 8.11         Construction.  The captions used in this Agreement are for reference purposes only and are to be given no effect in the construction or interpretation of this Agreement.  As used in this Agreement, the words “hereof” and “hereunder” and other words of similar import refer to this entire Agreement and not any separate portion hereof, unless otherwise specified.  The use in this Agreement of pronouns of the masculine, feminine, or neuter gender shall be deemed to include the other genders, as the context may require.  Any reference in this Agreement to an Article, Section, or Appendix shall be considered a reference to that Article or Section of, or that Appendix to, this Agreement, unless the context indicates otherwise.  As used in this Agreement, the word “including” and its derivatives (such as “include” and “includes”) shall be interpreted as if it were followed by the phrase “without limitation” unless the context indicates otherwise. 8.12         No Third Party Beneficiaries.  No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any person or entity other than the Parties hereto and their respective permitted successors and assigns. 8.13         Limitation of Damages.  NEITHER PARTY SHALL BE LIABLE FOR ANY INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING LOST REVENUES, LOST PROFITS, OR LOST PROSPECTIVE ECONOMIC ADVANTAGE, BUT NOT INCLUDING ANY AMOUNTS PAYABLE PURSUANT TO THIS AGREEMENT, ARISING FROM THIS AGREEMENT OR ANY BREACH HEREOF. 8.14         Audit.  Either Party may, upon reasonable notice to the other Party, at its discretion and expense, engage an independent third-party auditor to (i) with respect to Delta, verify Worldspan’s reporting of Bookings, including which Worldspan Distribution Product was used for the Booking and whether the Booking was made by an Online Worldspan Agency or a Traditional Worldspan Agency, and Worldspan’s obligations with respect to Delta confidential information and [**], and (ii) with respect to Worldspan, verify Delta’s compliance with the terms and conditions of Article 2 of this Agreement.  Any such auditor must enter into a non-disclosure agreement with the other Party substantially similar with the rights and obligations set forth in Section 8.3 of this Agreement.  Each Party agrees to make relevant information available to the auditor of the other Party, provided such other Party reimburses the audited Party for any reasonable costs and expenses incurred with respect to such availability.  Each Party shall be limited to conduct only one (1) audit per Contract Year, and no audit shall unreasonably interfere with the conduct of the audited Party’s business. 8.15         Entire Agreement.  This Agreement, including the Appendices attached hereto, and the PCA constitute the entire agreement and understanding of the Parties with respect to the subject matter hereof and supersedes all prior agreements and understandings with respect to such subject matter, including the Prior Content Agreement, which shall be terminated effective as of the Effective Date.  Notwithstanding the foregoing, the PCA will continue to be in full force and effect as provided in Sections 1.1 and 8.1.       -------------------------------------------------------------------------------- [**]         Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 18 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by its duly authorized representative as of the Agreement Date. Delta Air Lines, Inc. Worldspan, L.P.         By: /s/ Pamela Elledge   By: /s/ Ninan Chacko   Title: Vice President—Global Sales and Distribution   Title: Chief Commercial Officer         -------------------------------------------------------------------------------- [**]         Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 19 -------------------------------------------------------------------------------- APPENDIX A Definitions “Affiliate” means, with respect to an Person, any other Person that, directly or indirectly, owns or controls that Person, is owned or controlled by that Person, or is under common ownership or control with that Person, where “ownership” means owning fifty percent or more of the controlling interest in an entity, and “control” means the ability to direct the management or affairs of a Person. “Agreement Date” has the meaning specified in the first paragraph of this Agreement. [**] [**] “Booking” means an airline passenger segment created by (or secured to) a Worldspan Agency in the itinerary portion of a passenger name record (PNR) for transportation on a Delta Flight, including those types of segments treated as Bookings as of the Agreement Date.  For example, one passenger on a direct flight will constitute one Booking, one passenger on a two-   -------------------------------------------------------------------------------- [**]         Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-1 -------------------------------------------------------------------------------- segment trip with connecting flights will constitute two Bookings, and multiple passengers within the same PNR segment will constitute multiple Bookings. “Booking Fee” means, with respect to a Booking, the fee that Worldspan charges Delta on a per-segment basis for that Booking. “Cancellation” means a Booking that is canceled by the applicable Worldspan Agency through the Worldspan GDS prior to the date of departure for that Booking. [**] “Content Access Fee” means a fee that Delta charges a Person in connection with accessing and/or generating bookings from Delta Content. “Contract Year” means a twelve-month period commencing on September 1, 2006 or any anniversary thereof, but only that portion of any such twelve-month period as occurs during the Term. [**] [**] “Delta” has the meaning specified in the first paragraph of this Agreement. “Delta Content” means Fares for Delta Flights, together with related schedule information and associated access to inventory and seat availability, and corresponding information for any other products or services, if any, provided by the Delta Group. “Delta Flight” means any scheduled air transportation that is marketed or operated by, and using the air carrier designator code of, Delta or any of its Affiliates. “Delta Group” means Delta and its air carrier Affiliates. “Delta Internet Site” means an Internet site branded predominantly under Delta’s or its Affiliate’s trademarks, service marks or trade names which contains information about the schedules, Fares and seat inventory of Delta Flights, and provides Delta’s customers with the   -------------------------------------------------------------------------------- [**]         Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-2   -------------------------------------------------------------------------------- ability to review, make reservations for, or purchase air transportation services offered by the Delta Group. “Designated Codeshare” means, for any given air carrier and except as the Parties may otherwise agree, another air carrier that (i) operates flights that are marketed using the air carrier designator code of the given air carrier, and (ii) has an arrangement with the given air carrier pursuant to which the booking fees associated with bookings on those flights that are incurred by the given air carrier, as the marketing carrier, may be rebilled or passed through to the other air carrier, as the operating carrier.  The Parties agree that (x) the air carriers listed in Section 1(a) of Appendix Dare Designated Codeshares for Delta as of the Agreement Date, but none of the air carriers listed in Section 1(b) of Appendix D will be considered a Designated Codeshare for Delta unless and until the Parties mutually agree to consider it such a Designated Codeshare, and (y) Delta is a Designated Codeshare for the air carriers listed in Section 2 of Appendix D as of the Agreement Date. “Direct Connect” means, with respect to any air carrier, a direct connection to the air carrier’s internal reservations system by a Travel Agency, corporation, or other organization that provides the ability to reserve, purchase, or ticket travel on the air carrier’s flights without generating a booking through a GDS. “Dispute” has the meaning specified in Section 6.4. “Distribution Channel” means any Internal Distribution Channel or External Distribution Channel. “Effective Date” has the meaning specified in Section 1.1. “Eligible Worldspan Agency” means each Worldspan Agency, including ARC-accredited and non-ARC-accredited agencies, that, at the applicable time, is accredited by Delta through the granting of ticketing authority, or otherwise has booking authority, in the Territory. [**] “External Distribution Channel” means a channel for the distribution of Delta Content that is not an Internal Distribution Channel, including any (i) GDS in which Delta is a participant, or (ii) Direct Connect with a direct connection to Delta’s internal reservations system. “Fare” means the price charged by Delta for air travel, together with the necessary fare rules, tariffs and construction principles applicable thereto.  For the avoidance of doubt, a Fare shall not include (i) any fee or surcharge imposed by Delta on any person or entity distributing or selling such Fare to the consumer or user of such Fare, or (ii) any frequent flyer program miles or other loyalty benefit provided by Delta to the purchaser or user of such Fare. “Force Majeure Event” has the meaning specified in Section 8.7. “Full Content” has the meaning specified in Section 2.1(b).   -------------------------------------------------------------------------------- [**]         Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-3   -------------------------------------------------------------------------------- “GDS” means a global distribution system operated by [**] each as of the Agreement Date, or any similar system offered to subscribing Travel Agencies that provides aggregated information about the schedules, fares, or availability of the products and services of multiple air carriers and enables such subscribing Travel Agencies to make reservations and issue tickets for such products and services.  [**] “General Access Booking” means a Booking generated in the Territory by a Worldspan Agency that is then a participant in the General Access Product. “General Access Product” has the meaning specified in Section 3.1. “General Content” has the meaning specified in Section 2.1(a). [**] [**] “Internal Distribution Channel” means (i) Delta’s reservations or sales personnel, (ii) the internal reservations system used by Delta, (iii) any Delta Internet Site, and (iv) any publicly accessible Internet web site branded under the global airline alliance of which Delta is a member as of the applicable time. “Internet Channel” means any Internet web site, other than a Delta Internet Site, that derives [**] or more of its revenue from the sale of travel products or services to consumers. [**] [**]   -------------------------------------------------------------------------------- [**]         Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-4   -------------------------------------------------------------------------------- [**] “Online Travel Agency” or “OTA” means any Travel Agency (or group of Affiliated Travel Agencies who are marketed under the same brand name) whose primary business is operating one or more publicly accessible Internet Channels for the distribution of travel products or services. “Online Worldspan Agency” means any Worldspan Agency that is an Online Travel Agency. “Opaque Fare” means, with respect to any air carrier, a Private Fare, together with related schedule information and associated access to inventory, that is offered for sale by or on behalf of that air carrier in such a way that, until after an irrevocable commitment to purchase the particular fare has been made, there is no disclosure of (a) the air carrier identity, and (b) at least one of the following: (i) the exact time of departure, or (ii) the exact time of arrival. [**] [**] [**] [**]   -------------------------------------------------------------------------------- [**]         Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-5   -------------------------------------------------------------------------------- [**]. “Party” means each of Delta and Worldspan. “PCA” has the meaning specified in the recitals of this Agreement. [**] “Person” means any individual, firm, corporation, company, partnership, association, limited liability company, joint-stock company, trust, unincorporated organization or other entity. “PNR Sync Agreement” means the PNR Sync Agreement, dated December 3, 2003, between Worldspan and Delta. [**] “Prior Content Agreement” means, collectively, the letter agreement regarding fare content, dated December 3, 2003, between Worldspan and Delta and the Online Full Content Agreement, dated as of June 22, 2004, between Worldspan and Delta. [**] [**] “Publicly Available Fare” means, with respect to any air carrier, a fare, together with related schedule information and associated access to inventory, offered for sale by or on behalf of that air carrier to the general public in the Territory, including its Web Fares but excluding all of its Unpublished Fares. “Subscription Access Booking” means a Booking generated in the Territory by a Worldspan Agency that is then a participant in the Subscription Access Product.   -------------------------------------------------------------------------------- [**]         Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-6   --------------------------------------------------------------------------------                 “Subscription Access Product” has the meaning specified in Section 3.3. “Super Access Booking” means a Booking generated in the Territory through the Super Access Product by a Worldspan Agency that is then a participant in the Super Access Product. “Super Access Product” has the meaning specified in Section 3.5. “Super Content” has the meaning specified in Section 2.1(c). [**] [**] “Term” has the meaning specified in Section 1.1. “Territory” means (i) the 50 United States and the District of Columbia, (ii) the U.S. Virgin Islands, and (iii) Puerto Rico. “Traditional Travel Agency” means any Travel Agency [**]. “Traditional Worldspan Agency” means any Worldspan Agency that is a Traditional Travel Agency.  For the avoidance of doubt, Traditional Worldspan Agencies include corporations and other organizations using Trip Manager or any successor or comparable product offered by Worldspan. “Travel Agency” means a Person that books, sells, or fulfills the products or services of travel suppliers through the use of a GDS. “Trip Manager” means Worldspan’s Internet-based corporate travel booking tool, as it may be modified by Worldspan from time to time, that allows a company’s authorized users to create, modify, and view airline and other travel reservations made through the Worldspan GDS. “TSA Booking” means any booking for transportation on a Delta Flight with respect to which Delta is not required to pay a booking fee to any GDS provider, whether pursuant to an agreement reached prior to the Effective Date or during the Term. [**]   -------------------------------------------------------------------------------- [**]         Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-7   --------------------------------------------------------------------------------                 “Web Fare” means, with respect to any air carrier, a fare, together with related schedule information and associated access to inventory, that is made available to the public by that air carrier through the primary internal Internet web site owned, operated or controlled by such air carrier, and with respect to Delta, are filed under a ticket designator code beginning with WP or WN, or such other designator code as may be provided to Worldspan by Delta from time to time.  However, an air carrier’s Web Fares do not include its Private Fares, Promotional Fares, or Opaque Fares. [**] “Worldspan” has the meaning specified in the first paragraph of this Agreement. “Worldspan Agency” means, as of any time, any Travel Agency or other Person (including the home agency and all branches thereof) that at that time uses the Worldspan GDS to shop for, price, book, sell, or fulfill the products or services of travel suppliers or to enable end users to shop for, reserve, book, and pay for the products and services of travel suppliers.  For the avoidance of doubt, “Worldspan Agency” includes both Traditional Worldspan Agencies and Online Worldspan Agencies. “Worldspan Agency Base” has the meaning specified in the recitals of this Agreement. “Worldspan Distribution Product” means each of the General Access Product, the Subscription Access Product, and the Super Access Product. “Worldspan GDS” means the GDS operated by Worldspan, including Trip Manager, or any successor thereto. [**] -------------------------------------------------------------------------------- [**]         Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-8   -------------------------------------------------------------------------------- APPENDIX B-1 Financial Provisions for Bookings within the Territory 1.             [**] Booking Fees. (a)           [**] Agencies.  Subject to the provisions of Section [**]. (b)           [**] Worldspan Agencies.  Except for any [**] Online Bookings for which the Booking Fees are determined pursuant to the provisions of Section 1(c) of this Appendix B-1, (i) the Booking Fee payable to Worldspan by Delta for each [**] generated by [**] generated by any other [**] during any Contract Year will be the applicable Booking Fee set forth in the following table, which is based upon the [**], as set forth in the following table: [**] [**] (c)           [**] Bookings.  Notwithstanding the provisions of [**]       -------------------------------------------------------------------------------- [**]                          Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission.   B-1-1 -------------------------------------------------------------------------------- [**] is adjusted as a result of that transaction. 2.             General [**] Fees.  [**]. 3.             [**] Bookings.  Notwithstanding the provisions of Section [**] [**] [**] is adjusted as a result of that transaction. 4.             [**] [**] [**] [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. B-1-2 -------------------------------------------------------------------------------- [**]. 5.             [**].  [**] 6.             Operating Carrier Billing.  Notwithstanding the foregoing, the Parties acknowledge and agree as follows: (a)           With respect to bookings, [**] generated in the Territory through any Worldspan Distribution Product for travel on any flight that is marketed using the air carrier designator code of Delta or any of its Affiliates, but is operated by another air carrier that is a Designated Codeshare for Delta and is then a party to a Participating Carrier Agreement with Worldspan, Worldspan will bill the operating air carrier, rather than Delta, for the booking fees associated with those bookings, which booking fees will be determined in accordance with the provisions of the operating air carrier’s Participating Carrier Agreement, as then amended or supplemented. (b)           With respect to bookings, [**] generated in the Territory through any Worldspan Distribution Product for travel on any flight operated by Delta (or any of its Affiliates) that is marketed using the air carrier designator code of another Super Content Airline for which Delta is a Designated Codeshare, Worldspan will bill Delta, rather than the other Super Content Airline, for the booking fees associated with those bookings, which booking fees will be determined in accordance with the provisions of this Agreement. In connection with the provisions of this Section 6, Delta agrees to provide Worldspan promptly after the Agreement Date written confirmation of, and to thereafter give Worldspan prior written notice of any change in, (i) each other air carrier that is a Designated Codeshare for Delta, as well as the flight number ranges under Delta’s (or its Affiliate’s) air carrier designator code that are used for flights operated by the Designated Codeshare that are marketed under Delta’s (or its Affiliate’s) air carrier designator code, and (ii) each other air carrier for which Delta is a Designated Codeshare, as well as the flight number ranges under the other air carrier’s air carrier designator code that are used for flights operated by Delta that are marketed under such other air carrier’s air carrier designator code. [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. B-1-3 -------------------------------------------------------------------------------- 7.             Invoice Reconciliation.  If, despite Worldspan’s good faith efforts to accurately prepare each monthly invoice, it is subsequently determined that the actual amount payable by Delta for any month differs from the amount previously invoiced by Worldspan for that month, then the applicable Party will promptly make any additional payments, or issue any refunds or credits, that may be necessary to reconcile the amount previously invoiced for that month with the actual amount payable for that month. 8.             Time of Payment.  Any amounts to which either Party is entitled pursuant to this Appendix B-1 will be payable in accordance with the payment procedures that the Parties use for amounts payable under the PCA. 9.             Cancellation Fees.  [**] 10.           [**].        [**] 11.           [**].        [**] 12.           [**].        [**] [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. B-1-4 -------------------------------------------------------------------------------- APPENDIX B-2 Financial Provisions for Bookings outside of the Territory [**]   -------------------------------------------------------------------------------- [**]         Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. B-2-1 -------------------------------------------------------------------------------- APPENDIX C Designated Codeshares [**]           -------------------------------------------------------------------------------- [**] Confidential Treatment requested for redacted portion; redacted portion has been filed separately with the Commission. C-1 -------------------------------------------------------------------------------- [**] -------------------------------------------------------------------------------- [**]     Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission.   C-2 --------------------------------------------------------------------------------

Exhibit 10.12 Summary Sheet for Director Fees Effective January 1, 2006, each non-employee member of the Board will receive $1,000 for each Board meeting attended in person and $500 for each telephonic meeting of the Board participated in, and $1,000 for each committee meeting attended and $500 participated in by telephone of which such non-employee member of the Board is a member. In 2006, the Chairman of the Board will receive an annual retainer of $49,000. Each non-employee member of the Board, other than the Chairman of the Board and Audit Committee Chair, will receive an annual retainer of $24,000. The Chairman of the Audit Committee will receive an annual retainer of $34,000. Each of the annual retainers will be paid on a quarterly basis. Under the Corporation’s Non-Employee Directors Stock Option Plan, directors who are not employees of the Corporation or any of its subsidiaries receive an automatic one-time grant of an option to acquire 5,000 Common Shares of the Corporation upon their initial election or appointment to the Board of Directors and are also eligible to receive discretionary grants. A copy of the form of stock option agreement is filed as an exhibit to the Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 3, 2005. If the 2006 Equity Incentive Plan is approved by shareholders at the 2006 Annual Meeting, no further grants will be made under the Non-employee Directors Stock Option Plan. If approved by the shareholders at the 2006 Annual Meeting, directors will be eligible to receive awards pursuant to the 2006 Equity Incentive Plan. --------------------------------------------------------------------------------

  Exhibit 10.24     ROYAL CARIBBEAN CRUISES LTD CURRENT BOARD OF DIRECTOR COMPENSATION SCHEDULE           Cash Compensation   Annual   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   Annual Retainer   $ 45,000   Board Per Meeting Fees   $ 1,200   Audit Committee Chairman Retainer   $ 20,000   Compensation Committee Retainer $ 10,000   Other Committee Chairman Retainer   $ 6,000   Audit Committee Member Retainer   $ 10,000   Other Committee Member Retainer   $ 3,000   Committee Per Meeting Fees   $ 1,200   Annual Total Cash Compensation Cap   $ 100,000     At the discretion of the Board, each non-employee director is eligible to receive an annual grant of equity awards with an aggregate value on the date of grant equal to $70,000. Sixty-seven percent of this annual grant is awarded in the form of restricted stock units and thirty-three percent is awarded in the form of options to purchase the Company's common stock.   The Company provides Board members with one passenger cabin, upon request, on a complimentary basis. Immediate family traveling with Board members will also receive a “family rate” of $40 per person per day. Non-family guests of Board members may purchase the cabin of their choice at a 25% reduction of the “lowest available fare” at time of booking.          

  Exhibit 10.39(b) FOURTH AMENDMENT TO THE AMENDED AND RESTATED SERIES 2002-2 SUPPLEMENT           This FOURTH AMENDMENT TO THE AMENDED AND RESTATED SERIES 2002-2 SUPPLEMENT (this “Amendment”), dated as of November 28, 2005, amends the Amended and Restated Series 2002-2 Supplement (the “Series 2002-2 Supplement”), dated as of November 22, 2002, as amended by the First Amendment thereto, dated as of October 30, 2003, the Second Amendment thereto, dated as of June 3, 2004, and the Third Amendment thereto, dated November 30, 2004, and is among CENDANT RENTAL CAR FUNDING (AESOP) LLC, a special purpose limited liability company established under the laws of Delaware (“CRCF”), CENDANT CAR RENTAL GROUP, INC. (as assignee of Avis Rent A Car System, Inc.), a corporation organized under the laws of Delaware (“CCRG”), as administrator, JPMORGAN CHASE BANK, N.A. (formerly known as JPMorgan Chase Bank), a national banking association, as administrative agent, the several commercial paper conduits listed on Schedule I thereto (each a “CP Conduit Purchaser”), the several banks set forth opposite the name of each CP Conduit Purchaser on Schedule I thereto (each an “APA Bank” with respect to such CP Conduit Purchaser), the several agent banks set forth opposite the name of each CP Conduit Purchaser on Schedule I thereto (each a “Funding Agent” with respect to such CP Conduit Purchaser), THE BANK OF NEW YORK, a New York banking corporation, as trustee (in such capacity, the “Trustee”) and as agent for the benefit of the Series 2002-2 Noteholders (in such capacity, the “Series 2002-2 Agent”), to the Second Amended and Restated Base Indenture, dated as of June 3, 2004, between CRCF and the Trustee (as amended, modified or supplemented from time to time, exclusive of Supplements creating a new Series of Notes, the “Base Indenture”). All capitalized terms used herein and not otherwise defined herein shall have the respective meanings provided therefor in the Definitions List attached as Schedule I to the Base Indenture (as amended through the date hereof) or the Series 2002-2 Supplement, as applicable. W I T N E S S E T H:           WHEREAS, pursuant to Section 12.2(ii) of the Base Indenture, any amendment to any Supplement which extends the due date for any Note requires the consent of CRCF, the Trustee and each affected Noteholder of the applicable Series of Notes;           WHEREAS, the parties desire to amend the Series 2002-2 Supplement to extend the Scheduled Expiry Date; and           WHEREAS, CRCF has requested the Trustee, the Series 2002-2 Agent and each CP Conduit Purchaser, APA Bank and Funding Agent to, and, upon the effectiveness of this Amendment, CRCF, the Trustee, the Series 2002-2 Agent and each CP Conduit Purchaser, APA Bank and Funding Agent have agreed to, amend certain provisions of the Series 2002-2 Supplement as set forth herein;           NOW, THEREFORE, it is agreed:   --------------------------------------------------------------------------------     1.   Amendment to Defined Terms. The following defined term, as set forth in Article I(b) of the Series 2002-2 Supplement, is hereby amended and restated in its entirety as follows:           ““Scheduled Expiry Date” means, with respect to any Purchaser Group, the later of (a) March 29, 2006 and (b) the last day of any extension thereof made in accordance with Section 2.6(b).”   2.   Waiver of Notice Requirement and Certificate and Consent to Extension under Section 2.6(b). Each Purchaser Group, by executing this Amendment, solely with respect to this Amendment, (i) hereby waives the requirements set forth in Section 2.6(b) of the Series 2002-2 Supplement that CRCF provide the Administrative Agent with (x) sixty (60) days prior written notice of any proposed extension of the Scheduled Expiry Date and (y) a certificate from the chief financial officer of CRCF to the effect set forth in Schedule 8.3(d) of the Base Indenture and (ii) hereby agrees to the extension of the Scheduled Expiry Date as effected by this Amendment.     3.   This Amendment is limited as specified and, except as expressly stated herein, shall not constitute a modification, acceptance or waiver of any other provision of the Series 2002-2 Supplement.     4.   This Amendment shall become effective as of the first date (such date, the “Amendment Effective Date”) on which each of the following have occurred: (i) each of the parties hereto shall have executed and delivered this Amendment to the Trustee, and the Trustee shall have executed this Amendment and (ii) the Rating Agency Consent Condition shall have been satisfied with respect to this Amendment.     5.   From and after the Amendment Effective Date, all references to the Series 2002-2 Supplement shall be deemed to be references to the Series 2002-2 Supplement as amended hereby.     6.   This Amendment may be executed in separate counterparts by the parties hereto, each of which when so executed and delivered shall be an original but all of which shall together constitute one and the same instrument.     7.   THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.           -2- --------------------------------------------------------------------------------             IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective duly authorized officers as of the date above first written.                                                   CENDANT RENTAL CAR FUNDING             (AESOP) LLC, as Issuer                                     By:   /s/ Lori Gebron                           Name: Lori Gebron             Title: Vice President       --------------------------------------------------------------------------------                         THE BANK OF NEW YORK, as Trustee and Series 2002-2 Agent                                     By:   /s/ Eric A. Lindahl                           Name: Eric A. Lindahl             Title: Agent       --------------------------------------------------------------------------------   AGREED, ACKNOWLEDGED AND CONSENTED:                                             SHEFFIELD RECEIVABLES CORPORATION,         as a CP Conduit Purchaser under the Series         2002-2 Supplement     By:   Barclays Bank PLC         as Attorney-in-Fact               By:   /s/ Janette Lieu                   Name: Janette Lieu         Title: Director                             BARCLAYS BANK PLC,         as a Funding Agent and an APA Bank under         the Series 2002-2 Supplement     By:   /s/ Jeffrey Goldberg                   Name: Jeffrey Goldberg         Title: Associate Director       --------------------------------------------------------------------------------                 GEMINI SECURITIZATION CORP., LLC,         as a CP Conduit Purchaser under the Series         2002-2 Supplement     By:   /s/ Geraldine St-Louis                   Name: Geraldine St-Louis         Title: Vice President                                       DEUTSCHE BANK AG, NEW YORK BRANCH,         as a Funding Agent and an APA Bank under         the Series 2002-2 Supplement     By:   /s/ Michael Cheng                   Name: Michael Cheng         Title: Director               By:   /s/ Kevin Tanzer                   Name: Kevin Tanzer         Title: Vice President       --------------------------------------------------------------------------------                 LIBERTY STREET FUNDING CORPORATION,         as a CP Conduit Purchaser under the Series         2002-2 Supplement     By:   /s/ Bernard J. Angelo                   Name: Bernard J. Angelo         Title: Vice President                                       THE BANK OF NOVA SCOTIA,         as a Funding Agent and an APA Bank under         the Series 2002-2 Supplement     By:   /s/ Norman Last                   Name: Norman Last         Title: Managing Director       --------------------------------------------------------------------------------                 YC SUSI TRUST,         as a CP Conduit Purchaser under the Series         2002-2 Supplement               By:   Bank of America, National Association,         as Administrative Trustee               By:   /s/ John Zeszutek                   Name: John Zeszutek         Title: Vice President                                       BANK OF AMERICA, NATIONAL ASSOCIATION,         as a Funding Agent and an APA Bank under         the Series 2002-2 Supplement     By:   /s/ John Zeszutek                   Name: John Zeszutek         Title: Vice President       --------------------------------------------------------------------------------                 PARADIGM FUNDING LLC,         as a CP Conduit Purchaser under the Series         2002-2 Supplement     By:   /s/ Doris J. Hearn                   Name: Doris J. Hearn         Title: Vice President                             WESTLB AG, NEW YORK BRANCH,         as a Funding Agent and an APA Bank under         the Series 2002-2 Supplement     By:   /s/ Matthew F. Tallo                   Name: Matthew F. Tallo         Title: Director               By:   /s/ Elizabeth R. Wilds                   Name: Elizabeth R. Wilds         Title: Director       --------------------------------------------------------------------------------                 CHARTA, LLC,         as a CP Conduit Purchaser                   Citicorp North America, Inc., as     By:   Attorney-in-Fact               By:   /s/ Rosalia Agresti                   Name: Rosalia Agresti         Title: Vice President                             CITIBANK, N.A., as         an APA Bank     By:   /s/ Williams G. Martens III                   Name: William G. Martens III         Title: Vice President                             CITICORP NORTH AMERICA, INC.,         as a Funding Agent     By:   /s/ Rosalia Agresti                   Name: Rosalia Agresti         Title: Vice President       --------------------------------------------------------------------------------                 JUPITER SECURITIZATION CORPORATION,         as a CP Conduit Purchaser under         the Series 2002-2 Supplement     By:   /s/ George S. Wilkins                   Name: George S. Wilkins         Title: Vice President                             JPMORGAN CHASE BANK, NATIONAL ASSOCIATION         (formerly known as JPMorgan Chase Bank),         as a Funding Agent under the Series         2002-2 Supplement     By:   /s/ George S. Wilkins                   Name: George S. Wilkins         Title: Vice President                             JPMORGAN CHASE BANK, NATIONAL ASSOCIATION         (formerly known as JPMorgan Chase Bank),         as an APA Bank under the Series         2002-2 Supplement     By:   /s/ George S. Wilkins                   Name: George S. Wilkins         Title: Vice President                             JPMORGAN CHASE BANK, NATIONAL ASSOCIATION         (formerly known as JPMorgan Chase Bank),         as Administrative Agent under the Series         2002-2 Supplement     By:   /s/ George S. Wilkins                   Name: George S. Wilkins         Title: Vice President      

Exhibit 10.2   MANAGEMENT TRANSITION AGREEMENT   This Management Transition Agreement (the “Agreement”) is made as of January 30, 2006, by and between William L. Fiedler (the “Executive”) and SeaChange International, Inc. (the “Company”).   WHEREAS, the Executive is the chief financial officer (the “CFO”) of the Company; and   WHEREAS, the Executive has informed the Company that the Executive does not intend to continue as CFO of the Company after April 30, 2006;   WHEREAS, the Company and the Executive desire to provide for the transition from the Executive to a new CFO (the “New CFO”) to be hired by the Company;   NOW, THEREFORE, in consideration of the foregoing and the agreements herein contained, and intending to be legally bound, the parties hereby agree as follows:   1. Continuation of CFO Position. The Executive agrees to continue to serve as the CFO of the Company until the earlier of (i) April 30, 2006 or (ii) the election of the New CFO, unless terminated as specified in Section 4.   2. Continued Employment. The Executive will continue as an employee of the Company after his resignation as CFO through January 31, 2008, unless terminated as specified in Section 4. The Executive agrees to make himself available as reasonably requested by the Company, to provide such services and duties as the Company reasonably requests, including, without limitation, providing training, advice and assistance to the Company and the New CFO in the transition to the position of chief financial officer for the Company. The Executive’s duties will include training, advice and assistance on accounting issues and the preparation and filing of quarterly and annual filings with the Securities and Exchange Commission, and attendance and participation at Audit Committee meetings and on quarterly earnings calls with investors and analysts, in each case to the extent reasonably requested by the Company.   3. Compensation and Benefits. During the period in which the Executive remains an employee of the Company, the Executive will continue to receive (A) through April 30, 2006, his basic salary as currently in effect and (B) from May 1, 2006 through January 31, 2008, salary at a monthly rate equal to $17,975.00, and, in each case, benefits as currently in effect, subject to (i) the terms of the applicable plan documents, (ii) generally applicable Company policies, and (iii) the discretion of the Board or any administrative or other committee provided for in, or contemplated by, any such plan. The Company may alter, modify, add to, or delete its employee benefits plans and policies, at any time, as the Company, in its sole judgment, determines to be appropriate. Notwithstanding the above, the Company may not alter its policies or take any action during the term of this Agreement which is designed to affect the Executive’s rights only (and not those of other employees of the Company) to participate in the employee health and benefit plans. In addition, the Executive will be entitled to a bonus with respect to fiscal year 2006, which shall not be less than $45,000, the bonus payable with respect to fiscal year 2005. The Company shall pay or reimburse the Executive for all reasonable business expenses incurred or paid by the Executive in the performance of his duties and responsibilities as an employee under Section 2 hereof, subject to (i) any reasonable expense policy of the Company, as set by the Company and/or the Board of Directors from time to time and generally applicable to Executives of the Company in similar positions, and (ii) such reasonable substantiation and documentation requirements as may be specified by the Company and/or Board of Directors from time to time.   4. Termination of Employment Due to Cause, Voluntary Termination, Death or Disability. In the event of the Executive’s termination for Cause (as defined herein), voluntary termination of his employment (other than a voluntary termination for Good Reason (as defined herein)), death or Disability -------------------------------------------------------------------------------- (as defined herein) prior to the Executive’s retirement hereunder, the Executive’s employment shall immediately and automatically terminate and the Company shall have no obligations to the Executive hereunder. For purposes of this Agreement, “Cause” shall mean (i) the Executive engaging in willful and repeated gross negligence or gross misconduct, (ii) the Executive’s breaching of a material fiduciary duty to the Company or (iii) the Executive’s being convicted of a felony, in any such case, to the demonstrable and material injury to the Company. For purposes hereof, no act, or failure to act, on the Executive’s part, shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that any act or omission was in the best interest of the Company. For purposes of this Agreement, the Executive’s termination of his employment by the Company will be considered for “Good Reason” if he terminates upon the occurrence of any one or more of the following events: (i) a reduction in his base salary; (ii) a substantial reduction in his benefits without a similar reduction of the benefits of the other executive officers of the Company; or (iii) without his express written consent, his assignment to duties substantially inconsistent with his current position with the Company or a substantial reduction in his duties other than in connection with the employment of the New CFO. For the purposes of this Agreement, “Disability” shall mean any physical incapacity or mental incompetence (i) as a result of which the Executive is unable to perform the essential functions of his job for an aggregate of 90 days, whether or not consecutive, during any calendar year, and (ii) which cannot be reasonably accommodated by the Company without undue hardship.   5. Noncompetition, Nondisclosure and Developments Agreement; Change-in-Control Agreement. The Executive understands and agrees that he remains subject to the SeaChange Noncompetition, Nondisclosure and Developments Agreement, dated September 1998, which remains in full force and effect. The parties agree that the change-in-control severance agreement (“Change-in-Control Agreement”) between the Company and the Executive dated July 30, 2004 remains in full force and effect until, and will terminate on, April 30, 2006.   6. Conflicting Agreements. The Executive hereby warrants that the execution of this Agreement and the performance of his obligations hereunder will not breach or be in conflict with any other agreement to which or by which the Executive is a party or is bound and that the Executive is not now subject to and will not enter into any agreement, including, without limitation, any covenants against competition or similar covenants that would affect the performance of his obligations hereunder.   7. Withholding; Taxes. All payments made by the Company under this Agreement shall be subject to and reduced by any federal, state and/or local taxes or other amounts required to be withheld by the Company under any applicable law.   8. Miscellaneous.   8.1. Assignment. The Executive shall not assign this Agreement or any interest herein. The Company may assign this Agreement in connection with the sale of the Company or the sale of substantially all of the Company’s assets. This Agreement shall inure to the benefit of the Company and shall be binding upon the Company and the Executive, and their respective successors, executors, administrators, heirs and permitted assigns.   8.2. Severability. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the application of such provision in such circumstances shall be modified to permit its enforcement to the maximum extent permitted by law, and both the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable and the remainder of this Agreement shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.   8.3. Waiver; Amendment. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of the Company to require the performance of any term or obligation of this Agreement, or the waiver by the Company of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a   -2- -------------------------------------------------------------------------------- waiver of any subsequent breach. This Agreement may be amended or modified only by a written instrument signed by the Executive and the Chief Executive Officer of the Company (or other officer) authorized by the Board of Directors.   8.4. Notices. All notices, requests and other communications provided for by this Agreement shall be in writing and shall be effective when delivered in person or three (3) business days after being deposited in the mail of the United States, postage prepaid, registered or certified, and addressed (a) in the case of the Executive, to the address set forth underneath his signature to this Agreement, or (b) in the case of the Company, to the attention of the Chief Executive Officer at 124 Acton Street, Maynard, MA 01754, and/or to such other address as either party may specify by notice to the other.   8.5. Entire Agreement. This Agreement, the Proprietary Information and Inventions Agreement and the Change-in-Control Agreement constitute the entire agreement between the Company and the Executive with respect to the terms and conditions of the Executive’s employment with the Company and supersede all prior communications, agreements and understandings, written or oral, between the Executive and the Company with respect to the terms and conditions of the Executive’s employment with the Company, including, without limitation, the severance provisions in the Executive’s offer letter from the Company dated July 28, 1998.   8.6. Counterparts. This Agreement may be executed in counterparts, each of which shall be original and all of which together shall constitute one and the same instrument.   8.7. Governing Law. This Agreement, the employment relationship contemplated herein and any claim arising from such relationship, whether or not arising under this Agreement, shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts without giving effect to any choice or conflict of laws provision or rule thereof.   8.8. Consent to Jurisdiction. Each of the Company and the Executive, by its or his execution hereof, hereby irrevocably submits to the exclusive jurisdiction of the state or federal courts of the Commonwealth of Massachusetts for the purpose of any claim or action arising out of or based upon this Agreement, the Executive’s employment with the Company and/or termination thereof, or relating to the subject matter hereof, and agrees not to commence any such claim or action other than in the above-named courts.   -3- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, this Agreement has been executed by the Company, by its duly authorized representative, and by the Executive, as of the date first above written.   SEACHANGE INTERNATIONAL, INC. By:   /s/ William C. Styslinger, III -------------------------------------------------------------------------------- Name:   William C. Styslinger, III Title   President and CEO THE EXECUTIVE By:   /s/ William L. Fiedler -------------------------------------------------------------------------------- Name:   William L. Fielder Address:     --------------------------------------------------------------------------------       --------------------------------------------------------------------------------   -4-

EXHIBIT 10.6 Labor Contract Employer (Party A) Company name: ZHUHAI KING GLASS ENGINEERING CO., LTD Business code: 61751342-0 Address: 105 Baishi Road, Jiuzhou West Avenue Zhuhai, China. Phone number: 0756-8538919 Employee (Party B) Name: Li guo xing ID card No.: 520102741121241 Address: Phone number This Contract is signed on a mutuality voluntary basis by and between following Employer and Employee in accordance with the Labor Law of People Republic of China. 1. Term of the Contract:   1) The term of this contract is for 3 years and shall commence on Jan. 1st, 2006, and shall continue until Jan. lst, 2009, unless earlier term pursuant to this Contract.   2) It’s not necessary for the Employee to undergo a probationary period. 2. Job Description:   1) The Employer agrees to employ Mr. Luoyi as Director   2) The duty of Employee refers to <Description of Position>   3) If the Employer adjusts the position of Employee according to the requirement of operation, they should act in accordance with the provisions of altering contract. The agreement or notification for it, which is signed by both sides, should become an attachment of this Contract.   4) If the Employee is sent to work in other company by the Employer, they should sign an additional contract. 3. Working Hours   1) The normal working- hours of the Employee shall be eight hours each day, rest at least one day per week, and not beyond an average of forty hours per week.   2) The Employer may extend working hours due to the requirements of its production or business after consultation with the trade union and the Employee. Unless the situation described in the provision No. 42 of Labor Law, the extended working hour for a day shall generally not exceed 1 hour; if such extension is called for due to special reasons, the extended hour shall not exceed three hours a day. However, the total extension in a month shall not exceed thirty-six hours. --------------------------------------------------------------------------------   4. Remuneration of Labor   1) The salary of the Employee shall be monthly paid by the Employer in according with applicable laws and regulations of P.R.C. It shall be paid not less than the standard minimum local salary. The salary of the Employee is RMB 1004 per month.   2) It shall be paid by legal tender and instead of kind or value securities.   3) The employer adjusts the employee’s salary due to its operating situation or regulations of distributing salary. If the employee makes no difference about it within 60 days, it is considered as a sign of agreement.   4) Employer pays salary at 10th every month. If the payment day is the same as holiday or resting day, employer should pay at the nearest working day.   5) If the Employer extends the working time of the Employee under the authority of law, the Employer should pay for it additionally according to the provision No. 44 of Labor Law.   6) The employee’s compensation for work-caused injuries is counted on the base of the average salary of previous 12 months of last year.   7) The basic counting unit of the employee’s sick pay is according to the relative regulation.   8) After negotiation, the employer could deduct such amount as individual income tax, mandatory social security programs, and meal fee from the salary.   9) If the contract is released or terminated, the employer should pay off the employee’s salary at a time. 5. Working Protection & working Conditions.   1) The Employer should provide the Employee with occupational safety and health conditions conforming to the provisions of the State and necessary article of labor protection to guarantee the safety and health during the working process.   2) The Employer should provide the Employee with safety protection according to the Employee’s position, conforming to the provisions of the State and necessary article of labor protection.   3) If the Employer order irregularly or make the Employee work riskily regardless of the Employee’s safe and health, the Employee could refuse to obey, ask the Employer to correct, report to the government and charge the Employer. 6. Social Security & Welfare   1) The Employer will pay for all mandatory social security programs such pension insurance, unemployment insurance, medical insurance of the Employee according to the relevant government and city regulations at a certain rate.   2) If the Employee is sick or hurt not because of his job, the Employer should give the Employee time and treatment for his sickness conforming to some relative provisions, or pay for his treatment expense according to the regulations of medical insurance, and pay the certain salary and relief fee for the special period.   3) If the Employee has got occupational disease, dies or is injured due to it occupation, the Employer should handle affairs according to the relative laws and regulations.   4) After received the application from the Employee, the employer should give the employee vocations for holiday, annual rest, marriage, funeral, visiting family, pregnant and nursing baby, and pay them according to the standard set in this contract. 7. Labor Discipline   1) The Employer may draft bylaws an labor disciplines of the Company, According to which, the Employer shall have the right to give rewards or take disciplinary actions to the Employee. The Employee shall comply with the management directions of the employer and obey the bylaws and labor disciplines of the Employer --------------------------------------------------------------------------------     2) The Employee shall undertake the obligation to keep and not to disclose the trade secret for the Employer during the period of this Contract. Details refers to the Employee’s Manual. 8. Modification of the Contract.   1) If any party wants to modify relevant clauses of the Contract, he should inform the other party by written form.   2) Relevant clauses, which are agreed by both parties after negotiation, could be modified according to the procedures. 9. Discharge of the Contract.   1) The Contract, which are agreed by both parties after negotiation ,could be discharged. If the discharge is suggested by the Employer, he should compensate the Employee according to some regulation.   2) The Contract may be terminated by the Employer:   a. The Employee does not meet the job requirements during the probation period.   b. The Employee seriously violates disciplines or bylaws of the Employer.   c. The Employee seriously neglects his duty, engages in malpractice for selfish ends and brings significant loss to the Employer.   d. The Employee is being punished by physical labor for its misfeasance   e. The Employee is pregnant in the Contract term out of arrangement.   f. The Employee is being charged with criminal offences.   g. The Employee is going out of business, or shutout, or close to bankruptcy and legally neatening, or its business situation in serious trouble.   h. After the treatment of the employee’s disease, neither could he meet the requirement of the job agreed on the Contract, nor could he do other job assigned by the Employer.   i. The Employee couldn’t meet the requirement of his job before or after training or adjustment of position.   j. The circumstances have materially changed from the date his Contract was signed to the extent that it is impossible to execute the Contract provided, however that the parties can’t reach an agreement to amend the contract to reflect the changed circumstances.   k. The discharge clauses agreed here are met. The Contract may be discharged by the Employer by giving notice in written form 10 days in advance, which complies to the clauses of No. g, h, i ,j, k, and the Employer should compensate the Employee accordingly, and specially for medical treatment in clause No. h   3) The Contract may be discharged by the Employee by giving notice in written form 30 days in advance. However, the Employee may inform the Employer to discharge the Contract at random under the following occasions:   a. The Employee is still in the probationary period   b. The Employer force the Employee to work by violence, duress or illegal restriction to physical freedom.   c. The working conditions, which are confirmed by the state, are so serious that would do harm to the Employee’s health.   4) The Employee shall not be dismissed:   --------------------------------------------------------------------------------     a. The Employee is ill with occupational disease or injured due to work and has been authenticated fully or partly disables d by the Labor Authentication Commission.   b. The Employee is ill or injured (other than due to work) and is within the period of medical leave provided for by applicable PRC law and regulations and Company policy.   c. The Employee is woman who is pregnant, on maternity leave, or nursing a baby under one year of age or   d. The applicable PRC laws and regulations otherwise prohibit the termination of the Contract.   5) Both parties would come to the procedures in 7 days after the Contract is discharged. 10. Termination of the Contract The Contract may be automatically terminated at the expiration, or when the clauses agreed in the Contract are effective. 11. Breach Liabilities. Referring to the relative regulations an the Employee’s manual. 12. Labor Disputes Where a labor dispute between the parties takes place during the performance of this Contract, the parties concerned may seek for a settlement through consultation or either party may apply to the labor dispute mediation committee of their unit for mediation; if the mediation fails and one of the parties requests for arbitration that party may apply to the labor dispute arbitration committee for arbitration. Either party may also directly apply to the labor dispute arbitration committee for arbitration within 60 days starting from the date of the occurrence of a labor dispute. If one of the parties is not satisfied with the adjudication of arbitration, the party may bring the case to a people’s court within 15 days of the date of receiving the ruling of arbitration. 13. Others   1) Things, which are not mentioned here, are ruled by relevant laws and regulations. During the contract period any part should follow the latest amended provision of law and regulation.   2) The following documents are regarded as attachments for the contract and will be effective equally.   a. The Employee’s Manual   b. Other regulations of the Company. Employer: Employee:     Legal Representative:   Date of Contract: January 1, 2006 Discriminate and Confirm Comment:   Discriminate and Confirm Office:     The people for Discriminate and Confirm:   Date of discriminate and Confirm: --------------------------------------------------------------------------------

  EXHIBIT 10.2         TRIBUNE COMPANY SUPPLEMENTAL DEFINED CONTRIBUTION PLAN   (As Amended and Restated Effective October 18, 2006)     --------------------------------------------------------------------------------     TRIBUNE COMPANY SUPPLEMENTAL DEFINED CONTRIBUTION PLAN  (As Amended and Restated Effective October 18, 2006)     SECTION 1     Introduction     1.1   The Plan. TRIBUNE COMPANY SUPPLEMENTAL DEFINED CONTRIBUTION PLAN (the “Plan”), was established by TRIBUNE COMPANY, a Delaware corporation (the “Company”), effective January 1, 1994 to provide certain benefits representing contributions that could not be allocated to eligible employee accounts in the Tribune Company Employee Stock Ownership Plan (“ESOP”) because of limitations imposed by Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Code”). Effective January 1, 2004, no further contributions were made to the ESOP and the ESOP was merged into the Tribune Company 401(k) Savings and Profit Sharing Plan (the “Savings Plan”); therefore, the Plan was restated to provide that eligible employees will receive benefits hereunder to represent amounts that may not be allocated as employer Retirement and Profit Sharing Contributions under the Savings Plan because of the limitations of Section 401(a)(17) of the Code.   1.2   Purpose. The Company and certain of its subsidiaries maintain, and are Employers under, the Savings Plan, which is intended to constitute a qualified plan with a cash or deferred arrangement that meets the requirements for qualification under Sections 401(a) and 401(k) of the Code. Section 401(a)(17) of the Code limits the amount of employees' annual compensation that may be taken into account in determining the amount of Employer contributions that may be allocated to accounts under a qualified defined contribution plan, to $200,000 (subject to cost-of-living adjustments of that amount calculated as described in said Section 401(a)(17)) (the “Compensation Limitation”). The purpose of this Plan is to provide for Participants in this Plan the amount of Employer contributions that would have been allocated to their respective accounts under the Savings Plan but for the Compensation Limitation.   1.3   Employers. The Company and each subsidiary of the Company that is an Employer under the Savings Plan shall be an “Employer” under this Plan unless specified to the contrary by the Company by notice to the Committee described in subsection 1.4.   1.4   Plan Administration. The Plan will be administered by the Employee Benefits Committee of the Company (or such successor committee as shall from time to time have responsibility for administering the Savings Plan) (the “Committee”). The Committee has, to the extent appropriate and in addition to the powers described in subsection 2.1 below, the same powers, rights, duties and obligations with respect to the Plan as under the Savings Plan with respect to that plan. The Committee's determinations hereunder need not be uniform, and may be made selectively among eligible employees, whether or not they are similarly situated. The Plan will be administered on the basis of a “Plan Year” which is each calendar year.   1 --------------------------------------------------------------------------------     SECTION 2   Participation and Supplemental Benefits      2.1   Eligibility. Subject to the conditions and limitations of the Plan, each Employee of an Employer on or after January 1, 2004, who is a participant in the Savings Plan shall become a “Participant” under this Plan, entitled to benefits payable under this Plan, as of the first day of the first plan year under the Savings Plan which begins on or after January 1, 2004, and during which the Compensation (as defined in the Savings Plan) of such participant, determined without the Compensation Limitation, is greater than the Compensation Limitation.   In the event of the death of such a Participant, his beneficiary shall be entitled to participate in the Plan as of the date benefit payments to such beneficiary commence under the Plan, to the extent provided by the following subsections of the Plan.   2.2   Amount of Supplemental Benefits. The Committee shall maintain or cause to be maintained in the records of the Plan one or more separate bookkeeping accounts in the name of each Participant. A Participant who participated in the Plan prior to January 1, 2004, shall have as his opening account balance the amount credited to his Plan account as of December 31, 2003. In accordance with rules established by the Committee, the Committee shall credit, at such time as the Committee determines, to each Participant's account an amount equal to the difference between (i) the value of the amount that would have been credited to the Participant's account as an employer Retirement Contribution and employer Profit Sharing Contribution under the Savings Plan if there had been no Compensation Limitation in effect and (ii) the amount that is so credited to the Participant's account in the Savings Plan.   2.3   Adjustment of Accounts. The Committee shall adjust each Participant's accounts to reflect (a) hypothetical earnings and losses of such benchmark investments as the Participant may elect among such benchmark investments as the Committee shall determine, and (b) distributions to the Participant. Any such adjustment, and any Participant election among benchmark investments, shall be made at such times, in such manner and subject to such rules as the Committee may determine.   2.4   Payment of Accounts. A Participant (or his beneficiary in the event of his death) shall receive in a lump sum, within a reasonable period of time after the Participant terminates employment with all Employers, a cash amount equal to the vested balance of his accounts (as determined under Section 2.6); provided, a Participant may elect to receive the value of his accounts in annual installments over two to ten years or to defer payment until he attains age 65; provided further that the portion of a Participant’s account that has a benchmark investment in common stock of the Company shall be distributed in shares of such stock. A Participant may elect a different method of payment or installments by the later of December 31, 2006 or the date which is 30 days following the date the Participant first becomes eligible to participate. On or after January 1, 2007 no changes may be made to a Participant’s election with respect to the method of   2 --------------------------------------------------------------------------------   payment. Notwithstanding the foregoing provisions of this subsection 2.4, a Participant who is a “specified employee” as defined in Section 409A(a)(2)(B)(i) of the Code may not receive a distribution under the Plan of any amounts credited to his or her account (and any investment gains or losses attributable thereto) prior to the date which is 6 months after the date of the Participant’s termination of employment, or, if earlier, the date of death of the Participant. If a specified employee is unable to receive a distribution as of his or her Settlement Date as a result of the restrictions under Section 409A, the payment that otherwise would have been made as of his Settlement Date shall be made as soon as practicable following the lapse of such restrictions.   2.5   Change-In-Control. In the event of a Change-In-Control of the Company as defined in Section 3.1, all account balances, whether or not currently in pay status, shall become immediately due and payable and distribution shall be made in a lump sum as soon as practicable thereafter.   2.6   Vesting. A Participant shall be fully vested, and have a nonforfeitable right to, the balances in his account representing employer Retirement Contributions that could not be credited under the Savings Plan, as adjusted in accordance with Section 2.3, and amounts credited to his account as of December 31, 2003 (representing amounts that could not be credited under the ESOP), as adjusted in accordance with Section 2.3 of the Plan. The amounts credited to his account representing employer Profit Sharing Contributions, as adjusted in accordance with Section 2.3, shall vest in accordance with the following table:   If the Participant's Number of Years of Service is:   Then his Nonforfeitable Percentage Shall Be: Less than five   0% Five or more   100%   Years of Service shall be determined in accordance with the terms of the Savings Plan.   2.7   Funding. Benefits payable under this Plan to a Participant or his beneficiary shall be paid directly by the Employers from their general assets, in such proportions as the Company shall determine. The provisions of this Plan shall not require that the Employers segregate on their books or otherwise any amount to be used for payment of benefits under this Plan; provided, the Employers may establish a grantor (“rabbi”) trust to hold assets for the payment of Plan accounts, and any payout from such trust to or on behalf of a Participant shall extinguish the Employer's liability hereunder to the extent of such payment.   3 --------------------------------------------------------------------------------   SECTION 3   General Provisions      3.1   Terms. References in this Plan to an individual as being a “participant” in the Savings Plan and (unless expressly provided to the contrary in this Plan) terms used in this Plan that also are used in the Savings Plan as to that individual shall have the meanings for those terms set forth in the Savings Plan. For purposes of this Plan, a “subsidiary” of the Company shall mean any corporation, more than 50% of the voting stock in which is owned, directly or indirectly, by the Company and the term “Change-In-Control” shall mean a change in ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, all as defined in Section 409A(a)(2)(A)(v) of the Code or any regulations, notices or rulings thereunder.   3.2   Beneficiary. A Participant may designate the person or persons (including a trustee or trustees) in an instrument filed with the Committee (in such form and in such manner as the Committee may determine) to receive upon his death any amounts remaining in his Plan account; provided, that in the case of a Participant who is legally married on the date of his death, the Participant's beneficiary shall be his spouse unless such spouse validly consents in writing to a different beneficiary designation. The designation of the beneficiary (or form of payment) cannot be changed without the spouse's consent unless the consent expressly permits designations by the Participant without any further consent of the spouse. The spouse's consent must acknowledge the effect of the designation and be witnessed by a representative of the Plan or a notary public. Any death benefits payable hereunder and not effectively disposed of pursuant to a valid beneficiary designation shall be distributed in the following priority:   (i)   to the Participant's spouse living at his death, if any; and   (ii)   if the Participant has no spouse living at the time of his death, then to his estate.   3.3   Employment Rights. Establishment of the Plan shall not be construed to give any Participant the right to be retained in the service of the Company or any of its subsidiaries or to any benefits not specifically provided by the Plan.   3.4   Interests Not Transferable. Except as to withholding of any tax under the laws of the United States or any state or municipality, the interests of Participants and any other persons who become entitled to a benefits under the Plan are not subject to the claims of their creditors and may not be voluntarily or involuntarily transferred, assigned, alienated or encumbered. Notwithstanding the immediately preceding sentence, payment of a Participant's benefits shall be made pursuant to the terms of a valid domestic relations order. For purposes of this plan, a "valid domestic relations order" shall be a judgment, decree or order made pursuant to and valid under a state domestic relations law that relates to the provision of child support, alimony payments or marital property rights and that provides for payment of a Participant's benefits to a spouse, former spouse, child or   4 --------------------------------------------------------------------------------   other dependent of the Participant, so long as the judgment, decree or order clearly specifies what benefits are to be paid pursuant to the order and provides that benefits are paid only if, when and as otherwise paid to the Participant. The Committee shall have sole and complete discretion to determine whether a judgment, decree or order constitutes a valid domestic relations order for purposes of this Section.   3.5   Controlling Law. To the extent not superseded by the laws of the United States, the laws of Illinois shall be controlling in all matters relating to the Plan.   3.6   Gender and Number. Where the context admits, words in the masculine gender shall include the feminine and neuter genders, the plural shall include the singular and the singular shall include the plural.   3.7   Action by the Company. Any action required of or permitted by the Company under the Plan shall be by resolution of its Board of Directors or by a duly authorized committee of its Board of Directors, or by any person or persons authorized by resolution of its Board of Directors or such committee.   3.8   Successor to the Company or Any Other Employer. The term “Company” as used in the Plan shall include any successor to the Company by reason of merger, consolidation, the purchase or transfer of all or substantially all of the Company's assets, or otherwise. The term “Employer” as used in the Plan with respect to the Company or any of its subsidiaries shall include any successor to that corporation by reason of merger, consolidation, the purchase or transfer of all or substantially all of the assets of that corporation, or otherwise.   3.9   Facility of Payment. Any amounts payable under this Plan to any person under a legal disability or who, in the judgment of the Committee, is unable to properly manage his affairs may be paid to the legal representative of such person or may be applied for the benefit of such person in any manner which the Committee may select.   3.10    Other Benefits. The benefits provided under the Plan shall, except to the extent otherwise specifically provided herein, be in addition to, and not in derogation or diminution of, any benefits that a Participant or his beneficiary may be entitled to receive under any other plan or program now or hereafter maintained by the Company or by any of its subsidiaries.   3.11    Rights in the Event of Dispute. If a claim or dispute arises concerning the rights of a Participant or beneficiary to benefits under the Plan, regardless of the party by whom such claim or dispute is initiated, the Company shall, upon presentation of appropriate vouchers, pay all legal expenses, including reasonable attorneys' fees, court costs, and ordinary and necessary out-of-pocket costs of attorneys, billed to and payable by the Participant or by anyone claiming under or through the Participant (such person being hereinafter referred to as the Participant's “claimant”), in connection with the bringing, prosecuting, defending, litigating, negotiating, or settling of such claim or dispute; provided, that:   5 --------------------------------------------------------------------------------   (a) the Participant or the Participant's claimant shall repay to the Company any such expenses theretofore paid or advanced by the Company if and to the extent that the party disputing the Participant's rights obtains a judgment in its favor from a court of competent jurisdiction from which no appeal may be taken, whether because the time to do so has expired or otherwise, and it is determined that such expenses were not incurred by the Participant or the Participant's claimant while acting in good faith; provided further, that (b) in the case of any claim or dispute initiated by a Participant or the Participant's claimant, such claim shall be made, or notice of such dispute given, with specific reference to the provisions of this Plan, to the Committee within one year after the occurrence of the event giving rise to such claim or dispute.     SECTION 4    Amendment and Termination   While the Company and its subsidiaries that become Employers expect to continue the Plan, the Company must necessarily reserve and reserves the right to amend the Plan from time to time (including the right to amend the manner in which accounts are adjusted to reflect investment earnings and losses or the time value of money) or to terminate the Plan at any time, subject to Section 409A of the Code. However, neither an amendment of the Plan nor termination of the Plan may:   (a) cause the reduction in the amount credited to any Participant's account (and of the Employers' obligation to pay such account) which had accrued as of the date such amendment is made or the termination of the Plan occurs and which, but for such amendment or termination, are payable under this Plan on, or would become payable under this Plan after, the date such amendment is made or the termination of the Plan occurs; or (b) cause the modification, rescission or revocation of (i) the provisions of subsection 2.5 with respect to a Change-In-Control or (ii) any written determinations by the Committee pursuant to subsection 2.4 as to the form of payment of accounts to any person that are in effect on said date.   In addition, no amendment or termination of the Plan which has the effect of reducing or diminishing the right of any Participant to receive any payment or benefit under the Plan will become effective prior to the expiration of the 36 consecutive month period commencing on the date of a Change-In-Control, if such amendment or termination was adopted (i) on the day of or subsequent to the Change-In-Control, (ii) prior to the Change-In-Control, but at the request of any third party participating in or causing the Change-In-Control, or (iii) otherwise in connection with or in anticipation of a Change-In-Control.   6 --------------------------------------------------------------------------------   SECTION 5     Claims for Benefits Procedure    5.1   Claim for Benefits. Any claim for benefits under the Plan shall be made in writing to any member of the Committee. If such claim for benefits is wholly or partially denied by the Committee, the Committee shall, within a reasonable period of time, but not later than sixty (60) days after receipt of the claim, notify the claimant of the denial of the claim. Such notice of denial shall be in writing and shall contain:   (a) The specific reason or reasons for denial of the claim; (b) A reference to the relevant Plan provisions upon which the denial is based; (c) A description of any additional material or information necessary for the claimant to perfect the claim, together with an explanation of why such material or information is necessary; and (d) An explanation of the Plan's claim review procedure as set forth below.   5.2   Request for Review of a Denial of a Claim for Benefits. Upon the receipt by the claimant of written notice of denial of the claim, the claimant may within ninety (90) days file a written request to the Committee, requesting a review of the denial of the claim, which review shall include a hearing if deemed necessary by the Committee. In connection with the claimant's appeal of the denial of his/her claim, he/she may review relevant documents and may submit issues and comments in writing.   5.3   Decision Upon Review of Denial of Claim for Benefits. The Committee shall render a decision on the claim review promptly, but no more than sixty (60) days after the receipt of the claimant's request for review, unless special circumstances (such as the need to hold a hearing) require an extension of time, in which case the sixty (60) day period shall be extended to 120 days. Such decision shall:   (a) Include specific reasons for the decision; (b) Be written in a manner calculated to be understood by the claimant; and (c) Contain specific references to the relevant Plan provisions upon which the decision is based.   The decision of the Committee shall be final and binding in all respects on both the Company and the claimant.   7 --------------------------------------------------------------------------------       IN WITNESS WHEREOF, the Tribune Company Employee Benefits Committee has caused the foregoing to be executed on behalf of Tribune Company by the undersigned duly authorized Chairman of the Committee as of the 18th day of October 2006.       TRIBUNE COMPANY         By:  /s/ Donald C. Grenesko Chairman of Tribune Company Employee Benefits Committee       8 --------------------------------------------------------------------------------

EXHIBIT 10.2 2006 ANNUAL INCENTIVE PROGRAM GOALS AND AWARDS FOR THE NAMED EXECUTIVE OFFICERS ALEXANDER DAVERN, CHIEF FINANCIAL OFFICER, SENIOR VICE PRESIDENT MANUFACTURING & IT OPERATIONS; TREASURER 1/1/06 Base Salary: Bonus % Potential: Bonus Dollars: -------------------------------------------------------------------------------- $275,000 30% $82,500 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 2006 Officer Bonus Goal -------------------------------------------------------------------------------- % Goal Weighting -------------------------------------------------------------------------------- Goal $ Value --------------------------------------------------------------------------------     1) Manufacturing to meet delivery and quality goals   20 % $16,500       2) Achieve gross margin goal  20 % $16,500       3) Ensure 2006 spending within budget  20 % $16,500       4) Achieve internal controls goals  15 % $12,375       5) Manage General & Administrative employee costs  15 % $12,375       6) Enhance Communications with investment Community  10 % $  8,250                                                                    Total   100 % $82,500   TIMOTHY DEHNE, SENIOR VICE PRESIDENT, RESEARCH & DEVELOPMENT 1/1/06 Base Salary: Bonus % Potential: Bonus Dollars: -------------------------------------------------------------------------------- $262,000 30% $78,600 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 2006 Officer Bonus Goal -------------------------------------------------------------------------------- % Goal Weighting -------------------------------------------------------------------------------- Goal $ Value --------------------------------------------------------------------------------     1) Achieve scheduled product development release goals   30 % $23,580       2) Achieve strategic initiative goals  25 % $19,650       3) Achieve new product success goals  25 % $19,650       4) Achieve gross margin goal  20 % $15,720                                                                     Total   100 % $78,600   -------------------------------------------------------------------------------- PETER ZOGAS, SENIOR VICE PRESIDENT SALES & MARKETING 1/1/06 Base Salary: Bonus % Potential: Bonus Dollars: -------------------------------------------------------------------------------- $260,000 30% $78,000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 2006 Officer Bonus Goal -------------------------------------------------------------------------------- % Goal Weighting -------------------------------------------------------------------------------- Goal $ Value --------------------------------------------------------------------------------     1) Achieve new product revenue goals   25 % $19,500       2) Achieve major account initiatives  40 % $31,200       3) Implement pricing objectives  10 % $  7,800       4) Meet revenue targets  10 % $  7,800       5) Achieve keynote delivery goals  15 % $11,700                                                                    Total   100 % $78,000   JOHN GRAFF, VICE PRESIDENT, MARKETING, CUSTOMER OPERATIONS AND INVESTOR RELATIONS 1/1/06 Base Salary: Bonus % Potential: Bonus Dollars: -------------------------------------------------------------------------------- $225,000 20% $45,000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 2006 Officer Bonus Goal -------------------------------------------------------------------------------- % Goal Weighting -------------------------------------------------------------------------------- Goal $ Value --------------------------------------------------------------------------------     1) Achieve new product revenue goals   20 % $  9,000       2) Achieve expense management goals  25 % $11,250       3) Achieve web revenue goals  20 % $  9,000       4) Achieve lead growth goals  10 % $  4,500       5) Achieve business development goals  15 % $  6,750       6) Implement pricing objectives  10 % $  4,500                                                                     Total   100 % $45,000  

  Exhibit 10(W) Form Of Supplemental Executive Retirement Plan Agreement Goodrich Corporation (“Goodrich”) entered into a Supplemental Executive Retirement Plan Agreement identical to the form attached hereto with each of the following Goodrich executive officers on the dates and having the “Benefit Service Start Dates” indicated:                   Date   Name   Benefit Service Start Date 01/01/02   Marshall O. Larsen     12/01/95   01/01/02   Terrence G. Linnert     11/03/97   01/01/02   Stephen R. Huggins     02/16/99   01/01/02   Jerry S. Lee     06/01/00   01/01/02   John J. Carmola     04/01/00   01/01/02   John J. Grisik     10/01/99   04/16/02   Cynthia M. Egnotovich     04/16/02   02/22/05   Jennifer Pollino     02/22/05   08/09/05   Scott E. Kuechle     08/09/05     --------------------------------------------------------------------------------   GOODRICH CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN INTRODUCTION The purpose of this Plan is to provide additional pension benefits and supplemental retiree medical benefits to certain executive employees of Goodrich Corporation. This Plan, currently known as the Goodrich Corporation Supplemental Executive Retirement Plan, is hereby amended and restated as of January 1, 2002. This restatement of the Plan reflects all prior amendments to the Plan. I. DEFINITIONS      1.1 “Alternative Pension Benefits” means the benefits provided pursuant to Article III of this Plan.      1.2 “Benefit Service Start Date” means the date specified for an Eligible Employee pursuant to Section 2.1 of the Plan.      1.3 “Code” means the Internal Revenue Code of 1986, as amended from time to time.      1.4 “Company” means Goodrich Corporation.      1.5 “Covered Compensation” means Covered Compensation as defined in the Goodrich Retirement Plan.      1.6 “Earnings” means the definition of compensation contained in the Goodrich Retirement Plan with the following modifications: (a) For purposes of this Plan, Earnings shall be increased by the amount of salary reduction contributions made to the Goodrich Corporation Savings Benefit Restoration Plan or the Goodrich Pump and Engine Controls, Inc. Savings Benefit Equalization Plan; and (b) For purposes of this Plan, Earnings shall be determined without regard to the limitation on compensation contained in Code Section 401(a)(17).      1.7 “Eligible Employee” means an individual (a) who is or was an employee of the Company, (b) who is or was a participant in the Goodrich Corporation Employees’ Pension Plan or a predecessor plan, (c) who is or has been designated as a Eligible Employee by the Board of Directors of the Company.   --------------------------------------------------------------------------------        1.8 “Final Average Earnings” means the definition of average compensation contained in the Goodrich Retirement Plan as modified by the definition of Earnings contained in this Plan.      1.9 “Goodrich Retirement Plan” means the Goodrich Corporation Employees’ Pension Plan.      1.10 “Plan” means this Goodrich Corporation Supplemental Executive Retirement Plan, as in effect at any time.”      1.11 “Retiree Medical Plan” means the Goodrich Corporation Medical and Prescription Drug Plan for Salaried Retirees, as such plan may be amended from time to time.      1.12 “Supplemental Retiree Medical Benefits” means the benefits provided pursuant to Article V of this Plan.      1.13 “Supplemental Pension Benefits” means the benefits provided pursuant to Article IV of this Plan.      1.14 “Years of Benefit Service” means an Eligible Employee’s Years of Benefit Service, as determined under the Goodrich Retirement Plan. Notwithstanding the foregoing, if an Eligible Employee receives payments after termination of employment under the terms of the Goodrich Corporation Management Continuity Agreement, the period of service for which such payments are made shall be credited under this Plan as Years of Benefit Service if the Eligible Employee does not receive the equivalent of a pension benefit for such service under the Goodrich Corporation Management Continuity Agreement.      1.15 “Years of SERP Service” means an Eligible Employee’s period of service from the Eligible Employee’s Benefit Service Start Date to the date the Eligible Employee terminates employment with the Company or is no longer an Eligible Employee, using the methodology for calculating Years of Benefit Service under the Goodrich Retirement Plan. As provided in Sections 4.2 and 4.5 of the Plan, Years of SERP Service used to calculate Supplemental Pension Benefits shall be limited to a maximum of 15 years, and Years of SERP Service shall be reduced, if necessary, so that the sum of an Eligible Employee’s Years of Benefit Service and Years of SERP Service do not exceed thirty-five years. II. ELIGIBILITY AND BENEFITS      2.1 An Eligible Employee shall be notified by the Company of his or her eligibility to receive benefits under this Plan and shall be provided with a copy of the Plan which shall be signed by the Eligible Employee and which shall specify the Eligible Employee’s Benefit Service Start Date.      2.2 Subject to the terms and conditions contained in this Plan, an Eligible Employee shall be entitled to receive Alternative Pension Benefits as described in Article III of the Plan, Supplemental Pension Benefits as described in Article IV of the Plan, and Supplemental Retiree Medical Benefits as described in Article V of the Plan.   --------------------------------------------------------------------------------   III. ALTERNATIVE PENSION BENEFITS      3.1 An Eligible Employee shall be entitled to receive Alternative Pension Benefits which shall be calculated and paid in accordance with the provisions of this Article III.      3.2 An Eligible Employee’s Alternative Pension Benefit shall be a yearly pension benefit equal to 1.5% of the Eligible Employee’s Final Average Earnings multiplied by the Eligible Employee’s Years of Benefit Service, plus .45% of the Eligible Employee’s Final Average Earnings in excess of Covered Compensation multiplied by the Eligible Employee’s Years of Benefit Service up to a maximum of 35 Years of Benefit Service.      3.3 Notwithstanding the provisions contained in Section 3.2, an Eligible Employee’s Alternative Pension Benefit shall be reduced by the amount of any benefit paid to the Eligible Employee from the Goodrich Retirement Plan and/or the amount of any benefit paid to the Eligible Employee from a benefit restoration plan or a benefit equalization plan sponsored by the Company that provides special benefits to Eligible Employees as a result of limitations applicable to the Goodrich Retirement Plan.      3.4 An Eligible Employee’s Alternative Pension Benefit shall be payable, at the election of the Eligible Employee, under any payment option which could have been elected by the Eligible Employee under the Goodrich Retirement Plan. Notwithstanding the foregoing, if an Eligible Employee is entitled to receive a benefit from the Goodrich Retirement Plan, any Alternative Pension Benefit to be paid from this Plan shall be calculated using the same payment option elected by the Eligible Employee under the Goodrich Retirement Plan. Alternative Pension Benefits shall be actuarially adjusted in the same manner as benefits are adjusted under the Goodrich Retirement Plan.      3.5 Notwithstanding the provisions contained in Section 3.4, an Eligible Employee may elect to have his or her Alternative Pension Benefits paid in a single lump sum payment. Lump sum amounts shall be paid to the Eligible Employee 90 days after the Eligible Employee’s benefit commencement date under the Goodrich Retirement Plan, or as soon as administratively feasible thereafter. If an Eligible Employee is not eligible to receive a benefit from the Goodrich Retirement Plan, the lump sum amount shall be paid to the Eligible Employee 90 days after termination of employment, or as soon as administratively feasible thereafter. The election of a lump sum payment shall be made in writing and may be delivered to the Committee at any time up to 30 days before the Eligible Employee’s benefit commencement date or termination of employment. Lump sum payments shall be calculated using an immediate annuity factor and the interest rate and mortality table specified in the Goodrich Retirement Plan as of the valuation date. Lump sum payments shall be in lieu of all Alternative Pension Benefits, but shall have no effect on the form, timing, or amount of any distribution from the Goodrich Retirement Plan. IV. SUPPLEMENTAL PENSION BENEFITS      4.1 An Eligible Employee shall be entitled to receive Supplemental Pension Benefits which shall be calculated and paid in accordance with the provisions of this Article IV.      4.2 Subject to the maximum Years of Service contained in Section 4.5 of the Plan, an Eligible Employee’s Supplemental Pension Benefit shall be a yearly pension benefit equal to   --------------------------------------------------------------------------------   1.6% of the Eligible Employee’s Final Average Earnings multiplied by the Eligible Employee’s Years (and partial years) of SERP Service (up to a maximum of fifteen Years of SERP Service).      4.3 An Eligible Employee’s Supplemental Pension Benefit shall be payable, at the election of the Eligible Employee, under any payment option which could have been elected by the Eligible Employee under the Goodrich Retirement Plan. Notwithstanding the foregoing, if an Eligible Employee is entitled to receive a benefit from the Goodrich Retirement Plan, any Supplemental Pension Benefit to be paid from this Plan shall be calculated using the same payment option elected by the Eligible Employee under the Goodrich Retirement Plan. Supplemental Pension Benefits shall be actuarially adjusted in the same manner as benefits are adjusted under the Goodrich Retirement Plan.      4.4 Notwithstanding the provisions contained in Section 4.3, an Eligible Employee may elect to have his or her Supplemental Pension Benefits paid in a single lump sum payment. Lump sum amounts shall be paid to the Eligible Employee 90 days after the Eligible Employee’s benefit commencement date under the Goodrich Retirement Plan, or as soon as administratively feasible thereafter. The election of a lump sum payment shall be made in writing and may be delivered to the Committee at any time up to 30 days before the Eligible Employee’s benefit commencement date. Lump sum payments shall be calculated using an immediate annuity factor and the interest rate and mortality table specified in the Goodrich Retirement Plan as of the valuation date. Lump sum payments shall be in lieu of all Supplemental Pension Benefits, but shall have no effect on the form, timing, or amount of any distribution from the Goodrich Retirement Plan.      4.5 Notwithstanding any other provision of this Plan, an Eligible Employee’s Years of SERP Service shall be reduced, if necessary, so that the sum of the Eligible Employee’s Years of Benefit Service and Years of SERP Service do not exceed thirty-five. Notwithstanding the foregoing, this provision of the Plan shall not apply to Eligible Employee’s who were participants in the Plan on January 1, 2001. V. SUPPLEMENTAL RETIREE MEDICAL BENEFITS      5.1 An Eligible Employee and his or her eligible beneficiaries (as described in the Retiree Medical Plan) shall be entitled to receive Supplemental Retiree Medical Benefits as provided in this Article V, provided, however, that the provisions of this Article shall not apply to any Eligible Employee who becomes an Eligible Employee after December 31, 2002.      5.2 In the event and to the extent an Eligible Employee or his or her eligible beneficiaries are not eligible to participate in or are not entitled to full benefits under the Retiree Medical Plan following termination of employment, the Eligible Employee and his or her eligible beneficiaries shall be entitled to Supplemental Retiree Medical Benefits equal to the full benefits provided under the Retiree Medical Plan as in effect from time to time.      5.3 Supplemental Retiree Medical Benefits shall be payable to the Eligible Employee and his or her eligible beneficiaries from and after the later of the date the Eligible Employee terminates employment with the Company, or the date Eligible Employee reaches (or in the event of death would have reached) age 55.   --------------------------------------------------------------------------------   VI. DEATH BENEFITS      6.1 Except as provided in Section 6.2, if an Eligible Employee dies prior to retirement, his or her surviving spouse shall be entitled to receive a supplemental survivor annuity under this Plan. The amount of such supplemental survivor annuity shall be based on any Alternative Pension Benefit and/or Supplemental Pension Benefit payable under this Plan converted to a preretirement survivor annuity using the calculation methodology contained in the Goodrich Retirement Plan. Supplemental Pension death benefits shall be paid at the same time and in the same form as death benefits are paid to the surviving spouse under the Goodrich Retirement Plan. Alternative Pension death benefits shall be paid under any form of death benefit permitted under the Goodrich Retirement Plan, as elected by the surviving spouse.      6.2 Notwithstanding the provisions contained in Section 6.1, if an Eligible Employee dies after attaining age 55 and completing 5 years of vesting service, the Eligible Employee’s surviving spouse shall receive a lump sum benefit in lieu of the death benefit provided under Section 6.1. The lump sum benefit shall be the amount the Eligible Employee would have been entitled to receive as a lump sum benefit if the Eligible Employee had retired on the day before his or her death. Lump sum payments to a surviving spouse of an Eligible Employee shall be paid to the surviving spouse 90 days after the surviving spouse’s benefit commencement date under the Goodrich Retirement Plan, or as soon as administratively feasible thereafter. VII. PAYMENT OF BENEFITS AND RESERVATION OF RIGHTS      7.1 Alternative Pension Benefits, Supplemental Pension Benefits, and Supplemental Retiree Medical Benefits payable pursuant to the provisions of this Plan shall be paid from the general assets of the Company. Such benefits shall be paid in the same manner, and at the same time, as such benefits would be payable if paid from the underlying Goodrich Retirement Plan or Retiree Medical Plan.      7.2 Nothing in this Plan shall prevent the Company from terminating or amending the Goodrich Retirement Plan or the Retiree Medical Plan and any benefits payable from this Plan, to the extent such benefits are determined pursuant to the provisions of the Goodrich Retirement Plan or the Retiree Medical Plan, shall be calculated pursuant to the provisions of such plans as amended.      7.3 The Company may amend or terminate this Plan at any time, provided, however, that any such amendment or termination shall not reduce any Alternative Pension Benefits or Supplemental Pension Benefits which have accrued prior to the date of such amendment or termination. VIII. GENERAL PROVISIONS      8.1 To the extent benefits paid under this Plan are subject to withholding under Federal, state, and/or local law, such amounts shall be withheld from the payments due to Eligible Employees.      8.2 The right or interest of any person to a benefit under this Plan shall not be subject to voluntary or involuntary alienation, assignment, or transfer of any kind.   --------------------------------------------------------------------------------        8.3 The establishment of this Plan shall not confer any legal right to an Eligible Employee for continuation of employment, or interfere with the right of an Employer to discharge an Eligible Employee or to treat an Eligible Employee without regard to the impact that such treatment may have under this Plan.      8.4 Except to the extent that Federal law is controlling, this Plan shall be construed and administered in accordance with the laws of the State of North Carolina.   --------------------------------------------------------------------------------        Executed by the Company this ___day of ____________, ___. ____________________________                                                                                                   Accepted by the Eligible Employee this ___day of ____________, ___. _____________________________                                                                                                                                                                                            The Benefit Service Start Date for the Eligible Employee is ____________  

EXECUTION COPY $275,000,000 TransDigm Inc. 7¾%  Senior Subordinated Notes due 2014 PURCHASE AGREEMENT June 20, 2006 BANC OF AMERICA SECURITIES LLC (“Banc of America”) CREDIT SUISSE SECURITIES (USA) LLC (“Credit Suisse”)    As representatives of the several initial purchasers c/o Banc of America Securities LLC Nine West 57th Street New York, N.Y. 10019 and c/o Credit Suisse Securities (USA) LLC Eleven Madison Avenue, New York, N.Y. 10010-3629 Dear Sirs: 1. TransDigm 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 (collectively, the “Purchasers”) U.S.$275,000,000 principal amount of its 7¾%  Senior Subordinated Notes due 2014 (the “Offered Securities”) to be issued under an indenture (the “Indenture”) to be entered into among the Company, TransDigm Group Incorporated (“TD Group”), the subsidiaries of the Company to be named therein (TD Group and such subsidiaries being referred to herein collectively as the “Guarantors”) and The Bank of New York, as trustee (the “Trustee”). The United States Securities Act of 1933, as amended, is herein referred to as the “Securities Act.” The holders of the Offered Securities will be entitled to the benefits of a Registration Rights Agreement to be entered into on the Closing Date (as defined herein) among the Company, the Guarantors and Banc of America and Credit Suisse, as representatives of the several Purchasers (the “Registration Rights Agreement”), pursuant to which, and subject to the terms and conditions set forth therein, the Company shall agree to file a registration statement with the Securities and Exchange Commission (the “Commission”) registering the resale of the Offered Securities under the Securities Act. Simultaneously with the purchase, sale and delivery of the Offered Securities, the Company or TD Group, as applicable, will (i) accept for purchase and purchase all of the issued and outstanding 83¤8% Senior Subordinated Notes due 2011 of the Company (the “83¤8% Senior Subordinated Notes”) and accept all consents delivered in connection therewith with respect to the amendments to the indenture governing such notes to eliminate the restrictive covenants and certain event of default provisions contained therein, in each case that have been validly tendered or delivered, as the case may be, and not withdrawn upon the Closing Date (the offer to purchase the 83¤8% Senior Subordinated Notes, together with the consent solicitation being referred to collectively herein as the “Tender Offer”), (ii) repay in full any and all amounts borrowed   --------------------------------------------------------------------------------   pursuant to the terms of the amended and restated credit agreement (the “Credit Agreement”), dated as of April 1, 2004, as amended as of November 10, 2005, among the Company, TransDigm Holding Company, the lenders thereto and Credit Suisse, as administrative agent and as collateral agent, (iii) enter into a new credit agreement (the “New Credit Agreement”) among the Company, TD Group, each subsidiary of the Company from time to time party thereto, the lenders party thereto and Credit Suisse as administrative agent and collateral agent, whereby the lenders party thereto agree to extend credit in the form of term loans in an aggregate principal amount not in excess of $650,000,000 and revolving loans, swingline loans and letters of credit in an aggregate principal amount at any time outstanding not in excess of $150,000,000 and (iv) pay a dividend to TransDigm Holding Company, which in turn will pay a dividend to TD Group, which in turn will use all such proceeds to repay in full any and all amounts borrowed by it pursuant to the terms of that certain Loan Agreement, dated as of November 10, 2005, by and among TD Group, Banc of America Bridge LLC, as administrative agent, and the lenders and other agents named therein. The Company and the Guarantors hereby agree with the Purchasers as follows: 2. Representations and Warranties of the Company and the Guarantors. The Company and the Guarantors, jointly and severally, represent and warrant to, and agree with, the Purchasers that: (a)  A preliminary offering circular (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 and 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) and the information which is intended for general distribution to prospective investors, 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 C to this Agreement, which is referred to as the “Terms Communication”). “Applicable Time” means 5:45 p.m. (New York City time) on the date of this Agreement. As of the date of this Agreement, 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, 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 Offering Circular, the Final Offering Circular, the General Disclosure Package or any Supplemental Marketing Material based upon written information furnished to the Company by any Purchaser through Banc of America specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 8(b) hereof. “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.   2 --------------------------------------------------------------------------------   (b)  Each of the Company and TD Group has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware, with power and authority (corporate and other) to own its properties and conduct its business as described in the General Disclosure Package; and the Company 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 where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the condition (financial or otherwise), business, properties or results of operations of the Company and its subsidiaries, taken as a whole (“Material Adverse Effect”). (c)  Each subsidiary of the Company has been duly incorporated and is an existing corporation in good standing under the laws of the jurisdiction of its incorporation, with power and authority (corporate and other) to own its properties and conduct its business as described in the General Disclosure Package; and each subsidiary of the Company 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 where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; all of the issued and outstanding capital stock of each subsidiary of the Company has been duly authorized and validly issued and is fully paid and nonassessable; and the capital stock of each subsidiary owned by the Company, directly or through subsidiaries, is owned free from liens, encumbrances and defects, except for liens, encumbrances or defects on the capital stock of the subsidiaries (direct and indirect) of the Company granted in favor of the lenders under or related to the Credit Agreement or granted in favor of the lenders under or related to the New Credit Agreement. (d)  The Indenture has been duly authorized; the Offered Securities have been duly authorized; and when the Offered Securities are delivered and paid for pursuant to this letter agreement (this “Agreement”) on the Closing Date (as defined below), the Indenture will have been duly executed and delivered, such Offered Securities will have been duly executed, authenticated, issued and delivered, will be consistent in all material respects with the information in the General Disclosure Package and will conform in all material respects to the description thereof contained in the Final Offering Circular and the Indenture, and such Offered Securities will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles. (e) Except as disclosed in the General Disclosure Package, there are no contracts, agreements or understandings between the Company or the Guarantors, on the one hand, and any person, on the other hand, 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. (f)  No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required for the consummation by the Company or the Guarantors of the transactions contemplated by this Agreement, or the Registration Rights Agreement, except for the order of the Commission declaring effective the Exchange Offer Registration Statement or, if required, the Shelf Registration Statement (each as defined in the Registration Rights Agreement). (g)  The execution, delivery and performance of the Indenture and this Agreement by the Company and the Guarantors, the consummation by the Company and the Guarantors of the transactions herein contemplated and transactions contemplated by the Registration Rights Agreement, 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, (1) any statute or any rule, regulation or order of any governmental agency   3 --------------------------------------------------------------------------------   or body or any court, domestic or foreign, having jurisdiction over the Company, TD Group or any subsidiary of TD Group or any of their properties, (2) assuming that the Financing Transaction (as defined in the Preliminary Offering Circular) has been consummated, any agreement or instrument to which the Company, TD Group or any such subsidiary is a party or by which the Company, TD Group or any such subsidiary is bound or to which any of the properties of the Company, TD Group or any such subsidiary is subject or (3) the charter or by-laws of the Company, TD Group or any such subsidiary, except in the case of clauses (1) and (2), for breaches, violations and defaults that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and the Company has full power and authority to authorize, issue and sell the Offered Securities as contemplated by this Agreement. (h)  This Agreement has been duly authorized, executed and delivered by the Company and the Guarantors. (i) The Registration Rights Agreement has been duly authorized by the Company and the Guarantors and, upon its execution and delivery by the Company and the Guarantors, will be duly executed and delivered by the Company and the Guarantors and enforceable against the Company and the Guarantors in accordance with its terms, except that (1) the enforcement thereof may be subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles and (2) any rights to indemnity or contribution thereunder may be limited by federal and state securities laws and public policy considerations. (j)  Except as disclosed in the General Disclosure Package, the Company, TD Group and its subsidiaries have good and marketable title to all material real properties and all other material properties and material assets owned by them, in each case, and except as disclosed in the General Disclosure Package, free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or to be made thereof by them; and except as disclosed in the General Disclosure Package, the Company, TD Group and their subsidiaries hold any material leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or to be made thereof by them. (k)  The Company, TD Group and their 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 written notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate reasonably be expected to have a Material Adverse Effect. (l)  No labor dispute with the employees of the Company, TD Group or any subsidiary thereof exists or, to the knowledge of the Company, is imminent that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (m)  The Company, TD Group and their subsidiaries own, possess (including by license or other agreement) or can acquire on reasonable terms, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information 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 written 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, TD Group or any of their subsidiaries, would individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.   4 --------------------------------------------------------------------------------   (n)  Except as disclosed in the General Disclosure Package, neither the Company, nor TD Group, nor any of their subsidiaries (i) is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, 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”), (ii) owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, (iii) is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or (iv) is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and to the Company’s knowledge, there are no pending investigations which could reasonably be expected to lead to such a claim. (o)  Except as disclosed in the General Disclosure Package, there are no pending actions, suits or proceedings against or affecting the Company, TD Group, any of their subsidiaries or any of their respective properties that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, or would materially and adversely affect the ability of the Company to perform its obligations under the Indenture, this Agreement or the Registration Rights Agreement, or which are otherwise material in the context of the sale of the Offered Securities; to the Company’s knowledge, no such actions, suits or proceedings are threatened against the Company, TD Group any of their subsidiaries or any of their respective properties. (p)  The financial statements included in the General Disclosure Package present fairly in all material respects the financial position of TD Group (or, if applicable, TransDigm Holding Company) and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and, except as otherwise disclosed in the General Disclosure Package, such financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) applied on a consistent basis. (q)  Except as disclosed in the General Disclosure Package, since the date of the latest audited financial statements included 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 or results of operations of TD Group 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 TD Group on any class of its capital stock. (r) TD Group is subject to the reporting requirements of either Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended ( the “Exchange Act”), and files reports with the Commission on the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. (s) Neither the Company nor TD Group is 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, as amended (the “Investment Company Act”); and neither the Company nor TD Group is 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, neither the Company nor TD Group will be an “investment company” as defined in the Investment Company Act. (t)  TD Group maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 (e) under the Exchange Act) that comply in all material respects with the requirements of the Exchange Act; such disclosure controls and procedures have been designed to ensure that material information relating to TD Group and its subsidiaries is made known to TD Group’s principal executive officer and principal financial officer by others within those entities.   5 --------------------------------------------------------------------------------   (u)  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. (v)  The offer and sale of the Offered Securities in the manner contemplated by this Agreement will be exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereof, Regulation D thereunder and Regulation S thereunder; and it is not necessary to qualify an indenture in respect of the Offered Securities under the United States Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”). (w)  Except in connection with the consummation of the transactions contemplated by this Agreement, neither the Company, nor any of its affiliates, nor any person acting on its or their behalf (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 (“Regulation S”)) 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, by means of any directed selling efforts within the meaning of Rule 902(c) of Regulation S. The Company, its affiliates and any person acting on its or their behalf have complied in all material respects and will comply in all material respects with the offering restriction requirements of Regulation S. The Company has not entered into and will not enter into any contractual arrangement with respect to the distribution of the Offered Securities, except for this Agreement. Notwithstanding anything contained herein to the contrary, neither the Company nor any Guarantor makes any representation or warranty pursuant to this clause (v) with respect to any actions taken by the Purchasers in connection with the transactions contemplated by this Agreement. 3. Purchase, Sale and Delivery of Offered Securities. On the basis of the representations, warranties and agreements and subject to the terms and conditions set forth herein, on the Closing Date, the Company agrees to sell to the several Purchasers, and each such Purchaser agrees, severally and not jointly, to purchase from the Company, at a purchase price of 98% of the principal amount thereof, plus accrued interest from June 23, 2006 to the Closing Date, the principal amount of Offered Securities set forth opposite the name of such Purchaser 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 certificates 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 specified by the Company in writing to Banc of America, with such payment being made on June 23, 2006, or at such other time not later than seven full business days thereafter as Banc of America 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 purchased pursuant to the terms hereof. The Global Securities will be made available for checking at the office of  Latham & Watkins LLP, New York, New York 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   6 --------------------------------------------------------------------------------   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 its 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 903 or Rule 144A under the Securities Act (“Rule 144A”). 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 restriction requirements 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, as amended (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 into 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 Purchaser or affiliates of the other Purchaser 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 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, 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 not offered or sold and prior to the expiry of a period of six months from the Closing Date, will not offer or sell any Offered Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) 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 or any Guarantor;   7 --------------------------------------------------------------------------------   and (iii) 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 and the Guarantors. The Company and, as applicable, the Guarantors agree with the Purchasers that: (a)  The Company will advise Banc of America promptly of any proposal to amend or supplement the Preliminary Offering Circular or the Final Offering Circular and will not effect such amendment or supplementation without Banc of America’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 the Preliminary Offering Circular, the Final Offering Circular, any document included within 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, or if it is necessary at any such time to amend or supplement the Preliminary Offering Circular, the Final Offering Circular, any document included within the General Disclosure Package or any Supplemental Marketing Material, the Company promptly will notify Banc of America of such event and promptly will prepare, at its own expense, an amendment or supplement which will correct such statement or omission. Neither Banc of America’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 7. This subsection does not apply to statements in or omissions from the Preliminary Offering Circular, the Final Offering Circular, any document included within the General Disclosure Package or any Supplemental Marketing Material made in reliance upon and in conformity with written information furnished to the Company by any Purchaser through Banc of America specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 8(b) hereof. (b)  The Company will furnish to Banc of America 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 Banc of America may reasonably request, and the Company will furnish to Banc of America on the date hereof three copies of each of the foregoing documents, one of which in the case of the Preliminary Offering Circular and the Final Offering Circular will include the independent accountants’ reports manually signed by such independent accountants. At any time when neither the Company nor  TD Group is subject to Section 13 or 15(d) of the Exchange Act, the Company will promptly furnish or cause to be furnished to Banc of America 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 its commercially reasonable efforts to arrange for 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 Banc of America may reasonably designate and will use its commercially reasonable efforts to continue such qualifications in effect so long as required for the resale of the Offered Securities by the Purchasers, provided that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so   8 --------------------------------------------------------------------------------   qualified as of the date hereof or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise subject as of the date hereof. (d)  During the period of two years after the Closing Date, the Company will, upon request, furnish to Banc of America and Credit Suisse and any holder of Offered Securities a copy of the restrictions on transfer applicable to the Offered Securities. (e)  During the period of two years after the Closing Date, neither TD Group, nor the Company nor the Guarantors will, and will permit any of their subsidiaries to resell any of the Offered Securities that have been reacquired by any of them. (f)  During the period of two years after the Closing Date, neither the Company nor any of the Guarantors will 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. (g)  The Company will pay all expenses incidental to the performance of its obligations under this Agreement, the Indenture and the Registration Rights Agreement, including (i) the fees and expenses of the Trustee and its professional advisers; (ii) all expenses incurred by it in connection with the execution, issuance, 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 this Agreement, the Registration Rights Agreement, the Offered Securities, the Indenture, 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”) and any reasonable expenses incidental thereto; (iv) the cost of any advertising approved by the Company in connection with the issue of the Offered Securities; (v) for any expenses (including fees and disbursements of counsel) incurred by the Company in connection with the qualification of the Offered Securities or the Exchange Securities for sale under the laws of such states in the United States and Canada as Banc of America may reasonably designate (subject to the other terms set forth in this Agreement) and the printing of memoranda relating thereto; (vi) any fees charged by investment rating agencies for the rating of the Securities or the Exchange Securities; and (vii) any expenses incurred in distributing to the Purchasers 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. The Company will also pay or reimburse the Purchasers (to the extent incurred by them) for all reasonable travel expenses of the Purchasers and the Company’s officers and employees and any other reasonable expenses of the Purchasers and the Company incurred in connection with attending or hosting meetings with prospective purchasers of the Offered Securities. (h)  In connection with the offering, until Banc of America shall have notified the Company of the completion of the resale of the Offered Securities, none of TD Group, the Company or any of its subsidiaries has or will, either alone or with one or more other persons, bid for or purchase for any account in which TD Group, the Company or any of its subsidiaries has a beneficial interest any Offered Securities or attempt to induce any person to purchase any Offered Securities; and neither TD Group, the Company nor any of its subsidiaries 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. (i)  Simultaneously with the consummation of the transactions contemplated by this Agreement, TD Finance Corporation will merge with and into the Company, and the Company will be the surviving entity of such merger. In addition, on or prior to the second business day following   9 --------------------------------------------------------------------------------   the Closing Date, TransDigm Holding Company shall be merged with and into the Company, and the Company will be the surviving entity of such merger and, if for any reason such merger does not become effective on or prior to the second business day following the Closing Date, then TransDigm Holding Company shall execute and deliver a supplemental indenture to the Indenture, in form and substance reasonably satisfactory to Banc of America, pursuant to which it shall agree to become a guarantor under the terms of the Indenture for all purposes thereof. (j)  In conjunction with the consummation of the transactions contemplated by this Agreement, the Tender Offer shall have been consummated and the Company, the guarantors and the trustee party to the indenture governing the 83¤8% Senior Subordinated Notes (the “Existing Indenture”) shall have entered into a supplemental indenture to the Existing Indenture implementing the terms of the consent solicitation undertaken in connection with the Tender Offer. 6. Free Writing Communications. (a) The Company represents and agrees that, unless it obtains the prior consent of Banc of America, and Banc of America represents and agrees that, unless it obtains the prior consent of the Company, 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 (which Terms Communication constitutes a Free Writing 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, to the accuracy of the statements of officers of the Company made pursuant to the provisions hereof, to the performance, in all material respects, 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 Deloitte & Touche USA LLP confirming that they are independent public accountants within the meaning of the Securities Act and the applicable published rules and regulations thereunder (“Rules and Regulations”) and to the effect that in their opinion the financial statements examined by them and included in the Preliminary Offering Circular and the Final Offering Circular comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the related published Rules and Regulations. (b) The Purchasers shall have also received a letter, dated the date of this Agreement, of Ernst & Young LLP confirming that they are independent public accountants within the meaning of the Securities Act and the applicable published Rules and Regulations and to the effect that: (i)  in their opinion the financial statements examined by them and included in the Preliminary Offering Circular and the Final Offering Circular comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the related published Rules and Regulations;   10 -------------------------------------------------------------------------------- (ii) they have performed the procedures specified by the American Institute of Certified Public Accountants for a review of interim financial information as described in Statement of Auditing Standards No. 100, Interim Financial Information, on the unaudited financial statements included in the Preliminary Offering Circular and the Final Offering Circular; (iii) on the basis of the review referred to in clause (ii) above, a reading of the latest available interim financial statements of TD Group, inquiries of officials of TD Group who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that: (A)  (x) the unaudited financial statements included in the Preliminary Offering Circular and the Final Offering Circular do not comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the related published Rules and Regulations or (y) any material modifications should be made to such unaudited financial statements for them to be in conformity with GAAP;  (B) the unaudited consolidated net sales, net operating income and net income amounts for the 26-week periods ended April 1, 2006 and April 2, 2005 included in the Preliminary Offering Circular and the Final Offering Circular do not agree with the amounts set forth in the unaudited consolidated financial statements for those same periods or were not determined on a basis substantially consistent with that of the corresponding amounts in the audited statements of income; (C) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more than three business days prior to the date of this Agreement, (i) there was any change in the capital stock or any increase in short-term indebtedness or long-term debt of TD Group and its consolidated subsidiaries or, at the date of the latest available balance sheet read by such accountants, there was any decrease in consolidated net current assets or net assets, as compared with amounts shown on the latest balance sheet included in the Final Offering Circular; or (D) for the period from the closing date of the latest income statement included in the Final Offering Circular to the closing date of the latest available income statement read by such accountants there were any decreases, as compared with the corresponding period of the previous year and with the period of corresponding length ended the date of the latest income statement included in the Final Offering Circular, in consolidated net sales, net operating income, or in the ratio of earnings to fixed charges; except in all cases set forth in clauses (B), (C) and (D) above for changes, increases or decreases which are described in such letter; and (iv) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Preliminary Offering Circular, each other document comprising any part of the General Disclosure Package, the Final Offering Circular and each item of Supplemental Marketing Material (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of TD Group and its subsidiaries subject to the internal 11 -------------------------------------------------------------------------------- controls of TD Group’s accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter. (c)  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 one enterprise which, in the judgment of Banc of America and 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, except in each case for any of the foregoing relating solely to any 8 3/8% Senior Subordinated Notes that are not tendered in connection with the Tender Offer; (iii) any change in U.S. or international financial, political or economic conditions or currency exchange rates or exchange controls as would, in the reasonable judgment of Banc of America and 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; (v) any suspension of trading of any securities of TD Group on any exchange or in the over-the-counter market; (vi) any banking moratorium declared by U.S. Federal or New York authorities; (vii) any major disruption of settlements of securities or clearance services in the United States; (viii) any attack on, outbreak or escalation of hostilities or act of terrorism involving the United States or, any declaration of war by Congress or any other national or international calamity or emergency if, in the reasonable judgment of Banc of America and 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 payment for the Offered Securities. (d)  The Purchasers shall have received an opinion, dated the Closing Date, of Willkie Farr & Gallagher LLP, Baker & Hostetler LLP or other local counsel to the Company, as applicable, substantially to the effect that: (i)  Each of the Company and TD Group has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware , with corporate power and authority to own its properties and conduct its business as described in the General Disclosure Package, except where the failure to have such power and authority would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and each of the Company and TD Group is duly qualified to do business as a foreign corporation in good standing in the jurisdictions, if any, listed on a schedule to such opinion; (ii) Each subsidiary of the Company listed on Schedule D hereto has been duly incorporated and is an existing corporation in good standing under the laws of the jurisdiction of its incorporation, with power and authority (corporate and other) to own its properties and conduct its business as described in the General Disclosure Package, except where the failure to have such power and authority would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and each subsidiary of the Company is duly qualified to do business as a foreign corporation in good standing in the jurisdictions listed on a schedule to such opinion; all of the issued and outstanding capital stock of each such subsidiary 12 -------------------------------------------------------------------------------- of the Company has been duly authorized and validly issued and is fully paid and nonassessable; and the capital stock of each such subsidiary owned by the Company, directly or through subsidiaries, is, to the knowledge of such counsel, owned free from liens, encumbrances and defects, except for liens, encumbrances and defects on the capital stock of the subsidiaries (direct and indirect) of the Company granted in favor of the lenders under or related to the Credit Agreement or granted in favor of the lenders under or related to the New Credit Agreement. (iii)                The Indenture has been duly authorized, executed and delivered; the Offered Securities have been duly authorized, executed, authenticated, issued and delivered, are consistent in all material respects with the information in the General Disclosure Package and conform in all material respects to the description thereof contained in the Final Offering Circular; and the Indenture and the Offered Securities constitute valid and legally binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles; (iv)               No consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required to be obtained or made by the Company for the consummation of the transactions contemplated by this Agreement, and the Registration Rights Agreement in connection with the issuance or sale of the Offered Securities by the Company, except such as may be required under state securities or blue sky laws except for the order of the Commission declaring effective the Exchange Offer Registration Statement or, if required, the Shelf Registration Statement or where the failure to obtain or make any of the foregoing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; (v) To our knowledge, except as set forth in the General Disclosure Package, there are no pending actions, suits or proceedings against the Company, TD Group, any of their subsidiaries or any of their respective properties in any New York or Federal court that, would individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, or which are otherwise material in the context of the sale of the Offered Securities; (vi)               The execution, delivery and performance of the Indenture, this Agreement and the Registration Rights Agreement, the consummation of the transactions herein contemplated and the issuance and sale of the Offered Securities will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, (1) any Federal or New York statute or any rule, regulation or order, in each case known to such counsel to be customarily applicable to transactions of the type contemplated by this Agreement or, to such counsel’s knowledge, any order, judgment or decree specifically naming the Company or any of its subsidiaries of any governmental agency or body or any court having jurisdiction over the Company or any such subsidiary or any of their properties, (2) any agreement or instrument to which the Company, TD Group or any such subsidiary is a party or by which the Company or any such subsidiary is bound or to which any of the properties of the Company or any such subsidiary is subject and which is listed on Schedule E hereto, or (3) the charter or by-laws of the Company or any such subsidiary, except in the case of clauses (1) and (2), for breaches, violations and defaults that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and the Company has full power and authority to enter into this Agreement and to consummate the transactions contemplated hereby; 13 -------------------------------------------------------------------------------- (vii)              Such counsel have 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 required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; such counsel have 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, when considered together with the information set forth in the schedules to this Agreement, contained any untrue statement of a material fact or omitted 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; it being understood that such counsel need express no opinion as to the financial statements, related schedules and other financial and accounting information contained in the General Disclosure Package or the Final Offering Circular; (viii) This Agreement has been duly authorized, executed and delivered by the Company and the Guarantors; (ix)                The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and the Guarantors and will be enforceable against the Company and the Guarantors in accordance with its terms, except that (1) the enforcement thereof may be subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles and (2) any rights to indemnity or contribution thereunder may be limited by federal and state securities laws and public policy considerations (ix)                It is not necessary in connection with (i) the offer, sale and delivery of the—Offered Securities by the Company to the Purchasers pursuant to this Agreement or (ii) the resales of the Offered Securities by the Purchasers in the manner contemplated by this Agreement, to register the Offered Securities under the Securities Act or to qualify an indenture in respect thereof under the Trust Indenture Act. (e)  The Purchasers shall have received from Latham & Watkins 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 and the General Disclosure Package, the exemption from registration for the offer and sale of the Offered Securities by the Company to the Purchasers and the resales by the Purchasers as contemplated hereby and other related matters as Banc of America and Credit Suisse may reasonably 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 Chief Executive Officer, 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 in all material respects 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 involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole except as set forth in the General Disclosure Package or as described in such certificate. 14 --------------------------------------------------------------------------------               (g) The Purchasers shall have received letters, dated the Closing Date, of Deloitte & Touche USA LLP and Ernst & Young LLP which meet the requirements of subsections (a) and (b), respectively, of this Section, except that the specified dates referred to in such subsections will be a date not more than three days prior to the Closing Date for the purposes of this subsection. The Company will furnish the Purchasers with such conformed copies of such opinions, certificates, letters and documents as the Purchasers reasonably request. Banc of America 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 and the Guarantors will, jointly and severally, 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 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 the light of the circumstances under which they were made, not misleading 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 neither the Company nor the Guarantors 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 Banc of America 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 and the Guarantors, their directors and officers and each person, if any, who controls the Company or the Guarantors within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities to which the Company or the Guarantors, as the case may be, 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 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 Banc of America specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Company or the Guarantors 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 following information in the Preliminary Offering Circular and the Final Offering Circular furnished on behalf of each Purchaser: under the caption “Plan of Distribution” paragraphs 5, 8 and 9; 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 or the Guarantors’ failure to perform their 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 15 -------------------------------------------------------------------------------- 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 reasonably 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. 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 (i) includes 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. No indemnifying party shall be liable for any settlement or compromise of, or consent to the entry of judgment with respect to, any such action or claim effected without its consent, unless such indemnifying party has failed, upon request by the indemnified party pursuant to this Section 8, to reimburse the indemnified party for legal expenses due pursuant to this Section 8 within thirty days of such request. (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 and the Guarantors 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 and the Guarantors 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 and the Guarantors 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 compared 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 and the Guarantors under this Section shall be in addition to any liability which the Company or the Guarantors 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 16 -------------------------------------------------------------------------------- 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 or the Guarantors 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 Offered Securities that such defaulting Purchaser or Purchasers agreed but failed to purchase does not exceed 10% of the total—principal amount—of Offered Securities, Banc of America and 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 Offered Securities with respect to which such default or defaults occur exceeds 10% of the total principal amount of Offered Securities and arrangements satisfactory to Banc of America and 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 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), (vi), (vii) or (viii) of Section 7(c), the Company will reimburse the Purchasers for all out-of-pocket expenses (including reasonable 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 or telegraphed and confirmed to the Purchasers, c/o Banc of America Securities LLC, Nine West 57th Street, New York, NY 10019, Attention: Legal Department, or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at 1301 East 9th Street, Suite 3710, Cleveland, OH 44114, Attention: Chief Financial Officer; provided, however, that any notice to a Purchaser pursuant to Section 8 will be mailed, delivered or telegraphed 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 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. 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. 17 -------------------------------------------------------------------------------- 14. 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, the Preliminary Offering Circular or the Final Offering Circular, irrespective of whether any Purchaser has advised or is 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 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. 15. 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 and the Purchasers hereby submit 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.   18 -------------------------------------------------------------------------------- If the foregoing is in accordance with the Purchasers’ understanding of our agreement, kindly sign and return to us one of the counterparts hereof, whereupon it will become a binding agreement between the Company and the Purchasers in accordance with its terms.   Very truly yours,                       TransDigm Inc.             By: /s/ W. Nicholas Howley       Name: W. Nicholas Howley       Title: Chief Executive Officer               TransDigm Group Incorporated             By: /s/ W. Nicholas Howley       Name: W. Nicholas Howley       Title: Chief Executive Officer               Avionic Instruments Inc.             By: /s/ W. Nicholas Howley       Name: W. Nicholas Howley       Title: Chief Executive Officer               Skurka Aerospace Inc.             By: /s/ W. Nicholas Howley       Name: W. Nicholas Howley       Title: Chief Executive Officer               DAC Realty Corp.             By: /s/ W. Nicholas Howley       Name: W. Nicholas Howley       Title: Chief Executive Officer   19 --------------------------------------------------------------------------------               Champion Aerospace Inc.             By: /s/ W. Nicholas Howley       Name: W. Nicholas Howley       Title: Chief Executive Officer               MarathonNorco Aerospace Inc.             By: /s/ W. Nicholas Howley       Name: W. Nicholas Howley       Title: Chief Executive Officer               ZMP, Inc.             By: /s/ W. Nicholas Howley       Name: W. Nicholas Howley       Title: Chief Executive Officer               Adams Rite Aerospace, Inc.             By: /s/ W. Nicholas Howley       Name: W. Nicholas Howley       Title: Chief Executive Officer               Christie Electric Corp.             By: /s/ W. Nicholas Howley       Name: W. Nicholas Howley       Title: Chief Executive Officer               Sweeney Engineering Corp.             By: /s/ Gregory Rufus       Name: Gregory Rufus       Title: Secretary and Treasurer   20 -------------------------------------------------------------------------------- The foregoing Purchase Agreement is hereby confirmed and accepted as of the date first above written. BANC OF AMERICA SECURITIES LLC           By: /s/ John McCusker       Name: John McCusker     Title: Managing Director           CREDIT SUISSE SECURITIES (USA) LLC           By: /s/ Edward L. Neuburg       Name: Edward L. Neuburg     Title: Director     Acting on behalf of themselves and as the Representatives of the several Purchasers   21 --------------------------------------------------------------------------------   SCHEDULE A   Purchaser     Principal Amount of Offered Securities   Banc of America Securities LLC.   $ 130,625,000           Credit Suisse Securities (USA) LLC   130,625,000           UBS Investment Bank   6,875,000           Barclays Capital   6,875,000           Total   $ 275,000,000       22 -------------------------------------------------------------------------------- SCHEDULE B 1-  Terms Communication attached as Schedule C hereto.   23 --------------------------------------------------------------------------------   SCHEDULE C $275,000,000 TransDigm Inc. 7 ¾% Senior Subordinated Notes due 2014 June 20, 2006 Pricing Supplement dated June 20, 2006 to Preliminary Offering Memorandum dated June 19, 2006 of TransDigm Inc. (“TransDigm”) This Pricing Supplement is qualified in its entirety by reference to the Preliminary Offering Memorandum. The information in this Pricing Supplement supplements the Preliminary Offering Memorandum and supersedes the information in the Preliminary Offering Memorandum to the extent inconsistent with the information in the Preliminary Offering Memorandum. The notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) and are being offered only (1) to “qualified institutional buyers” as defined in Rule 144A under the Securities Act and (2) outside the United States to non-U.S. persons in compliance with Regulation S under the Securities Act. Principal Amount:   $275,000,000 Title of Securities:   7 ¾% Senior Subordinated Notes due 2014 Final Maturity Date:   July 15, 2014 Issue Price:   100%, plus accrued interest, if any Coupon:   7 ¾% Interest Payment Dates:   January 15 and July 15 First Interest Payment Date:   January 15, 2007 Optional Redemption:   On or after July 15, 2009, TransDigm may redeem all or a part of the notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if any, on the notes redeemed, to the applicable redemption date, if redeemed during the twelve-month period beginning on July 15 of the years indicated below:       Year   Price 2009   105.813% 2010   103.875% 2011   101.938% 2012 and thereafter   100.000%   At any time prior to July 15, 2009, the TransDigm may redeem all or a part of the Notes (which includes Additional Notes, if any), upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to the registered address of each Holder of Notes, at a redemption price equal to 100% of the principal amount of Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, to the date of redemption (the ‘‘Redemption Date’’), subject to the rights of Holders of Notes on the relevant record date to receive interest due on the relevant interest payment date.   24 --------------------------------------------------------------------------------   ‘‘Applicable Premium’’ means, with respect to any Notes on any Redemption Date, the greater of: (1) 1.0% of the principal amount of the Note; or (2) the excess, if any, of: (a) the present value at such Redemption Date of (i) the redemption price of the Note at July 15, 2009, plus (ii) all required interest payments due on such Note through July 15, 2009 (excluding accrued but unpaid interest to the Redemption Date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over (b) the principal amount of such Note.   Optional Redemption with Equity Proceeds:   At any time prior to July 15, 2009, TransDigm may on any one or more occasions redeem up to 35% of the aggregate principal amount of notes issued under the indenture at a redemption price equal to 107.750% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date.       Initial Purchasers:   Principal Amount of Notes Banc of America Securities LLC   $130,625,000 Credit Suisse   130,625,000 UBS Securities LLC   6,875,000 Barclays Capital Inc.   6,875,000       Trade Date:   June 20, 2006 Settlement Date:   June 23, 2006 (T+ 3) Distribution:   144A and Regulation S with registration rights as set forth in the Preliminary Offering Memorandum       Use of Proceeds:   The net proceeds from this offering will be used, together with the initial borrowings under the New Senior Secured Credit Facility and a portion of TransDigm’s existing cash balances, to repay the entire $288.4 million of principal amount outstanding under the Existing Senior Secured Credit Facility, to repay the entire $200 million of principal amount outstanding under the TD Group Loan Facility, to purchase all of the $400 million of aggregate principal amount of TransDigm’s 8 ⅜% Senior Subordinated Notes that are tendered in connection with the tender offer that was commenced in connection with this offering, to pay accrued and unpaid interest on all such indebtedness and to pay all premiums and transaction expenses associated with this transaction.   25 --------------------------------------------------------------------------------   SCHEDULE D LIST OF CERTAIN SUBSIDIARIES Name of Subsidiary   State or Jurisdiction of Incorporation       MarathonNorco Aerospace, Inc.   Delaware       ZMP, Inc.   California       Adams Rite Aerospace, Inc.   California       Champion Aerospace Inc.   Delaware       Christie Electric Corp.   California       Avionic Instruments, Inc.   Delaware       Skurka Aerospace Inc.   Delaware       DAC Realty Corp.   New Jersey       Sweeney Engineering Corp.   California   26 --------------------------------------------------------------------------------   SCHEDULE E LIST OF CERTAIN AGREEMENTS 1.                  Stockholders’ Agreement, dated as of July 22, 2003, by and among TD Holding Corporation, Warburg Pincus Private Equity VIII, L.P., the other institutional investors whose names and addresses are set forth on Schedule I thereto and the employees of TransDigm Inc. and certain of its subsidiaries whose names and addresses are set forth on Schedule II thereto. 2.                  Registration Rights Agreement, dated as of July 22, 2003, among the institutional investors whose names and addresses are set forth on Schedule I thereto, the employees of TransDigm Inc. and certain of its subsidiaries whose names and addresses are set forth on Schedule II thereto and TD Holding Corporation. 3.                  Tax Sharing Agreement, dated as of July 22, 2003, by and among TD Holding Corporation, TransDigm Holding Company, TransDigm Inc. and such direct and indirect subsidiaries of TD Holding Corporation that are listed on Exhibit A thereto. 4.                  Standard Industrial/Commercial Single-Tenant Lease — Net, dated as of December 31, 2004, between VHEM, LLC, d/b/a H&M Properties, and Skurka Aerospace Inc. 5.                    Guaranty of Lease, dated as of December 31, 2004, by TransDigm Inc. in favor of VHEM, LLC, d/b/a H&M Properties.   27 --------------------------------------------------------------------------------

EXHIBIT 10.1 DEFERRED STOCK UNIT AWARD AGREEMENT   This Award Agreement (the “Agreement”) is entered into as of  ____________ (the “Award Date”) by and between Schnitzer Steel Industries, Inc, an Oregon corporation (the “Company”), and ____________ , a non-employee director of the Company (the “Recipient”), for the award of deferred stock units with respect to the Company’s Class A Common Stock (“Common Stock”).   The award of deferred stock units to the Recipient is made pursuant to Section 8 of the Company’s 1993 Stock Incentive Plan (the “Plan”) and the 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. Award and Terms of Deferred Stock Units. The Company awards to the Recipient under the Plan _________ deferred stock units (the “Award”), subject to the restrictions, terms and conditions set forth in this Agreement.   (a)    Rights under Deferred Stock Units. A deferred stock unit (a “DSU”) represents the unfunded, unsecured right to require the Company to deliver to the Recipient one share of Common Stock for each DSU.  The number of shares of Common Stock deliverable with respect to each DSU 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 Date. The DSUs awarded under this Agreement shall initially be 100% unvested and subject to forfeiture.  Subject to Sections 1(c) and (d), the DSUs shall vest in full on the day before the 2007 annual meeting of shareholders (the “Vesting Date”) if the Recipient is a director of the Company on the Vesting Date and has served as a director of the Company continuously from the Award Date to the Vesting Date.   (c)    Acceleration on Death or Disability. If the Recipient ceases to be a director of the Company by reason of the Recipient’s death or physical disability, all outstanding but unvested DSUs shall become immediately vested. The term “disability” means a medically determinable mental or physical impairment that, in the opinion of the Board of Directors, causes the Recipient to be unable to perform his or her duties as a director of the Company. (d)    Acceleration of DSUs on a Change in Control. Upon a Change in Control of the Company, all outstanding but unvested DSUs shall become immediately vested. For purposes of this Agreement, a “Change in Control” of the Company shall mean the occurrence of any of the following events:   (i)    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     -1- --------------------------------------------------------------------------------     Securities issued or retained by such holders in respect of securities of any other party to the Merger;   (ii)    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;   (iii)    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   (iv)    Any Person 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, unless otherwise determined by the Board of Directors, no Change in Control shall be deemed to have occurred for purposes of this Agreement if (1) the 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 (i) or (ii) above, or (2) the 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 (iv) above. 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.   (e)    Forfeiture of DSUs on Termination of Service. If the Recipient ceases to be a director of the Company for any reason that does not result in acceleration of vesting pursuant to Section 1(c) or 1(d), the Recipient shall immediately forfeit all outstanding but unvested DSUs awarded pursuant to this Agreement and the Recipient shall have no right to receive the related Common Stock.   (f)    Restrictions on Transfer. The Recipient may not sell, transfer, assign, pledge or otherwise encumber or dispose of the DSUs subject to this Agreement. The Recipient may designate beneficiaries to receive the shares of Common Stock underlying the DSUs subject to this Agreement if the Recipient dies before delivery of the shares of Common Stock by so indicating on a form supplied by the Company. If the Recipient fails to designate a beneficiary, such Common Stock will be delivered as provided in the Company’s Deferred Compensation Plan for Non-Employee Directors (the “Deferred Compensation Plan”).     -2- --------------------------------------------------------------------------------     (g)    No Voting Rights; Dividend Equivalents. The Recipient shall have no rights as a shareholder with respect to the DSUs or the Common Stock underlying the DSUs until the underlying Common Stock is issued to the Recipient. The Recipient will not be entitled to receive cash payments representing any cash dividends paid with respect to the Common Stock underlying the DSUs. Following the Vesting Date, the DSUs shall be credited to the Recipient’s account under the Deferred Compensation Plan and dividend equivalents with respect to the DSUs shall thereafter be credited to Recipient’s account as provided in the Deferred Compensation Plan.   (g)    Delivery Date for the Shares Underlying the DSU. The Company shall not issue any shares underlying the DSUs, and the Recipient shall have no right to receive any shares of Common Stock underlying the DSUs (even to the extent vested), while the Recipient is serving as a director of the Company. When the Recipient ceases to serve as a director of the Company for any reason, the Company shall, subject to any deferral elections made by the Recipient as provided in this paragraph Section 1(g) and the terms of the Deferred Compensation Plan, deliver shares of Common Stock represented by vested DSUs to the Recipient as provided in the Deferred Compensation Plan (the date of delivery of such shares is referred to as a “delivery date”).  The shares of Common Stock will be issued in the Recipient’s name or, in the event of the Recipient’s death or disability, to the Recipient’s beneficiary or as provided in the Deferred Compensation Plan. The Recipient may elect to defer the receipt of the shares underlying the DSUs beyond the delivery date provided for in this Section 1(g) pursuant to the terms of the Deferred Compensation Plan. (h)    Taxes and Tax Withholding. (i)    The Company shall be entitled to withhold from any delivery of Common Stock hereunder any income or other tax withholding obligations arising as a result of this Award, in amounts determined by the Company. (ii)    The Recipient acknowledges and agrees that no election under Section 83(b) of the Internal Revenue Code can or will be made with respect to the DSUs. 2.    Miscellaneous.   (a)    Entire Agreement. This Agreement, the Plan and the Deferred Compensation Plan constitute the entire agreement of the parties with regard to the subjects hereof. (b)    Interpretation of the Plan and the Agreement. The Compensation Committee of the Board of Directors (the “Administrator”), shall have the sole authority to interpret the provisions of this Agreement, the Plan and the Deferred Compensation Plan, and all determinations by it shall be final and conclusive. (c)    Electronic Delivery. The Recipient consents to the electronic delivery of any prospectus and any other documents relating to this Award in lieu of mailing or other form of delivery.   (d)    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     -3- --------------------------------------------------------------------------------     restrictions on transfer of this Agreement, be binding upon the Recipient’s heirs, executors, administrators, successors and assigns.   (e)    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. (f)    Governing Law. This Agreement and the Plan will be interpreted under the laws of the state of Oregon, exclusive of choice of law rules. (g)    Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original.       SCHNITZER STEEL INDUSTRIES, INC.           By:         Authorized Officer                 Recipient         -4- --------------------------------------------------------------------------------    

NON-COMPETITION AGREEMENT This Agreement (“Agreement”) is made and entered into as of this 21 day of July, 2006, by and between Reptron Electronics, a Florida corporation (“Reptron”), and Charles L. Pope (“Executive”). WHEREAS, Executive and Reptron have entered into a Severance Agreement, dated July 21, 2006 (the “Severance Agreement”), by which upon the satisfaction of certain conditions, Reptron will provide Executive with post-employment severance in the amounts set forth in the Severance Agreement. WHEREAS, a key condition of Reptron entering into the Severance Agreement is Executive entering into this Agreement simultaneous with the Severance Agreement and restricting his right to compete against Reptron. NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained and contained in the Severance Agreement the parties agree as follows: 1. Severance. Reptron’s obligation to make any payments or offer any benefits to Executive under the Severance Agreement is conditioned on, among other things, the full compliance by Executive with the terms and conditions of this Agreement. 2. Scope of Employer Protection. Reptron is a national concern that does business throughout the United States. In his employment with Reptron, Executive has performed services in more than one city, county or state in the United States, and has gained access to Confidential Information that pertains not only to the specific area in which Executive lives and/or works but also to other cities, counties, and states in which Reptron does business. The protections stated herein are intended to protect Reptron to the fullest extent possible in all of the cities, counties, and states in the United States in which Reptron does business. 3. Non-Competition. In return for the right to receive the severance benefits provided in the Severance Agreement, Executive hereby agrees that Executive will not during his employment with the Company, and for a period of one year immediately following the termination by the Company of such employment for any reason, Executive shall not, directly or indirectly, own, have any interest in, act as an officer, director, agent, employee, shareholder, owner, partner, joint venturer, or consultant of, or assist in any way or in any capacity any person, firm, association, partnership, corporation or other entity which engages or proposes to engage in any business in competition with the business of Reptron (a “Competitive Entity”). The restrictions of this section prohibiting ownership in a Competitive -------------------------------------------------------------------------------- Entity shall not apply to Executive’s ownership of less than one percent (1%) of publicly-traded securities of any Competitive Entity or less than five percent (5%) of the capital stock of a competing business whose stock is not publicly traded. If the Company fails to make any payment or provide any benefit due Executive under the Severance Agreement, Executive shall give the Company written notice of such omission and the Company shall have seven (7) days after receipt of such notice to cure the failure to make such payment or provide such benefit. Executive’s obligation under this Section 3 of this Agreement shall be conditioned upon Reptron making all payments to Executive and providing the benefits due Executive under the Severance Agreement after such notice and opportunity to cure as provided herein. 4. Reasonableness. While the Executive and Reptron acknowledge that the restrictions contained in this section are reasonable, in the unlikely event that any court should determine that any of the restrictive covenants contained in this section, or any part thereof, is unenforceable because of the duration of such provision, the area covered thereby or any other basis, such court shall have the power to reduce the duration or area of such provision or otherwise amend it and, in its reduced form, such provision shall then be enforceable and shall be enforced. 5. Acknowledgement of Irreparable Harm. Executive acknowledges that he has received confidential information during the term of his employment with Reptron which is special and unique to Reptron and that the disclosure of any Confidential Information or the breach of any of the terms and covenants of this Non-Competition Agreement will result in irreparable and continuing harm to Reptron for which there will be no adequate remedy at law. 6. Remedies. Executive agrees, that in the event he fails to abide by this Agreement, Reptron shall be entitled to specific performance, including immediate issuance of a temporary restraining order and/or preliminary or permanent injunctive relief enforcing this Agreement, without the necessity of proof of actual damages and without posting bond for such relief, and to judgment for damages caused by his breach, and to any other remedies provided by applicable law. In the event any of the terms or conditions of this Agreement are found unreasonable by a court of competent jurisdiction, Executive agrees to accept as binding in lieu thereof, any such lesser restrictions which said court may deem reasonable. 7. Notification of Other Employment. In order to allow Reptron to evaluate risks to its business interests and to take steps, if necessary, to protect its rights under this Agreement and other Agreements between Executive and Reptron, Executive agrees to notify Reptron, prior to accepting any position with any third party, whether as an employee or independent contractor, and prior to commencing any business. He also agrees to inform any new employer, prior to accepting employment or providing services, of the existence of this Non-Competition Agreement.   - 2 - -------------------------------------------------------------------------------- 8. Scope. The scope and effect of the covenants contained in this Agreement shall be as broad as may be permitted under the provisions of applicable law. To the extent that the language of such covenants may be greater than permitted by applicable law, that portion thereof shall be ineffective, but the provisions of the covenants shall nevertheless remain effective with respect to such portion of the covenants as shall be permitted by applicable law. 9. Entire Agreement. This document is the entire, final, and complete agreement and understanding of the parties with respect to Executive’s possible competition with Reptron and, if this Agreement directly conflicts with any other written and oral agreements made or executed by and between the parties or their representatives, this Agreement shall supersede all such agreements with respect to this limited topic. 10. Waiver. A waiver of any provision of this Agreement shall not be deemed, or shall not constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the parties making the waiver. 11. Binding Effect. All rights, remedies, and liabilities herein given to or imposed upon the parties shall extend to, inure to the benefit of, and bind, as the circumstances may require, the parties or their representative heirs, personal representatives, administrators, successors and assigns. 12. Amendments. No supplement, modification, or amendment of this Agreement shall be valid, unless the same is in writing and signed by all parties thereto. 13. Severability. In the event any provision or portion of this Agreement is held to be unenforceable or invalid by any court of competent jurisdiction, the remainder of this Agreement shall remain in full force and effect and shall in no way be affected or invalidated thereby. 14. Attorneys’ Fees. If litigation is commenced by either party to enforce any provision of this Agreement, or by reason of any breach of this Agreement, the prevailing party shall be entitled to recover reasonable costs and attorneys’ fees, both at trial and on appeal. 15. Governing Law. This Agreement and the rights of the parties hereunder shall be governed, construed and enforced in accordance with the laws of the State of Florida, without regard to its conflict of law principles. Any suit or action arising out of or in connection with this Agreement, or any breach hereof, shall be brought and maintained in the federal or state courts in Tampa, Florida. The parties hereby irrevocably submit to the jurisdiction of such courts for the purpose of such suit or action and hereby expressly and irrevocably waive, to the fullest extent permitted by law, any suit or action in any such court and any claim that any such suit or action has been brought in an inconvenient forum.   - 3 - -------------------------------------------------------------------------------- 16. No Pressure or Coercion. Executive acknowledges that he has read this Agreement and is being given an opportunity to consider it and discuss it with financial and legal counsel of his choice. 17. Voluntary Act. Executive covenants that he has freely and voluntarily executed this Agreement, with a complete understanding of its terms and present and future effect, and without any undue pressure or coercion from Reptron. 18. Notices. All notices to the Company shall be in writing and shall be deemed given when received by the Company as long as such notice is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:   If to the Company:    Reptron Electronics, Inc.    13700 Reptron Blvd.    Tampa, Florida 33626    Attention: CEO and President Copy to:    Schwabe Williamson & Wyatt, P.C.    1211 SW 5th Avenue, Suite 1900    Portland, Oregon 97204    Attention: A. Jeffery Bird IN WITNESS THEREOF, the parties have executed this Agreement on the respective dates set forth below.   EXECUTIVE    REPTRON ELECTRONICS, INC. Name:   /s/ Charles L. Pope    By   /s/ Paul J. Plante Date:   July 21, 2006    Name:   Paul J. Plante      Title:   President and Chief Executive Officer      Date:   July 21, 2006   - 4 -

  Exhibit 10.1 Adopted May 2, 2006 by the Compensation Committee (ALKERMES LOGO) [b60858aib6085800.gif] Alkermes Fiscal 2007 Named Executive Bonus Plan The Alkermes Fiscal 2007 Named Executive Bonus Plan (the “Plan”) includes the following elements:   •   Our Philosophy     •   Eligibility     •   Performance Period Company Objectives     •   Size of Company Bonus Pool     •   Individual Bonus Targets     •   Individual Performance Factor Our Philosophy We believe in a pay-for performance approach that combines individual and Company performance with compensation to reward employees for the work they do to achieve Company goals. This Plan is designed to:   •   provide upside reward for outstanding Company and individual performance     •   motivate named executives to focus on and work together toward achieving Company and individual goals     •   be competitive within our industry Eligibility Company named executives are eligible to participate in the plan. As of April 1, 2006, the following named executives have been approved for participation in the Plan:   •   CEO     •   President and COO     •   Vice President and CFO     •   Vice President Corporate Development     •   Vice President, General Counsel and Secretary The performance period under the Plan will consist of the twelve month period from April 1, 2006 to March 31, 2007 (the “Performance Period”). Bonuses will be paid within two and one half months of the end of the period for which they are being paid. Performance Period Company Objectives The following are the overall Company objectives for the Performance Period: Objective 1 Drive robust supply of Risperdal Consta® sales   --------------------------------------------------------------------------------   Objective 2 Launch and successfully commercialize Vivitrol™ Objective 3 Achieve key development program milestones Objective 4 Financial performance against budget The Compensation Committee of the Board of Directors reserves the right to modify the above objectives at any time during the course of the Performance Period in response to changing business goals, needs and operations. Individual Bonus Targets Individual bonus targets as a percentage of base salary are established by the Compensation Committee for each of the named executive officers. First year employees’ bonuses are to be prorated based on the number of days employed in the Performance Period both for purposes of determining the size of the bonus pool and individual bonus payments. Size of Plan Bonus Pool The Compensation Committee of the Board of Directors of the Company will determine the size of the overall bonus pool under all bonus plans of the Company based on Company performance against the above objectives and the target bonus figures. The size of the overall bonus pool shall be determined in the absolute discretion of the Compensation Committee. Individual Performance Factor Individual performance against individual objectives affects the bonus payout by increasing or decreasing by an individual performance factor the individual bonus targets. The precise individual performance factor for each employee eligible to receive a bonus under the Plan will be determined by the Compensation Committee of the Board of Directors of the Company. Individual bonus payouts will be determined in light of the overall bonus pool set by the Compensation Committee.  

ALPHARMA INC. CHANGE IN CONTROL PLAN Amended and Restated Effective January 1, 2005   Purpose of the Plan The purpose of the Alpharma Inc. Change in Control PlanFebruary 19, 2004 (the "Plan") is to provide certain executive Employees with benefits that will assist them with their transition following a Change in Control. The Plan was initially effective March 11, 2002, and was amended and restated effective April 5, 2004. The Plan is being amended and restated in its entirety effective January 1, 2005. This Plan represents an amendment and restatement of all prior change in control plans, practices or policies in effect at Alpharma or any of its Subsidiaries as of the effective date hereof, and supersedes any and all such prior change in control plans, practices and policies. Except as otherwise specified in the Plan all such prior change in control plans, practices and policies are hereby discontinued and terminated, to the extent permitted by law. Wherever any words are used herein in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever any words are used herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would so apply.   SECTION I - DEFINITIONS The following definitions shall apply for purposes of this Plan: 1.1 "Acquiring Company" - Has the meaning provided in the definition of Change in Control. 1.2 "Alpharma" - Alpharma Inc., a Delaware Company. 1.3 "Benefit Continuation Period" -In the case of an Executive who receives a Change in Control Benefit, his Benefit Continuation Period will be determined based on the number of months used in Section 4.2 to compute the Executive's Change in Control Benefit. 1.4 "Board" - The Board of Directors of Alpharma. 1.5 "Change in Control" - (i) The acquisition by any person, entity or "group" (Acquiring Company") within the meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (excluding, for this purpose, Alpharma or its Subsidiaries, or any employee benefit plan of Alpharma or its Subsidiaries which acquires beneficial ownership of voting securities of Alpharma) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of shares of Common Stock of Alpharma sufficient to elect a majority of directors to the Board; (ii) persons who, as of the date of this Plan, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director on the Board subsequent to the date hereof whose election, or nomination for election by Alpharma's stockholders, was approved by a vote of at least a majority of the directors on the Board then comprising the Incumbent Board shall be considered as though such person were a member of the Incumbent Board; (iii) approval by the stockholders of Alpharma or a reorganization, merger or consolidation, in each case, with respect to which persons who were the stockholders of Alpharma immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, beneficially own shares sufficient to elect a majority of directors in the election of directors of the reorganized, merged or consolidated company; or (iv) a liquidation or dissolution of Alpharma (other than pursuant to the United States Bankruptcy Code) or the conveyance, transfer or leasing of all or substantially all of the assets of Alpharma to any person; provided, however, that for the purposes of clauses (i) - (iv) above, the terms "person", "entity" and "group" shall not include (x) A.L. Industrier ASA ("Industrier"), (y) the stockholders of Industrier in the case of a distribution of shares of capital stock of Alpharma beneficially owned by Industrier to the shareholders of Industrier, unless a Change in Control of Industrier has occurred or occurs concurrently with such a distribution, or in series of related transaction of which such distribution is part, (determined without regard to this clause (y) of this proviso) or (z) E.W. Sissener, his spouse, any heir or descendant of Mr. Sissener or the spouse of any such heir or descendant of the estate of Mr. Sissener (each, an "EWS Party"), or any trust or other similar arrangement for the benefit of any EWS Party or any corporation or other person or entity controlled by one or more EWS Party or any group of which any EWS Party is a member. For purposes of the preceding sentence, a "liquidation" or "dissolution" shall not be deemed to include any transfer of Alpharma property solely to any persons identified in clauses (x), (y) and (z) of the proviso of such sentence. Notwithstanding anything to the contrary in the foregoing, effective September 8, 2005, no transaction or series of transactions shall constitute a 'Change in Control' unless the Committee affirmatively concludes that such transaction or series of transactions constitutes a 'Change of Control'. 1.6 "Change in Control Benefits" - Has the meaning provided in Section 4.2. 1.7 "Chief Executive Officer" - Chief Executive Office of Alpharma 1.8 "Committee" - The Benefits Committee appointed by the Chief Executive Officer to administer the Plan which shall consist of at least three (3) employees: the Executive Vice President, Human Resources, the Chief Financial Officer, and the Chief Legal Officer. Effective September 8, 2005, 'Committee' shall mean the Compensation Committee of the Board. 1.9 "Company" - Alpharma Inc. and its US Subsidiaries and any non-US Subsidiary whose Board of Directors (or similar governing body) has adopted this plan, or any successor by merger, consolidation or sale of assets. 1.10 "Constructive Termination" - A voluntary resignation following a Change in Control and following an action initiated by Alpharma, a Subsidiary or an Acquiring Company which results in (i) a reduction in the Executive's compensation or a reduction in the basis upon which such Executive's bonus or commission is determined, (ii) the Executive's relocation to a base office or site which is more than 50 miles from the location of the Executive's office or site prior to the Change in Control, (iii) the assignment of duties substantially inconsistent with, or a substantial diminution of, the duties, responsibilities or status of the position that the Executive held prior to the Change in Control, (iv) a reduction in benefits, or (v) a change in reporting relationship which is detrimental to the Executive (including, without limitation, a detrimental change in the position to which the Executive reports and not including, without limitation, the termination or change in the person who held the position to whom the Executive reported prior to the Change in Control). 1.11 "Employee" - A full-time permanent salaried or hourly employee of the Company, as determined by the Committee. An Employee shall not include any individual classified by the Company as either a temporary employee, a leased employee or an independent contractor (regardless of whether such individual is classified or retroactively reclassified as an employee of the Company by any person, entity or agency). 1.12 "Executive" - An Employee who is providing services to the Company in one of the following capacities: the Chief Executive Officer, a member of the Leadership Team, an Employee holding the title of Vice President or Director (not to be confused with a member of the Board) of the Company or its Operating Divisions, or any other individual deemed by the Committee to be an Executive. 1.13 "Involuntary Termination of Employment" - A Termination of Employment which was initiated by the Company other than a Termination for Cause. The Committee shall have complete discretion to determine whether an Involuntary Termination of Employment has occurred. 1.14 "Leadership Team" - Those officers of the Company that report directly to the Chief Executive Officer and such other employees who the Chief Executive Officer, in his sole discretion, determines is eligible to be classified as a member of the Leadership Team for purposes of this Plan. 1.15 "Non Qualifying Sale" - A sale of (i) the stock or assets of a Subsidiary or the assets of an Operating Division or (ii) assets (other than substantially all the assets of the Company). 1.16 Operating Division" - The Company's operating divisions, which for management or financial purposes are reported as individual business segments. 1.17 "Plan" - The Alpharma Inc. Change in Control Plan. 1.18 "Salary" - An Executive's annual base salary immediately preceding his Termination Date. In the United States, Salary shall include amounts contributed on behalf of the Executive to a cafeteria plan or a cash or deferred arrangement and not includable in compensation under Section 125 or 402(e)(3) of the Internal Revenue Code. Salary shall also include cash amounts paid to an Executive in lieu of fringe benefits. Salary shall exclude the following: commissions; incentive compensation; bonuses; overtime; extended workweek premiums; cost-of-living allowances; shift premiums; other premiums; deferred compensation; payments under consulting agreements; payments under advisory agreements; any other special payments, fees, or allowances. 1.19 "Subsidiary" - Any corporation in which Alpharma owns either directly or indirectly, more than 50% of the voting stock. 1.20 "Termination Date" - The date an Executive's active employment with the Company terminates as a result of an Involuntary Termination of Employment or a Constructive Termination. 1.21 "Termination for Cause" - A Termination of Employment for reasons such as a conviction of a felony, habitual excessive use of drugs or alcohol, unsatisfactory attendance, substantial and willful neglect of job duties, failure or inability to adequately perform job duties, disclosure of confidential information regarding the Company or its operations, or the aiding or assisting of any person or entity which is competitive with the Company or its successors. The determination of whether an Executive is terminated for cause or not for cause shall be made by the Committee in its sole discretion and shall be final and conclusive. 1.22 "Termination of Employment" - A termination of employment with the Company for any reason other than by reason of retirement, death or disability provided that a transfer of employment to the Acquiring Company or any of its affiliates shall not be a Termination of Employment unless it constitutes a Constructive Termination. 1.23 "US Employee" - An Employee whose primary place of employment is in the United States. 1.24 "US Subsidiary" - Any Subsidiary incorporated in the United States. 1.25 "Waiver and Release" - A form of waiver and release provided by the Company which has the effect of releasing the Company, its affiliates, officers, directors on the Board and employees from any and all claims, demands, causes of action, damages, expenses and liabilities, whether known or unknown, which the Executive has or may later have against the Company which relate in any way to his employment by the Company, or his separation from employment with the Company, or any other matter at the time of Termination of Employment.   ARTICLE II - ELIGIBILITY 2.1 Eligibility for Change in Control Benefits. Subject to Section 3.1, an Executive shall be eligible to receive Change in Control Benefits specified under Article IV if concurrently with or within the 24-month period following the Change in Control he has either (i) an Involuntary Termination of Employment or (ii) a Constructive Termination. An Executive shall not be eligible for Change in Control Benefits if he is subject to a collective bargaining agreement or comparable labor agreement or is otherwise not permitted to participate pursuant to the laws of the jurisdiction where he is employed. A Non Qualifying Sale shall not be deemed a Change in Control and an Executive shall not be eligible to receive Change in Control Benefits upon a Non Qualifying Sale. 2.2 Committee Discretion. The Committee shall have full discretion to determine eligibility to receive benefits under this Plan. Such discretion shall be exercised in accordance with the provisions set forth herein and in a uniform and non-discriminatory fashion.   ARTICLE III - CONDITIONS 3.1 Change in Control Benefits Conditions. The following are conditions to an Executive receiving Change in Control Benefits: Termination Date on or after March 11, 2002; Termination Date does not immediately follow a period during which the Executive has not been actively at work due to leave of absence, layoff or salary continuance, unless the Committee specifically designates the condition as not applicable to the Executive; To the extent that an Executive claims that Constructive Termination has occurred, such claim shall be made in writing to the Committee within 90 days following the Constructive Termination event; If requested by the Company or Acquiring Company, the Executive shall remain employed with the Company or the Acquiring Company for up to six months following the Change in Control; and Executive executes a Waiver and Release and does not revoke it within seven (7) days after the execution thereof. To the extent the duration of the Change in Control Benefits is longer than any notice period required under the laws of the jurisdiction in which an Executive is employed, then such Change in Control Benefits shall be in lieu of such notice period. ARTICLE IV - CHANGE IN CONTROL BENEFITS 4.1 General. Subject to Section 6.1, an Executive who is eligible under Section 2.1 to receive Change in Control Benefits and who satisfies the conditions in Section 3.1 shall receive the amount of Change in Control Benefits specified under Section 4.2 payable in accordance with Article VII and those other benefits as specified in Article V. 4.2 Amount of Change in Control Benefits. An Executive who satisfies the eligibility requirements under Section 2.1 shall be entitled to receive Change in Control benefits ("Change in Control Benefits") equal to the following: In the case of the Chief Executive Officer, Salary during each of the 36 months following the Termination Date. Additionally, he shall receive his bonus or other cash incentive award (as in effect immediately preceding the date of the Change in Control event), at 100% of his annual target rate, with an assumed 100% funding of any applicable bonus pool, for such 36 month period; In the case of a member of the Leadership Team, Salary during each of the 30 months following the Termination Date. Additionally, he shall receive his bonus or other cash incentive award (as in effect immediately preceding the date of the Change in Control event), at 100% of his annual target rate, with an assumed 100% funding of any applicable bonus pool, for such 30 month period; In the case of a Vice President, Salary during each of the 18 months following the Termination Date; and (iv) In the case of a Director (employee title, not member of the Board), Salary during each of the 12 months following the Termination Date. 4.3 Bonus and Incentive Awards. Any bonus or incentive award payable under the terms of this Plan shall be in addition to any bonus or incentive award otherwise payable under any then-existing bonus or incentive award plans during the year in which the Change in Control event occurs. Notwithstanding anything herein to the contrary, upon a Change in Control event, an Executive's target annual bonus or incentive award amounts or rates may not be reduced.   ARTICLE V - OTHER BENEFIT PROVISIONS 5.1 Medical, Dental and/or Life Insurance Coverage An Executive shall be entitled to continued coverage under the medical, dental, accidental death and dismemberment and/or life insurance benefits plan sponsored by the Company under which the Executive is covered and as in effect on the Executive's Termination Date (including medical and dental coverage for the Executive's covered dependents, if any) for the duration of the applicable Benefit Continuation Period whether or not the Executive receives the benefit payments in a lump sum or in monthly payments. Such coverage shall be equal to the coverage offered to the Employees of the Company or Acquiring Company, as the case may be, during such Benefit Continuation Period and shall be at the same cost to the Executive as is applicable to such Employees during the Benefit Continuation Period. In no event shall an Executive be entitled to add dependents to his medical or dental coverage after his Termination Date except for US Employees as would otherwise be allowed by the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). At the end of the Benefit Continuation Period, an Executive which is a US Employee may elect to continue medical and dental benefits according to the continuation coverage requirements of group health plans in COBRA, and all of the health insurance continuation provisions under COBRA shall regulate an Executive's election to continue medical and dental benefits at the end of the period during which he is covered under the terms of this Plan. The period for which such Executive is eligible for COBRA shall be reduced by the number of weeks during which he received medical and/or dental coverage as a result of his participation in the Plan. At the end of the Benefit Continuation Period, accidental death and dismemberment and life insurance benefits shall cease. 5.2 Retiree Medical Benefits. An Executive who is eligible to retire and who is eligible for retiree medical insurance as of his Termination Date shall be provided retiree welfare benefits in accordance with the provisions of the applicable plans rather than the benefits described in this Article V. An Executive who is eligible to retire and who is not eligible for retiree medical insurance as of his Termination Date shall be eligible for Medical/Dental benefits for the Benefit Period, in accordance with the provisions of this Article V. 5.3 Retirement Plans. In the event an Executive becomes eligible to receive Change in Control Benefits, the benefit payments under this Plan shall not be considered for purposes of computing benefits under the Alpharma Inc. Pension Plan and the Alpharma Inc. Supplemental Pension Plan or any similar pension or retirement plan. An Executive shall not be eligible to actively participate under any such Plans after his Termination Date. 5.4 Savings Plan and Stock Purchase Plan In the event an Executive becomes eligible to receive Change in Control Benefits, the benefit payments under this Plan shall not be considered for purposes of computing benefits under any defined contribution plan or stock purchase plan sponsored by the Company including the Employee Stock Purchase Plan, the Alpharma Inc. Savings Plan and the Alpharma Inc. Supplemental Savings Plan. An Executive shall not be eligible to actively participate under any of these Plans after his Termination Date. 5.5 Long Term Incentive Awards. Stock Options. As permitted under Section 8 of the Alpharma Inc. 1997 Incentive Stock Option and Appreciation Rights Plan, as amended ("Stock Option Plan"), upon the occurrence of a Change in Control, all Options and Units (as defined under the Stock Option Plan) held by an Executive shall become immediately exercisable by the optionee and grantee, respectively, and shall remain exercisable for the lesser of (i) the length of time during which the Option or Unit, as the case may be, may be exercised or (ii) the maximum period permitted under the Stock Option Plan. (2) As permitted under Article 16 of the Alpharma Inc. 2003 Omnibus Incentive Compensation Plan ("Omnibus Plan"), upon the occurrence of a Change in Control, all NQSOs and ISOs (both as defined under the Omnibus Plan) held by an Executive shall become immediately exercisable by the optionee and shall remain exercisable for the lesser of (i) the length of time during which the NQSO or ISO may be exercised and (ii) the maximum period permitted under the Omnibus Plan. As permitted under Article 16 of the Omnibus Plan, upon the occurrence of a Change in Control followed by either (i) an Involuntary Termination of Employment or a Constructive Termination within twenty-four (24) months after the date of said Change in Control or (ii) the purchase or other acquisition by the entity effecting such Change in Control (either as part of the transaction giving rise to the Change in Control or in a separate transaction or transactions or in a combination of such transactions ) of all or substantially all of the issued and outstanding Class A and Class B common stock, (x) all Restricted Stock (as defined under the Omnibus Plan) held by an Executive in the employ of the Company as of the day immediately prior to the date upon which condition (i) or (ii) is first satisfied shall immediately vest and become the property of said Executive and (y) all Performance Shares and Performance Units (as defined under the Omnibus Plan) held by an Executive in the employ of the Company as of the day immediately prior to the date upon which condition (i) or (ii) is first satisfied shall have a final value computed on a date as close as practicable to the date upon which condition (i) or (ii) is first satisfied and such sum shall thereupon be paid to the Executive. (43) Notwithstanding anything herein to the contrary,upon a Change in Control, this Plan shall only accelerate exercisability of Options, Units, NQSOs and ISOs as set forth in this Section 5.5. the a Additional changes and modifications to benefits granted under the Omnibus Plan not inconsistent with the treatment of such benefits as set forth in this Section 5.5 may be made upon a Change in Control pursuant to Section 4.2 of the Omnibus Plan. 5.6 Other Plans. An Executive's participation in all other employee benefit plans sponsored by the Company shall cease being effective as of the Executive's Termination Date. 5.7 Terms of Other Plans. Continued participation in any of the plans noted above shall be subject to the terms of said plans; as in the past, the Company continues to retain the right to amend or terminate such plans at any time.   ARTICLE VI - OTHER AGREEMENTS AND LAWS 6.1 General. Notwithstanding anything to the contrary herein, to the extent that an Executive is party to an employment agreement with the Company, the Executive shall be entitled to receive benefits (taken individually) equal to the greater of (i) the benefits available under the Plan or (ii) the benefits available under such employment agreement. 6.2 Local Laws Notwithstanding anything to the contrary herein, to the extent that an Employee satisfies the conditions in Sections 2.1 and 3.1, and any such Employee is entitled to benefits at the time of a Termination of Employment under applicable local law, which are more favorable than the Severance Benefits available under the Plan, the Employee shall receive only those benefits available under local law.   ARTICLE VII - PAYMENT 7.1 Method of Payment. Change in Control Benefits under Section 4.2 shall be paid to an Executive in installments in accordance with the Company's standard payroll cycles beginning with the first payroll period immediately after his Termination Date and continuing for the applicable Benefit Continuation Period. Notwithstanding the foregoing, effective January 1, 2005, Change in Control Benefits to an Executive who is a key employee within the meaning of Proposed Treasury Regulation Section 1.409A-1(i)(1) shall begin no earlier than six months after his Termination Date if necessary to comply with Section 409A of the Code and the regulations issued thereunder. If an Executive dies after his Involuntary Termination of Employment or Constructive Termination but before receiving the total amount of his Change in Control Benefit, such benefit will instead be paid in a lump sum to the Executive's surviving spouse, if any, and otherwise to the Executive's estate commencing as soon as administratively feasible after the date of death.   SECTION VIII - ADMINISTRATION 8.1 The Committee. The Committee shall have the complete authority to: (a) determine eligibility for benefits in accordance with the provisions of the Plan; (b) construe the terms of the Plan; and (c) control and manage the operation of the Plan. 8.2 Administrative Rules. Subject to the limitations of the Plan, the Committee from time to time shall establish rules for the administration and interpretation of the Plan and the transaction of its business. The determination of the Committee as to any disputed question shall be conclusive. All actions, decisions and interpretations of the Committee in administering the Plan shall be conclusive. All actions, decisions and interpretations of the Committee in administering the Plan shall be performed in a uniform and non-discriminatory manner. 8.3 Delegation. The Committee may, in its sole discretion, delegate some or all of its functions to third parties and employ counsel and other agents and may procure such clerical, actuarial accounting and other services as the Committee may require in carrying out the provisions of the Plan. 8.4. Indemnification. The Company shall indemnify and hold harmless each member of the Committee against all expenses and liabilities arising out of the Committee member's service as such, excepting only expenses and liabilities arising from the member's own gross negligence or willful misconduct. 8.5 Arbitration. All disputes regarding the application of the definition of Constructive Termination shall be submitted to an Arbitration Panel whose findings shall be binding on the Company and the Executive. For purposes of this Plan, the term "Arbitration Panel" shall mean three (3) independent arbitrators, one of whom shall be selected by the Company, one by the Executive and the third shall be selected by the two other arbitrators. In the event that agreement cannot be reached on the selection of the third arbitrator, such arbitrator shall be selected by the American Arbitration Association. All arbitrators shall be selected from a list provided by the American Arbitration Association. All matters presented to the Arbitration Panel shall be decided by majority vote. All costs of the arbitration, including the Executive's attorneys' fees, if any, shall be paid by the Company. 8.6 Claim Procedure. (a) The Company will notify an Executive at the time of Termination of Employment what benefits, if any, he will receive under the Plan. If an Executive believes that he is entitled to receive additional benefits under the Plan he must submit a claim for benefits in writing to the Committee. Any claim for benefits must be received by the Committee within 60 days after the date of the Executive's Terminated Employment. If a claim for benefits under the Plan is denied in whole or in part, the claimant will receive written notice of the denial within 90 days after the filing of the claim. The notice will state the specific reason for the denial of benefits. (b) Any claimant whose claim for benefits is denied may request a review of the decision denying his claim. The claimant or his duly authorized representative must submit a written request for review to the Committee within 60 days after receiving the notice of denial. When making a request for review, a claimant should state the reasons why he believes the claim was improperly denied and should submit any documents or information relevant to the claim. (c) The decision on review will be completed and furnished to the claimant in writing within 60 days after receipt of the request for review. All decisions of the Committee are final and binding. In unusual circumstances the Committee may require an extension of time for deciding on a claim for benefits or a request for review. Whenever there is a need for an extension of time, the Committee will notify the claimant of the extension. In no event will such an extension exceed a period of 90 days in the case of the initial claim or 60 days in the case of the decision on review. (d) If the Committee fails to take any action required by it within the time limits specified above, the claim shall be deemed denied as of the latest date by which such action should have been completed.   ARTICLE IX - MISCELLANEOUS 9.1 Amendment and Termination. The Company reserves the right to amend or modify the Plan, to terminate the Plan in its entirety, or to terminate the participation in the Plan of any Subsidiary, provided that (i) any such amendment, modification or termination shall be approved by the Compensation Committee of the Board, (ii) any such amendment, modification or termination shall not be applicable to an Executive who has already been notified of a Termination of Employment, and (iii) the Plan shall not be amended, modified or terminated after the earlier of (a) the Board's initial consideration of a transaction which would be a Change in Control or (b) the execution of a contract which results in a Change in Control. Notwithstanding the foregoing, effective September 8, 2005, the Company reserves the right to amend or modify the Plan, to terminate the Plan in its entirety, or to terminate the participation in the Plan of any Subsidiary, provided that (i) any such amendment, modification or termination shall be approved by the Compensation Committee of the Board, (ii) any such amendment, modification or termination shall not be applicable to an Executive who has already been notified of a Termination of Employment, and (iii) the Plan shall not be amended, modified or terminated after the date on which a Change of Control shall have occurred. 9.2 Parachute Payments. (a) Notwithstanding anything in this Agreement to the contrary, to the extent that any payment or benefit received or to be received by an Executive in connection with a Change in Control (whether pursuant to the terms of this Agreement ("Contract Payments") or pursuant to any other plan, arrangement or agreement with (1) the Company, (2) any person whose actions result in a Change in Control or (3) any person affiliated with the Company or such person (collectively with the Contract Payments, "Total Payments")) would, as determined by tax counsel selected by the Company, result in "Excess Parachute Payments" (as defined below) subject to the tax ("Excise Tax") imposed by Section 4999 of the Internal Revenue Code (or any similar tax that may hereafter be imposed), then such Total Payments shall be reduced to the extent necessary so that no portion thereof shall be subject to the Excise Tax, but only if, by reason of such reduction, the Executive's "net after-tax benefit" (defined below) shall exceed what the net after-tax benefit would have been if such reduction were not made and the Executive paid such Excise Tax. (b) "Net after-tax benefit" shall mean (1) the sum of all payments and benefits which the Executive receives or is then entitled to receive from the Company and any of its Subsidiaries that would constitute a "parachute payment" within the meaning of Section 280G of the Code, less (2) the amount of federal income taxes payable with respect to the payments and benefits described in (1) above calculated at the maximum marginal income tax rate for each year in which such payments and benefits shall be paid to the Executive (based upon the rate in effect for such year as set forth in the Code at the time of the first payment of the foregoing), less (3) the amount of Excise Taxes imposed with respect to the payments and benefits described in (1) above by Section 4999 of the Code. (c) "Excess Parachute Payments" shall mean "parachute payments" as defined in Section 280G of the Code other than (1) health and life insurance benefits and (2) payments attributable to any award, benefit or other compensation plan or program based upon the number of full or fractional months of any restricted period (relating thereto) which has elapsed prior to the date of the Change in Control. The terms of any new or revised tax regulations relating to Excess Parachute Payments shall be incorporated by reference herein. 9.3 Withholding. The Company shall withhold all required local, state and federal income taxes from any benefits payable under this Plan. 9.4 Binding on Successors. The obligations of the Company under the Plan shall be binding upon any organization which shall succeed to all or substantially all of the assets of the Company, and the term "Company," whenever used in the Plan, shall mean and include any such organization after the succession. 9.5 Applicable Law. The Plan shall be governed by and construed in accordance with the laws of the State of New Jersey (regardless of the laws that might otherwise govern under applicable New Jersey principles of conflicts of law. 9.6 Contract Right of Executives. Subject to Section 9.1 above, the Board intends this Plan to constitute an enforceable contract between the Company and each Executive and intends this Plan to vest rights in such Executives as third party beneficiaries. 9.7 Compensation. For all purposes hereof, the determination of an Executive's bonus or incentive award amount, compensation, rate of base earnings, job grade or band, target award and similar amounts or status shall be made based upon the highest such amount that was in effect at the time of the occurrence of a Change in Control.

Exhibit 10.4   EXECUTION COPY   February 1, 2006   Tapestry Pharmaceuticals, Inc. 4840 Pearl East Circle, Suite 300W Boulder, Colorado  80301 Attention:  Leonard Shaykin, Chairman and Chief Executive Officer   Re:          Lock-Up Agreement   Ladies and Gentlemen:   Reference hereby is made to that certain Purchase Agreement, dated as of even date herewith (the “Purchase Agreement”), by and among Tapestry Pharmaceuticals, Inc. (the “Company”) and each of the Investors party thereto (the “Investors”).  Terms used but not otherwise defined herein shall have the meaning set forth in Purchase Agreement.   In consideration of the Investors’ agreement to enter into the Purchase Agreement and to proceed with the transactions contemplated thereby, and for other good and valuable consideration, receipt of which is hereby acknowledged, each of the undersigned hereby agrees for the benefit of the Company and the Investors that the undersigned will not, during the period beginning on the date hereof and ending on the earliest to occur of (i) the first date following termination of the Purchase Agreement, (ii) ninety days after the Effective Date or (iii) with respect to any of the undersigned, the first date following termination of such undersigned’s employment by or directorship with the Company that is six months following the last opposite-way transaction that occurred prior to such termination of employment or directorship, directly or indirectly (A) offer, pledge, assign, encumber, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock owned either of record or beneficially (as defined in the 1934 Act) by the undersigned on the date hereof or hereafter acquired or (B) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (A) or (B) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise, or publicly announce an intention to do any of the foregoing.   In furtherance of the foregoing, the Company, and any duly appointed transfer agent for the registration or transfer of the securities described herein, are hereby authorized to decline to make any transfer of securities if such transfer would constitute a violation or breach of this letter agreement.   Each of the undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this letter agreement.  All authority herein conferred or agreed to be conferred and any obligations of the undersigned shall be binding upon the successors, assigns, heirs or personal representatives of the undersigned.   Each of the undersigned understands that the Investors and the Company are entering into the Purchase Agreement and proceeding with the transactions contemplated thereby in reliance upon this letter agreement.  The Investors are intended third party beneficiaries of this letter agreement.   This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the choice of law principles thereof.   --------------------------------------------------------------------------------     Very truly yours,           /s/ Leonard P. Shaykin     Leonard P. Shaykin           /s/ Martin M. Batt     Martin M. Batt                 Patricia A. Pilia           /s/ Gordon Link     Gordon Link           /s/ Kai P. Larson     Kai P. Larson           /s/ Bruce W. Fiedler     Bruce W. Fiedler                 Stephen K. Carter, M.D.           /s/ George M. Gould     George M. Gould                 Arthur H. Hayes, Jr.     --------------------------------------------------------------------------------           /s/ Elliot M. Maza     Elliot M. Maza           /s/ Richard N. Perle     The Honorable Richard N. Perle           /s/ Robert E. Pollack     Robert E. Pollack     --------------------------------------------------------------------------------

  Exhibit 10.57     SUBSCRIPTION AGREEMENT   THIS SUBSCRIPTION AGREEMENT (this “Agreement”), dated as of November 30, 2006, by and among Diamond Entertainment Corporation, a New Jersey corporation (the “Company”), and the subscribers identified on the signature page hereto (each a “Subscriber” and collectively “Subscribers”).   WHEREAS, the Company and the Subscribers are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the provisions of Section 4(2) and/or Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “1933 Act”).   WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Subscribers, as provided herein, and the Subscribers, in the aggregate, shall purchase up to Two Million Three Hundred Thousand Dollars ($2,300,000) (the "Purchase Price") of principal amount of 12% secured promissory notes of the Company (“Note” or “Notes”) and share purchase warrants (collectively the “Warrants”), in the form attached hereto as Exhibit A, to purchase shares of the Company’s no par value common stock (“Common Stock”) (the “Warrant Shares”). The Notes, the Warrants and the Warrant Shares are collectively referred to herein as the "Securities"; and   WHEREAS, the aggregate proceeds of the sale of the Notes and the Warrants contemplated hereby will be held in escrow pursuant to the terms of a Funds Escrow Agreement to be executed by the parties substantially in the form attached hereto as Exhibit B (the "Escrow Agreement").   NOW, THEREFORE, in consideration of the mutual covenants and other agreements contained in this Agreement the Company and the Subscribers hereby agree as follows:   1.     (a). Closing Date. The “Initial Closing Date” shall be the date that the Initial Closing Purchase Price is transmitted by wire transfer or otherwise credited to or for the benefit of the Company. The consummation of the transactions contemplated herein shall take place at the offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, upon the satisfaction or waiver of all conditions to closing set forth in this Agreement. Each of the Initial Closing Date and Second Closing Date (as defined in Section 1(c) below is referred to herein as a “Closing Date”.    (b) Initial Closing. Subject to the satisfaction or waiver of the terms and conditions of this Agreement, on the Initial Closing Date, each Subscriber shall purchase and the Company shall sell to each Subscriber a Note in the principal amount designated on the signature page hereto (“Initial Closing Notes”), and Warrants as described in Section 2 of this Agreement (“Initial Closing Warrants”). The Principal Amount of the Notes to be purchased by the Subscribers on the Initial Closing Date shall be up to One Million One Hundred and Fifty Thousand Dollars ($1,150,000) (the “Initial Closing Purchase Price”). (c) Second Closing. The closing date in relation to up to One Million One Hundred and Fifty Thousand Dollars ($1,150,000) (the “Second Closing Purchase Price”) shall be on or before the fifth business day after the compliance with the Second Closing Condition as defined in Section 1(d) (the “Second Closing Date”). Subject to the satisfaction or waiver of the conditions to Closing, on the Second Closing Date, each Subscriber shall purchase and the Company shall sell to each Subscriber a Note in the Principal Amount designated on the signature page hereto (“Second Closing Notes”) and Warrants as described in Section 2 of this Agreement (“Second Closing Warrants”). The Second Closing Notes shall be of the same tenor as the Notes issuable on the Initial Closing Date and have the same maturity date as the Initial Closing Notes.   1 --------------------------------------------------------------------------------   (d) Conditions to Second Closing. The occurrence of the Second Closing is expressly contingent on (i) compliance with the Second Closing Condition, (ii) the truth and accuracy, on the Second Closing Date of the representations and warranties of the Company and Subscriber contained in this Agreement except for changes that do not constitute a Material Adverse Event [as defined in Section 5(a)], (iii) continued compliance with the covenants of the Company set forth in this Agreement, (iv) the non-occurrence of any Event of Default (as defined in the Note and this Agreement) or an event that with the passage of time or the giving of notice could become an Event of Default, or other default by the Company of its obligations and undertakings contained in this Agreement. “Second Closing Condition” shall mean the first to occur of (i) the actual effectiveness of the Registration Statement as defined in Section 11.1(iv) hereunder, or (ii) the delivery by the Company on or before January 31, 2007 of certified consolidated financial statements of the Company and all entities which are or will be direct or indirect subsidiaries of the Company after the closing of the transaction described in the Letter of Intent (“Acquisition”), all in order to satisfy the requirements of Form 8-K after giving effect to the Acquisition, certified by an independent certified public accountant, pursuant to General Accepted Accounting Principals in the United States, including a balance sheet, results of operations, cash flows and supporting schedules and consolidated financial statements for the fiscal year ended March 31, 2006, and all in form and substance reasonably acceptable to Subscriber.   (e) Second Closing Deliveries. On the Second Closing Date, the Company will deliver a certificate (“Second Closing Certificate”) signed by its chief executive officer or chief financial officer (i) representing the truth and accuracy of all the representations and warranties made by the Company contained in this Agreement, as of the Initial Closing Date, and the Second Closing Date, as if such representations and warranties were made and given on all such dates except for changes that do not constitute a Material Adverse Event [as defined in Section 5(a)], (ii) certifying that the information contained in the schedules and exhibits hereto is substantially accurate as of the Second Closing Date, except for changes that do not constitute a Material Adverse Effect, (iii) adopting and renewing the covenants and representations set forth in Sections 5, 8, 9, 10, 11, and 12 of this Agreement in relation to the Second Closing Date, Second Closing Notes, and Second Closing Warrants, (iv) representing timely compliance by the Company with the Second Closing Condition, (v) representing the timely compliance by the Company with the Company’s applicable registration requirements set forth in Section 11 of this Agreement, and (vi) certifying that an Event of Default nor an event that with the passage of time or the giving of notice could become an Event of Default, has not occurred. A legal opinion nearly identical to the legal opinion referred to in Section 6 of this Agreement shall be delivered to each Subscriber at the Second Closing in relation to the Company, Second Closing Notes, and Second Closing Warrants (“Second Closing Legal Opinion”).   2. Warrants. On each Closing Date, the Company will issue and deliver Warrants to the Subscribers. One Warrant will be issued for each two Shares which would be issued on such Closing Date assuming the complete conversion of the Note on such Closing Date at the Conversion Price in effect on such Closing Date. The per Warrant Share exercise price to acquire a Warrant Share upon exercise of a Warrant shall be equal to Twelve Million Dollar pre-money valuation on a fully diluted basis. The Warrants shall be exercisable until five (5) years after the issue date of the Warrants. The holder of the Warrants is granted the registration rights set forth in this Agreement. The Warrant exercise price and amount of Warrant Shares issuable upon exercise of the Warrants shall be equitably adjusted to offset the effect of stock splits, stock dividends, pro rata distributions of property or equity interests to the Company’s shareholders, similar event and as otherwise described in the Warrant.     2 --------------------------------------------------------------------------------   3. Security Interest. The Subscribers have been granted a security interest in all assets of the Company including ownership of the Subsidiaries memorialized in a “Security Agreement” dated June 30, 2006 and filed in the States of New Jersey and California under file numbers 2368529-1 and 06-7077741180, respectively. The Subscribers will be granted a security interest in all assets in Diamond Entertainment Corp., Jewel Products International, Inc. and DMEC Acquisition Inc. to be memorialized in a “Security Agreement, a form of which is annexed hereto as Exhibit C. Each Subsidiary will execute and deliver to the Subscribers a form of “Guaranty” annexed hereto as Exhibit D. The Company will execute such other agreements, documents and financing statements reasonably requested by Subscribers, which will be filed at the Company’s expense with such jurisdictions, states and counties designated by the Subscribers. The Company will also execute all such documents reasonably necessary in the opinion of Subscribers to memorialize and further protect the security interest described herein. The Subscribers will appoint a Collateral Agent to represent them collectively in connection with the security interest to be granted to the Subscribers. The appointment will be pursuant to a “Collateral Agent Agreement”, a form of which is annexed hereto as Exhibit E. 4. Subscriber's Representations and Warranties. Each Subscriber hereby represents and warrants to and agrees with the Company only as to such Subscriber that:   (a) Information on Company. The Subscriber has been furnished with or has had access at the EDGAR Website of the Commission to the Company's Form 10-KSB for the year ended March 31, 2005 as filed with the Commission, together with all subsequently filed Forms 10-QSB, 8-K, and filings made with the Commission available at the EDGAR website (hereinafter referred to collectively as the "Reports"). The Subscriber has had an opportunity to ask questions and receive answers from representatives of the Company. In addition, the Subscriber has received in writing from the Company such other information concerning its operations, financial condition and other matters as the Subscriber has requested in writing (such other information is collectively, the "Other Written Information"), and considered all factors the Subscriber deems material in deciding on the advisability of investing in the Securities.   (b) Information on Subscriber. The Subscriber is, and will be at the time of exercise of any of the Warrants, an "accredited investor", as such term is defined in Regulation D promulgated by the Commission under the 1933 Act, is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of United States publicly-owned companies in private placements in the past and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable the Subscriber to utilize the information made available by the Company to evaluate the merits and risks of and to make an informed investment decision with respect to the proposed purchase, which represents a speculative investment. The Subscriber has the authority and is duly and legally qualified to purchase and own the Securities. The Subscriber is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof. The information set forth on the signature page hereto regarding the Subscriber is accurate.   (c) Purchase of Notes and Warrants. On each Closing Date, the Subscriber will purchase the Notes and Warrants as principal for its own account for investment only and not with a view toward, or for resale in connection with, the public sale or any distribution thereof.     3 --------------------------------------------------------------------------------   (d) Compliance with Securities Act. The Subscriber understands and agrees that the Securities have not been registered under the 1933 Act or any applicable state securities laws, by reason of their issuance in a transaction that does not require registration under the 1933 Act (based in part on the accuracy of the representations and warranties of Subscriber contained herein), and that such Securities must be held indefinitely unless a subsequent disposition is registered under the 1933 Act or any applicable state securities laws or is exempt from such registration. Notwithstanding anything to the contrary contained in this Agreement, such Subscriber may transfer (without restriction and without the need for an opinion of counsel) the Securities to its Affiliates (as defined below) provided that each such Affiliate is an “accredited investor” under Regulation D and such Affiliate agrees to be bound by the terms and conditions of this Agreement. For the purposes of this Agreement, an “Affiliate” of any person or entity means any other person or entity directly or indirectly controlling, controlled by or under direct or indirect common control with such person or entity. Affiliate when employed in connection with the Company includes each Subsidiary [as defined in Section 5(a)] of the Company. For purposes of this definition, “control” means the power to direct the management and policies of such person or firm, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.   (e) Shares Legend. The Warrant Shares and Shares shall bear the following or similar legend:   "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO DIAMOND ENTERTAINMENT CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED."   (f) Warrants Legend. The Warrants shall bear the following or similar legend:   "THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON SHARES 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 OR ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO DIAMOND ENTERTAINMENT CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED."   4 --------------------------------------------------------------------------------   (g) Note Legend. The Note shall bear the following legend:   "THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO DIAMOND ENTERTAINMENT CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED."   (h) Communication of Offer. The offer to sell the Securities was directly communicated to the Subscriber by the Company. At no time was the Subscriber presented with or solicited by any leaflet, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such communicated offer.   (i) Authority; Enforceability. This Agreement and other agreements delivered together with this Agreement or in connection herewith have been duly authorized, executed and delivered by the Subscriber and are valid and binding agreements enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights generally and to general principles of equity; and Subscriber has full corporate power and authority necessary to enter into this Agreement and such other agreements and to perform its obligations hereunder and under all other agreements entered into by the Subscriber relating hereto. (j) No Governmental Review. Each Subscriber understands that no United States federal or state agency or any other governmental or state agency has passed on or made recommendations or endorsement of the Securities or the suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities. (k) Correctness of Representations. Each Subscriber represents as to such Subscriber that the foregoing representations and warranties are true and correct as of the date hereof and, unless a Subscriber otherwise notifies the Company prior to the Closing Date shall be true and correct as of the Closing Date. (l) Survival. The foregoing representations and warranties shall survive the Second Closing Date for a period of three years.   5. Company Representations and Warranties. Except as set forth in the Reports, the Company represents and warrants to and agrees with each Subscriber that:   (a) Due Incorporation. The Company and each of its Subsidiaries are corporations duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and have the requisite corporate power to own its properties and to carry on its business as presently conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect. For purpose of this Agreement, a “Material Adverse Effect” shall mean a material adverse effect on the financial condition, results of operations, properties or business of the Company taken individually, or in the aggregate, as a whole. For purposes of this Agreement, “Subsidiary” means, with respect to any entity at any date, any corporation, limited or general partnership, limited liability company, trust, estate, association, joint venture or other business entity) of which more than 50% of (i) the outstanding capital stock having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors or other managing body of such entity, (ii) in the case of a partnership or limited liability company, the interest in the capital or profits of such partnership or limited liability company or (iii) in the case of a trust, estate, association, joint venture or other entity, the beneficial interest in such trust, estate, association or other entity business is, at the time of determination, owned or controlled directly or indirectly through one or more intermediaries, by such entity. All the Company’s Subsidiaries as of the Closing Date are set forth on Schedule 5(a) hereto.     5 --------------------------------------------------------------------------------   (b) Outstanding Stock. All issued and outstanding shares of capital stock of the Company and each Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable.   (c) Authority; Enforceability. This Agreement, the Note, the Warrants, Security Agreement, Guaranty, Collateral Agent Agreement, the Funds Escrow Agreement, and any other agreements delivered together with this Agreement or in connection herewith (collectively “Transaction Documents”) have been duly authorized, executed and delivered by the Company and are valid and binding agreements enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally and to general principles of equity. The Company and Subsidiaries have full corporate power and authority necessary to enter into and deliver the Transaction Documents and to perform its obligations thereunder.   (d) Additional Issuances. There are no outstanding agreements or preemptive or similar rights affecting the Company's common stock or equity and no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of any shares of common stock or equity of the Company or Subsidiaries or other equity interest in any of the Subsidiaries of the Company except as described on Schedule 5(d). The Common Stock of the Company on a fully diluted basis outstanding as of the last Business Day preceding the Closing Date is set forth on Schedule 5(d). “Business Day” shall mean any day that the New York Stock Exchange is open for trading for three or more hours.   (e) Consents. No consent, approval, authorization or order of any court, governmental agency or body or arbitrator having jurisdiction over the Company, or any of its Affiliates, nor the Company's shareholders is required for the execution by the Company of the Transaction Documents and compliance and performance by the Company of its obligations under the Transaction Documents, including, without limitation, the issuance and sale of the Securities. The Transaction Documents and the Company’s performance of its obligations thereunder has been approved unanimously by the Company’s directors.   (f) No Violation or Conflict. Assuming the representations and warranties of the Subscribers in Section 4 are true and correct, neither the issuance and sale of the Securities nor the performance of the Company’s obligations under this Agreement and all other agreements entered into by the Company relating thereto by the Company will:   (i) violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would be reasonably likely to constitute a default) under (A) the articles or certificate of incorporation, charter or bylaws of the Company, (B) to the Company's knowledge, any decree, judgment, order, law, treaty, rule, regulation or determination applicable to the Company of any court, governmental agency or body, or arbitrator having jurisdiction over the Company or any of its subsidiaries or over the properties or assets of the Company or any of its Affiliates, (C) the terms of any bond, debenture, note or any other evidence of indebtedness, or any agreement, stock option or other similar plan, indenture, lease, mortgage, deed of trust or other instrument to which the Company or any of its Affiliates or subsidiaries is a party, by which the Company or any of its Affiliates or subsidiaries is bound, or to which any of the properties of the Company or any of its Affiliates or subsidiaries is subject, or (D) the terms of any "lock-up" or similar provision of any underwriting or similar agreement to which the Company, or any of its Affiliates or subsidiaries is a party except the violation, conflict, breach, or default of which would not have a Material Adverse Effect on the Company; or     6 --------------------------------------------------------------------------------   (ii) result in the creation or imposition of any lien, charge or encumbrance upon the Securities or any of the assets of the Company, its subsidiaries or any of its Affiliates; or   (iii) result in the activation of any anti-dilution rights or a reset or repricing of any debt or security instrument of any other creditor or equity holder of the Company, nor result in the acceleration of the due date of any obligation of the Company; or   (iv) result in the triggering of any piggy-back registration rights of any person or entity holding securities of the Company or having the right to receive securities of the Company.   (g) The Securities. The Securities upon issuance:   (i) are, or will be, free and clear of any security interests, liens, claims or other encumbrances, subject to restrictions upon transfer under the 1933 Act and any applicable state securities laws; (ii) have been, or will be, duly and validly authorized and on the date of issuance of the Shares upon conversion of the Notes and the Warrant Shares and upon exercise of the Warrants, the Shares and Warrant Shares will be duly and validly issued, fully paid and nonassessable and if registered pursuant to the 1933 Act, and resold pursuant to an effective registration statement will be free trading and unrestricted);   (iii) will not have been issued or sold in violation of any preemptive or other similar rights of the holders of any securities of the Company;   (iv) will not subject the holders thereof to personal liability by reason of being such holders; and   (v) will have been issued in reliance upon an exemption from the registration requirements of and will not result in a violation of Section 5 under the 1933 Act.   (h) Litigation. There is no pending or, to the best knowledge of the Company, threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its Affiliates that would affect the execution by the Company or the performance by the Company of its obligations under the Transaction Documents. Except as disclosed in the Reports, there is no pending or, to the best knowledge of the Company, basis for or threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its Affiliates which litigation if adversely determined would have a Material Adverse Effect on the Company.     7 --------------------------------------------------------------------------------   (i) Reporting Company. The Company is a publicly-held company subject to reporting obligations pursuant to Section 13 of the 1934 Act and has a class of common shares registered pursuant to Section 12(g) of the 1934 Act. Pursuant to the provisions of the 1934 Act, the Company has filed all reports and other materials required to be filed thereunder with the Commission during the preceding twelve months.   (j) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.   (k) Information Concerning Company. The Reports and Other Written Information contain all material information relating to the Company and its operations and financial condition as of their respective dates which information is required to be disclosed therein. Since the date of the financial statements included in the Reports, and except as modified in the Other Written Information or in the Schedules hereto, there has been no Material Adverse Event relating to the Company's business, financial condition or affairs not disclosed in the Reports. The Reports and Other Written Information do not contain any 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, taken as a whole, not misleading in light of the circumstances when made.   (l) No Market Manipulation. The Company will not 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 the Common Stock of the Company to facilitate the sale or resale of the Securities or affect the price at which the Securities may be issued or resold.   (m) Stop Transfer. The Securities, when issued, will be restricted securities. The Company will not issue any stop transfer order or other order impeding the sale, resale or delivery of any of the Securities, except as may be required by any applicable federal or state securities laws and unless contemporaneous notice of such instruction is given to the Subscriber.   (n) Defaults. The Company is not in violation of its articles of incorporation or bylaws. The Company is (i) not in default under or in violation of any other material agreement or instrument to which it is a party or by which it or any of its properties are bound or affected, which default or violation would have a Material Adverse Effect on the Company, (ii) not in default with respect to any order of any court, arbitrator or governmental body or subject to or party to any order of any court or governmental authority arising out of any action, suit or proceeding under any statute or other law respecting antitrust, monopoly, restraint of trade, unfair competition or similar matters, or (iii) to its knowledge not in violation of any statute, rule or regulation of any governmental authority which violation would have a Material Adverse Effect on the Company.   (o) No Integrated Offering. Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the offer of the Securities pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the 1933 Act or any applicable stockholder approval provisions. Nor will the Company or any of its Affiliates or Subsidiaries take any action or steps that would cause the offer or issuance of the Securities to be integrated with other offerings. The Company will not conduct any offering other than the transactions contemplated hereby that will be integrated with the offer or issuance of the Securities.     8 --------------------------------------------------------------------------------   (p) No General Solicitation. Neither the Company, nor any of its Affiliates, nor to its knowledge, any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the 1933 Act) in connection with the offer or sale of the Securities.   (q) No Undisclosed Liabilities. The Company has no liabilities or obligations which are material, individually or in the aggregate, which are not disclosed in the Reports and Other Written Information, other than those incurred in the ordinary course of the Company’s businesses since March 31, 2006 and which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect other than as set forth in Schedule 5(p).   (r) No Undisclosed Events or Circumstances. Since March 31, 2006, no event or circumstance has occurred or exists with respect to the Company or its businesses, properties, operations or financial condition, that, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed in the Reports.   (s) Capitalization. The authorized and outstanding capital stock of the Company as of the date of this Agreement and the Closing Date are set forth on Schedule 5(d). Except as set forth on Schedule 5(d), there are no options, warrants, or rights to subscribe to, securities, rights or obligations convertible into or exchangeable for or giving any right to subscribe for any shares of capital stock of the Company. All of the outstanding shares of Common Stock of the Company have been duly and validly authorized and issued and are fully paid and nonassessable.   (t) Dilution. The Company's executive officers and directors understand the nature of the Securities being sold hereby and recognize that the issuance of the Securities will have a potential dilutive effect on the equity holdings of other holders of the Company’s equity or rights to receive equity of the Company. The board of directors of the Company has unanimously concluded, in its good faith business judgment that the issuance of the Securities is in the best interests of the Company. The Company specifically acknowledges that its obligation to issue the Warrant Shares upon exercise of the Warrants is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company or parties entitled to receive equity of the Company.   (u) No Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company, including but not limited to disputes or conflicts over payment owed to such accountants and lawyers, nor have there been any such disagreements during the two years prior to the Closing Date. (v) DTC Status. The Company’s transfer agent is a participant in and the Common Stock is eligible for transfer pursuant to the Depository Trust Company Automated Securities Transfer Program. The name, address, telephone number, fax number, contact person and email address of the Company transfer agent is set forth on Schedule 5(v) hereto. (w) Subsidiary Representations. The Company makes each of the representations contained in Sections 5(a), (b), (d), (f), (h), (k), (n), (q), (r), (s), (u) and (v) of this Agreement, as same relate to each Subsidiary of the Company.   9 --------------------------------------------------------------------------------   (x) Company Predecessor. All representations made by or relating to the Company of a historical or prospective nature and all undertaking described in Sections 9(g) through 9(l) shall relate and refer to the Company, its predecessors, and the Subsidiaries. (v) Investment Company. Neither the Company nor any Affiliate is an “investment company” within the meaning of the Investment Company Act of 1940, as amended. (y) Solvency. Based on the financial condition of the Company as of the Closing Date after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the Company’s fair saleable value of its assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature; (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business for the current fiscal year as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof; and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debt when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). (z) Letter of Intent. The Company and its Subsidiary, DMEC Acquisition, Inc. have executed a Letter of Intent for the acquisition of RX for Africa, a copy of which is annexed hereto as Exhibit F. (AA) Correctness of Representations. The Company represents that the foregoing representations and warranties are true and correct as of the date hereof in all material respects, and, unless the Company otherwise notifies the Subscribers prior to the Closing Date, shall be true and correct in all material respects as of the Closing Date.   (BB) Survival. The foregoing representations and warranties shall survive the Closing Date for a period of three years.   6. Regulation D Offering. The offer and issuance of the Securities to the Subscribers is being made pursuant to the exemption from the registration provisions of the 1933 Act afforded by Section 4(2) of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder. On the Closing Date, the Company will provide an opinion reasonably acceptable to Subscriber from the Company's legal counsel opining on the availability of an exemption from registration under the 1933 Act as it relates to the offer and issuance of the Securities and other matters reasonably requested by Subscribers. A form of the legal opinion is annexed hereto as Exhibit G. The Company will provide, at the Company's expense, such other legal opinions in the future as are reasonably necessary for the issuance and resale of the Common Stock issuable upon exercise of the Warrants. 7.1. Conversion of Note.   10 --------------------------------------------------------------------------------   (a) Upon the conversion of a Note or part thereof, the Company shall, at its own cost and expense, take all necessary action, including obtaining and delivering, an opinion of counsel to assure that the Company's transfer agent shall issue stock certificates in the name of Subscriber (or its permitted nominee) or such other persons as designated by Subscriber and in such denominations to be specified at conversion representing the number of shares of Common Stock issuable upon such conversion. The Company warrants that no instructions other than these instructions have been or will be given to the transfer agent of the Company's Common Stock and that the certificates representing such shares shall contain no legend other than the usual 1933 Act restriction from transfer legend. If and when the Subscriber sells the Shares and Warrant Shares, assuming (i) the Registration Statement (as defined below) is effective and the prospectus, as supplemented or amended, contained therein is current and (ii) the Subscriber confirms in writing to the transfer agent that the Subscriber has complied with the prospectus delivery requirements, the restrictive legend can be removed and the Shares and Warrant Shares will be free-trading, and freely transferable. In the event that the Shares and Warrant Shares are sold in a manner that complies with an exemption from registration, the Company will promptly instruct its counsel to issue to the transfer agent an opinion permitting removal of the legend (indefinitely, if pursuant to Rule 144(k) of the 1933 Act, or for 90 days if pursuant to the other provisions of Rule 144 of the 1933 Act). (b) Subscriber will give notice of its decision to exercise its right to convert the Note, interest, any sum due to the Subscriber under the Transaction Documents or part thereof by telecopying an executed and completed Notice of Conversion (a form of which is annexed as Exhibit A to the Note) to the Company via confirmed telecopier transmission or otherwise pursuant to Section 13(a) of this Agreement. The Subscriber will not be required to surrender the Note until the Note has been fully converted or satisfied. Each date on which a Notice of Conversion is telecopied to the Company in accordance with the provisions hereof shall be deemed a Conversion Date. The Company will itself or cause the Company’s transfer agent to transmit the Company's Common Stock certificates representing the Shares issuable upon conversion of the Note to the Subscriber via express courier for receipt by such Subscriber within three (3) business days after receipt by the Company of the Notice of Conversion (such third day being the "Delivery Date"). In the event the Shares are electronically transferable, then delivery of the Shares must be made by electronic transfer provided request for such electronic transfer has been made by the Subscriber and the Subscriber has complied with all applicable securities laws in connection with the sale of the Common Stock, including, without limitation, the prospectus delivery requirements. A Note representing the balance of the Note not so converted will be provided by the Company to the Subscriber if requested by Subscriber, provided the Subscriber delivers the original Note to the Company. In the event that a Subscriber elects not to surrender a Note for reissuance upon partial payment or conversion, the Subscriber hereby indemnifies the Company against any and all loss or damage attributable to a third-party claim in an amount in excess of the actual amount then due under the Note. “Business day” and “trading day” as employed in the Transaction Documents is a day that the New York Stock Exchange is open for trading for three or more hours.   (c) The Company understands that a delay in the delivery of the Shares in the form required pursuant to Section 7.1 hereof, or the Mandatory Redemption Amount described in Section 7.2 hereof, respectively after the Delivery Date or the Mandatory Redemption Payment Date (as hereinafter defined) could result in economic loss to the Subscriber. As compensation to the Subscriber for such loss, the Company agrees to pay (as liquidated damages and not as a penalty) to the Subscriber for late issuance of Shares in the form required pursuant to Section 7.1 hereof upon Conversion of the Note in the amount of $100 per business day after the Delivery Date for each $10,000 of Note principal amount being converted of the corresponding Shares which are not timely delivered. The Company shall pay any payments incurred under this Section in immediately available funds upon demand. Furthermore, in addition to any other remedies which may be available to the Subscriber, in the event that the Company fails for any reason to effect delivery of the Shares by the Delivery Date or make payment by the Mandatory Redemption Payment Date, the Subscriber may revoke all or part of the relevant Notice of Conversion or rescind all or part of the notice of Mandatory Redemption by delivery of a notice to such effect to the Company whereupon the Company and the Subscriber shall each be restored to their respective positions immediately prior to the delivery of such notice, except that the liquidated damages described above shall be payable through the date notice of revocation or rescission is given to the Company.   11 --------------------------------------------------------------------------------   (d) Nothing contained herein or in any document referred to herein or delivered in connection herewith shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest or dividends required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Company to the Subscriber and thus refunded to the Company. 7.2. Mandatory Redemption at Subscriber’s Election. In the event (i) the Company is prohibited from issuing Shares, (ii) the Company fails to timely deliver Shares on a Delivery Date, (iii) upon the occurrence of any other Event of Default (as defined in the Note or in this Agreement), any of the foregoing that continues for more than twenty (20) business days, (iv) a Change in Control (as defined below), or (v) of the liquidation, dissolution or winding up of the Company, then at the Subscriber's election, the Company must pay to the Subscriber ten (10) business days after request by the Subscriber (“Calculation Period”), a sum of money determined by multiplying up to the outstanding principal amount of the Note designated by the Subscriber by 120%, together with accrued but unpaid interest thereon ("Mandatory Redemption Payment"). The Mandatory Redemption Payment must be received by the Subscriber on the same date as the Shares otherwise deliverable or within ten (10) business days after request, whichever is sooner ("Mandatory Redemption Payment Date"). Upon receipt of the Mandatory Redemption Payment, the corresponding Note principal and interest will be deemed paid and no longer outstanding. Liquidated damages calculated pursuant to Section 7.1(c) hereof, that have been paid or accrued for the ten day period prior to the actual receipt of the Mandatory Redemption Payment by the Subscriber shall be credited against the Mandatory Redemption Payment. For purposes of this Section 7.2, “Change in Control” shall mean (i) the Company no longer having a class of shares publicly traded or listed on a Principal Market, (ii) the Company becoming a Subsidiary of another entity (other than a corporation formed by the Company for purposes of reincorporation in another U.S. jurisdiction), (iii) a majority of the board of directors of the Company as of the Closing Date no longer serving as directors of the Company except due to natural causes, (iv) the sale, lease or transfer of substantially all the assets of the Company or Subsidiaries, or (v) if the holders of the Company’s Common Stock as of the Closing Date beneficially own at any time after the Closing Date less than forty percent of the Common Stock owned by them on the Closing Date. 7.3. Maximum Conversion. The Subscriber shall not be entitled to convert on a Conversion Date that amount of the Note 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 Subscriber and its Affiliates on a Conversion Date, and (ii) the number of shares of Common Stock issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Subscriber and its Affiliates of more than 4.99% of the outstanding shares of common stock of the Company on such Conversion Date. Beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Subscriber shall not be limited to aggregate conversions of only 4.99%. The Subscriber may decide whether to convert a Note or exercise Warrants to achieve an actual 4.99% ownership position.   12 --------------------------------------------------------------------------------   7.4. Injunction Posting of Bond. In the event a Subscriber shall elect to convert a Note or part thereof or exercise the Warrant in whole or in part, the Company may not refuse conversion or exercise based on any claim that such Subscriber or any one associated or affiliated with such Subscriber has been engaged in any violation of law, or for any other reason, unless, an injunction from a court, on notice, restraining and or enjoining conversion of all or part of such Note or exercise of all or part of such Warrant shall have been sought and obtained by the Company or at the Company’s request or with the Company’s assistance, and the Company has posted a surety bond for the benefit of such Subscriber in the amount of 120% of the outstanding principal and interest of the Note, or aggregate purchase price of the Shares and Warrant Shares which are sought to be subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Subscriber to the extent Subscriber obtains judgment in Subscriber’s favor. 7.5. Buy-In. In addition to any other rights available to the Subscriber, if the Company fails to deliver to the Subscriber such shares issuable upon conversion of a Note by the Delivery Date and if after seven (7) business days after the Delivery Date the Subscriber or a broker on the Subscriber’s behalf, purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Subscriber of the Common Stock which the Subscriber was entitled to receive upon such conversion (a "Buy-In"), then the Company shall pay in cash to the Subscriber (in addition to any remedies available to or elected by the Subscriber) the amount by which (A) the Subscriber's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (B) the aggregate principal and/or interest amount of the Note for which such conversion was not timely honored, together with interest thereon at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty). For example, if the Subscriber purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 of note principal and/or interest, the Company shall be required to pay the Subscriber $1,000, plus interest. The Subscriber shall provide the Company written notice indicating the amounts payable to the Subscriber in respect of the Buy-In. 7.6. Adjustments. The Conversion Price, Warrant exercise price and amount of Shares issuable upon conversion of the Notes and exercise of the Warrants shall be adjusted as described in this Agreement, the Notes and Warrants.   7.7. Redemption. The Note and Warrants shall not be redeemable or mandatorily convertible except as described in the Note and Warrants.   8. Broker/Legal Fees.    (a) Broker. The Company on the one hand, and each Subscriber (for himself only) on the other hand, agrees to indemnify the other against and hold the other harmless from any and all liabilities to any persons claiming brokerage commissions or finder’s fees on account of services purported to have been rendered on behalf of the indemnifying party in connection with this Agreement or the transactions contemplated hereby and arising out of such party’s actions. The Company represents that there are no parties entitled to receive fees, commissions, or similar payments in connection with the Offering except that a due diligence fee of $75,000 (“Due Diligence Fee”) will be paid to The Lieberman Financial Group, Inc. upon the Initial Closing Date out of the funds held pursuant to the Escrow Agreement. (b)  Legal Fees. The Company shall pay to Grushko & Mittman, P.C., a cash fee of $25,000 (“Legal Fees”) as reimbursement for services rendered to the Subscribers in connection with this Agreement and the purchase and sale of the Notes and Warrants (the “Offering”). The Legal Fees and reimbursement for estimated UCC searches and filing fees (less any amounts paid prior to a Closing Date), and estimated printing and shipping costs for the closing statements to be delivered to Subscribers, will be payable on the Initial Closing Date out of funds held pursuant to the Escrow Agreement.     13 --------------------------------------------------------------------------------   9. Covenants of the Company. The Company covenants and agrees with the Subscribers as follows:   (a) Stop Orders. The Company will advise the Subscribers, within two hours after the Company receives notice of issuance by the Commission, any state securities commission or any other regulatory authority of any stop order or of any order preventing or suspending any offering of any securities of the Company, or of the suspension of the qualification of the Common Stock of the Company for offering or sale in any jurisdiction, or the initiation of any proceeding for any such purpose.   (b) Listing. The Company shall promptly secure the listing of the shares of Common Stock and the Warrant Shares upon each national securities exchange, or electronic or automated quotation system upon which they are or become eligible for listing and shall maintain such listing so long as any Notes or Warrants are outstanding. The Company will maintain the listing or quotation of its Common Stock on the American Stock Exchange, Nasdaq Capital Market, Nasdaq National Market System, Bulletin Board, or New York Stock Exchange (whichever of the foregoing is at the time the principal trading exchange or market for the Common Stock (the “Principal Market”)), and will comply in all respects with the Company's reporting, filing and other obligations under the bylaws or rules of the Principal Market, as applicable. The Company will provide the Subscribers copies of all notices it receives notifying the Company of the threatened and actual delisting of the Common Stock from any Principal Market. As of the date of this Agreement, the Bulletin Board is the Principal Market.   (c) Market Regulations. The Company shall notify the Commission, the Principal Market and applicable state authorities, in accordance with their requirements, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Securities to the Subscribers and promptly provide copies thereof to Subscriber.   (d) Filing Requirements. From the date of this Agreement and until the sooner of (i) two (2) years after the Second Closing Date, or (ii) until all the Shares and Warrant Shares have been resold or transferred by all the Subscribers pursuant to the Registration Statement or pursuant to Rule 144, without regard to volume limitations, the Company will (A) cause its Common Stock to continue to be registered under Section 12(b) or 12(g) of the 1934 Act, (B) comply in all respects with its reporting and filing obligations under the 1934 Act, (C) voluntarily comply with all reporting requirements that are applicable to an issuer with a class of shares registered pursuant to Section 12(g) of the 1934 Act, if Company is not subject to such reporting requirements, and (D) comply with all requirements related to any registration statement filed pursuant to this Agreement. The Company will use its best efforts not to take any action or file any document (whether or not permitted by the 1933 Act or the 1934 Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said acts until two (2) years after the Closing Date. Until the earlier of the resale of the Shares and the Warrant Shares by each Subscriber or two (2) years after the Closing Date, the Company will use its best efforts to continue the listing or quotation of the Common Stock on a Principal Market and will comply in all respects with the Company's reporting, filing and other obligations under the bylaws or rules of the Principal Market. The Company agrees to timely file a Form D with respect to the Securities if required under Regulation D and to provide a copy thereof to each Subscriber promptly after such filing.     14 --------------------------------------------------------------------------------   (e) Use of Proceeds. The proceeds of the Offering will be employed by the Company for the purposes set forth on Schedule 9(e) hereto. Except as set forth on Schedule 9(e), the Purchase Price may not and will not be used for accrued and unpaid officer and director salaries, payment of financing related debt, redemption of outstanding notes or equity instruments of the Company, litigation related expenses or settlements, brokerage fees, nor non-trade obligations outstanding on a Closing Date.   (f) Reservation. Prior to the Initial Closing Date, the Company undertakes to reserve, pro rata, on behalf of the Subscribers from its authorized but unissued common stock, a number of common shares equal to 150% of the amount of Common Stock necessary to allow each Subscriber to be able to convert all Notes issuable pursuant to this Agreement and interest thereon and reserve 100% of the amount of Warrant Shares issuable upon exercise of the Warrants. Failure to have sufficient shares reserved pursuant to this Section 9(f) shall be a material default of the Company’s obligations under this Agreement and an Event of Default under the Note.   (g) Taxes. From the date of this Agreement and until the conversion or satisfaction of the Note, in its entirety, and exercise of the Warrants, the Company will promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or business of the Company; provided, however, that any such tax, assessment, charge or levy need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if the Company shall have set aside on its books adequate reserves with respect thereto, and provided, further, that the Company will pay all such taxes, assessments, charges or levies forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefore.   (h) Insurance. From the date of this Agreement and until the conversion or satisfaction of the Note, in its entirety, and exercise of the Warrants, the Company will keep its assets which are of an insurable character insured by financially sound and reputable insurers against loss or damage by fire, explosion and other risks customarily insured against by companies in the Company’s line of business, in amounts sufficient to prevent the Company from becoming a co-insurer and not in any event less than one hundred percent (100%) of the insurable value of the property insured less reasonable deductible amounts; and the Company will maintain, with financially sound and reputable insurers, insurance against other hazards and risks and liability to persons and property to the extent and in the manner customary for companies in similar businesses similarly situated and to the extent available on commercially reasonable terms.   (i) Books and Records. From the date of this Agreement and until the conversion or satisfaction of the Note, in its entirety, and exercise of the Warrants, the Company will keep true records and books of account in which full, true and correct entries will be made of all dealings or transactions in relation to its business and affairs in accordance with generally accepted accounting principles applied on a consistent basis.   (j) Governmental Authorities. From the date of this Agreement and until the conversion or satisfaction of the Note, in its entirety, and exercise of the Warrants, the Company shall duly observe and conform in all material respects to all valid requirements of governmental authorities relating to the conduct of its business or to its properties or assets.   (k) Intellectual Property. From the date of this Agreement and until the conversion or satisfaction of the Note, in its entirety, and exercise of the Warrants, the Company shall maintain in full force and effect its corporate existence, rights and franchises and all licenses and other rights to use intellectual property owned or possessed by it and reasonably deemed to be necessary to the conduct of its business, unless it is sold for value.     15 --------------------------------------------------------------------------------   (l) Properties. From the date of this Agreement and until the conversion or satisfaction of the Note, in its entirety, and exercise of the Warrants, the Company will keep its properties in good repair, working order and condition, reasonable wear and tear excepted, and from time to time make all necessary and proper repairs, renewals, replacements, additions and improvements thereto; and the Company will at all times comply with each provision of all leases to which it is a party or under which it occupies property if the breach of such provision could reasonably be expected to have a Material Adverse Effect.   (m) Confidentiality/Public Announcement. From the date of this Agreement and until the sooner of (i) two (2) years after the Second Closing Date, or (ii) until all the Shares and Warrant Shares have been resold or transferred by all the Subscribers pursuant to the Registration Statement or pursuant to Rule 144, without regard to volume limitations, the Company agrees that except in connection with a Form 8-K or the Registration Statement or as otherwise required in any other Commission filing, it will not disclose publicly or privately the identity of the Subscribers unless expressly agreed to in writing by a Subscriber, only to the extent required by law and then only upon five days prior notice to Subscriber. In any event and subject to the foregoing, the Company shall file a Form 8-K or make a public announcement describing the Offering not later than the first business day after the Closing Date. In the Form 8-K or public announcement, the Company will specifically disclose the amount of common stock outstanding immediately after the Closing. A form of the proposed Form 8-K or public announcement to be employed in connection with the Closing is annexed hereto as Exhibit H.   (n) Further Registration Statements. Except for a registration statement filed on behalf of the Subscribers pursuant to Section 11 of this Agreement, the Company will not file with the Commission or with state regulatory authorities, any registration statements including but not limited to Forms S-8, or amend any already filed registration statement to increase the amount of Common Stock registered therein, or reduce the price of which such Common Stock is registered therein without the consent of the Subscriber until the expiration of the “Exclusion Period”, which shall be defined as the first to occur of (i) the Registration Statement having been current and available for use in connection with the resale of all of the Registrable Securities (as defined in Section 11.1(i) for a period of 365 days, (ii) until all the Shares and Warrant Shares have been resold or transferred by the Subscribers pursuant to the Registration Statement or Rule 144, without regard to volume limitations, or (iii) the satisfaction of the Notes. The Exclusion Period will be tolled during the pendency of an Event of Default as defined in the Note.   (o) Blackout. The Company undertakes and covenants that until the end of the Exclusion Period, the Company will not enter into any acquisition, merger, exchange or sale or other transaction that could have the effect of delaying the effectiveness of any pending Registration Statement or causing an already effective Registration Statement to no longer be effective or current for a period of twenty (20) or more days in the aggregate.   (p) Non-Public Information. The Company covenants and agrees that neither it nor any other person acting on its behalf will provide any Subscriber or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Subscriber shall have agreed in writing to receive such information. The Company understands and confirms that each Subscriber shall be relying on the foregoing representations in effecting transactions in securities of the Company. The Company will offer to the Subscriber an opportunity to review and comment on the Registration Statement thereto between three and five business days prior to the proposed filing date thereof.     16 --------------------------------------------------------------------------------   (q) Offering Restrictions. Until the expiration of the Exclusion Period and during the pendency of an Event of Default, except for the Excepted Issuances [as defined in Section 12(a)], the Company will not enter into an agreement to nor issue any equity, convertible debt or other securities convertible into common stock or equity of the Company nor modify any of the foregoing which may be outstanding at anytime, without the prior written consent of the Subscriber, which consent may be withheld for any reason. For so long as the Notes are outstanding, except for the Excepted Issuances, the Company will not enter into any equity line of credit or similar agreement, nor issue nor agree to issue any floating or variable priced equity linked instruments nor any of the foregoing or equity with price reset rights. The only officer, director, employee and consultant stock option or stock incentive plan currently in effect or contemplated by the Company has been submitted to the Subscribers. No other plan will be adopted nor may any options or equity not included in such plan be issued for so long as any sum is outstanding under the Note. (r) Board Representation or Attendance by Observer.  The Company agrees until such time as 90% of the initial principal amount outstanding on the Notes shall have been fully paid or converted that the Subscriber shall have the right, but not the obligation, from time to time to designate in writing a nominee to serve as a member of the Board of Directors of the Company. The Company will nominate and secure the election of such designee as Director of the Company. During such time as the Subscriber has not exercised such rights, the Subscriber shall have the right to designate an observer, who shall be entitled to attend and participate (but not vote) in all meetings of the Board of Directors of the Company and to receive all notices, reports, information, correspondence and communications sent by the Company to members of the Board of Directors. All reasonable costs and expenses incurred in connection therewith by any such designated Director or observer, or by the Broker on behalf of such Director or observer, shall be reimbursed by the Company to the extent that the Company reimburses such expenses incurred by any directors of the Company. It is provided and agreed that the actions and advice of any person while serving pursuant to this section as a Director or an observer at meetings of the Board of Directors shall be construed to be the actions and advice of that person alone and not be construed as actions of any Subscriber as to any notice, requirements or rights of any Subscriber under the Transaction Documents, nor as action of any Subscriber to approve modifications, consents, amendments or waivers thereof; and all such actions or notices shall be deemed actions or notices to the Subscribers only when duly provided in writing and given in accordance with the provisions of the Transaction Documents.  The relationship between the Company and the Subscribers is, and shall at all times remain, solely that of the Company with a purchaser of its securities. The Subscribers neither undertake nor assume any responsibility or duty to the Company to review, inspect, supervise, pass judgment upon, or inform the Company of any matter in connection with any phase of the Company’s business, operations, or condition, financial or otherwise. The Company shall rely entirely upon its own judgment with respect to such matters, and any review, inspection, supervision, exercise of judgment, or information supplied to the Company by the Subscribers, or any representative or agent of the Subscribers, in connection with any such matter is for the protection of the Subscribers, and neither the Company nor any third party is entitled to rely thereon. It shall be deemed a default of a material obligation under the Notes if Company does not comply with the requirements of this section. (s) Additional Negative Covenants. So long as the Notes are outstanding and during the pendency of an Event of Default (as defined in the Note), without the consent of the Subscribers, the Company will not and will not permit any of its Subsidiaries to directly or indirectly:   17 --------------------------------------------------------------------------------   (i) create, incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, security title, mortgage, security deed or deed of trust, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction) (each, a “Lien”) upon any of its property, whether now owned or hereafter acquired except for (i) the Excepted Issuances, (ii) (a) Liens imposed by law for taxes that are not yet due or are being contested in good faith and for which adequate reserves have been established in accordance with generally accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’, material men’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or that are being contested in good faith and by appropriate proceedings; (c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) Liens created with respect to the financing of the purchase of new property in the ordinary course of the Company’s business up to the amount of the purchase price of such property, or (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property (each of (a) through (f), a “Permitted Lien”) and (iii) indebtedness for borrowed money which is not senior or pari passu in right of payment to the payment of the Notes;   (ii) amend its certificate of incorporation, bylaws or its charter documents so as to adversely affect any rights of the Subscriber;   (iii) repay, repurchase or offer to repay, repurchase or otherwise acquire or make any dividend or distribution in respect of any of its Common Stock, preferred stock, or other equity securities other than to the extent permitted or required under the Transaction Documents;   (iv) prepay any financing related or other outstanding debt obligations; or   (v) engage in any transactions with any officer, director, employee or any Affiliate of the Company, including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $10,000 other than (i) for payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) for other employee benefits, including stock option agreements under any stock option plan of the Company.   (t) Acquisition. The Company undertakes, covenants and agrees to consummate the acquisition of RX for Africa on the same terms as described in the Letter of Intent. (u) Financial Statements. The Company will deliver to the Subscribers on or before January 31, 2007 the financial statements described in Section 1(d) of this Agreement.   18 --------------------------------------------------------------------------------   10. Covenants of the Company and Subscriber Regarding Indemnification.   (a) The Company agrees to indemnify, hold harmless, reimburse and defend the Subscribers, the Subscribers' officers, directors, agents, Affiliates, control persons, and principal shareholders, against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the Subscriber or any such person which results, arises out of or is based upon (i) any material misrepresentation by Company or material breach of any warranty by Company in this Agreement or in any Exhibits or Schedules attached hereto, or other agreement delivered pursuant hereto; or (ii) after any applicable notice and/or cure periods, any material breach or default in performance by the Company of any covenant or undertaking to be performed by the Company hereunder, or any other agreement entered into by the Company and Subscriber relating hereto.   (b) Each Subscriber agrees to indemnify, hold harmless, reimburse and defend the Company and each of the Company’s officers, directors, agents, Affiliates, control persons against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the Company or any such person which results, arises out of or is based upon (i) any material misrepresentation by such Subscriber in this Agreement or in any Exhibits or Schedules attached hereto, or other agreement delivered pursuant hereto; or (ii) after any applicable notice and/or cure periods, any material breach or default in performance by such Subscriber of any covenant or undertaking to be performed by such Subscriber hereunder, or any other agreement entered into by the Company and Subscribers, relating hereto.   (c) In no event shall the liability of any Subscriber or permitted successor hereunder or under any Transaction Document or other agreement delivered in connection herewith be greater in amount than the dollar amount of the net proceeds actually received by such Subscriber upon the sale of Registrable Securities (as defined herein).   (d) The procedures set forth in Section 11.6 shall apply to the indemnification set forth in Sections 10(a) and 10(b) above.   11.1. Registration Rights. The Company hereby grants the following registration rights to holders of the Securities.   (i) On one occasion, for a period commencing ninety-one (91) days after the Initial Closing Date, but not later than two (2) years after the Initial Closing Date, upon a written request therefor from any record holder or holders of more than 50% of the Shares issued and issuable upon conversion of the outstanding Notes and outstanding Warrant Shares, the Company shall prepare and file with the Commission a registration statement under the 1933 Act registering the Registrable Securities, as defined in Section 11.1(iv) hereof, which are the subject of such request for unrestricted public resale by the holder thereof. For purposes of Sections 11.1(i) and 11.1(ii), Registrable Securities shall not include Securities which are (A) registered for resale in an effective registration statement, (B) included for registration in a pending registration statement, or (C) which have been issued without further transfer restrictions after a sale or transfer pursuant to Rule 144 under the 1933 Act. Upon the receipt of such request, the Company shall promptly give written notice to all other record holders of the Registrable Securities that such registration statement is to be filed and shall include in such registration statement Registrable Securities for which it has received written requests within ten (10) days after the Company gives such written notice. Such other requesting record holders shall be deemed to have exercised their demand registration right under this Section 11.1(i).     19 --------------------------------------------------------------------------------   (ii) If the Company at any time proposes to register any of its securities under the 1933 Act for sale to the public, whether for its own account or for the account of other security holders or both, except with respect to registration statements on Forms S-4, S-8 or another form not available for registering the Registrable Securities for sale to the public, provided the Registrable Securities are not otherwise registered for resale by the Subscribers or Holder pursuant to an effective registration statement, each such time it will give at least fifteen (15) days' prior written notice to the record holder of the Registrable Securities of its intention so to do. Upon the written request of the holder, received by the Company within ten (10) days after the giving of any such notice by the Company, to register any of the Registrable Securities not previously registered, the Company will cause such Registrable Securities as to which registration shall have been so requested to be included with the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent required to permit the sale or other disposition of the Registrable Securities so registered by the holder of such Registrable Securities (the “Seller” or “Sellers”). In the event that any registration pursuant to this Section 11.1(i) shall be, in whole or in part, an underwritten public offering of common stock of the Company, the number of shares of Registrable Securities to be included in such an underwriting may be reduced by the managing underwriter if and to the extent that the Company and the underwriter shall reasonably be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold by the Company therein; provided, however, that the Company shall notify the Seller in writing of any such reduction. Notwithstanding the foregoing provisions, or Section 11.4 hereof, the Company may withdraw or delay or suffer a delay of any registration statement referred to in this Section 11.1(i) without thereby incurring any liability to the Seller.   (iii) If, at the time any written request for registration is received by the Company pursuant to Section 11.1(i), the Company has determined to proceed with the actual preparation and filing of a registration statement under the 1933 Act in connection with the proposed offer and sale for cash of any of its securities for the Company's own account and the Company actually does file such other registration statement, such written request shall be deemed to have been given pursuant to Section 11.1(ii) rather than Section 11.1(i), and the rights of the holders of Registrable Securities covered by such written request shall be governed by Section 11.1(ii).   (iv) The Company shall file with the Commission a Form SB-2 registration statement (the “Registration Statement”) (or such other form that it is eligible to use) in order to register the Registrable Securities for resale and distribution under the 1933 Act on or before February 15, 2007 (the “Filing Date”), and cause the Registration Statement to be declared effective not later than April 16, 2007 (the “Effective Date”). Subject to the limitation described in Section 11.1(v), the Company will register not less than a number of shares of Common Stock in the aforedescribed registration statement that is equal to 150% of the Shares issuable upon conversion of all of the Notes issuable to the Subscribers, and 100% of the Warrant Shares issuable pursuant to this Agreement upon exercise of the Warrants (collectively the “Registrable Securities”). The Registrable Securities shall be reserved and set aside exclusively for the benefit of each Subscriber and Warrant holder, pro rata based on the principal amount of Notes purchased by each Subscriber pursuant to this Agreement, and not issued, employed or reserved for anyone other than each such Subscriber and Warrant holder. The Registration Statement will immediately be amended or additional registration statements will be immediately filed by the Company as necessary to register additional shares of Common Stock to allow the public resale of all Common Stock included in and issuable by virtue of the Registrable Securities. Except with the written consent of the Subscriber, no securities of the Company other than the Registrable Securities will be included in the Registration Statement. It shall be deemed a Non-Registration Event if at any time after the date the Registration Statement described in this Section 11.1(iv) is declared effective by the Commission (“Actual Effective Date”) the Company has registered for unrestricted resale on behalf of the Subscribers fewer than 125% of the amount of Common Shares issuable upon full conversion of all sums due under the Notes.     20 --------------------------------------------------------------------------------     (v) The amount of Registrable Securities required to be included in the Registration Statement as described in Section 11.1(iv) (“Initial Registrable Securities”) shall be limited to not less than 100% of the maximum amount (“Rule 415 Amount”) of Common Stock which may be included in a single Registration Statement without exceeding registration limitations imposed by the Commission pursuant to Rule 415 of the 1933 Act but in no event not less than the greater of 53, 333, 334 shares of Common Stock or 130% of the Shares outstanding at the time the registration is filed (post reverse split shares)     (w) . In the event that less than all of the Initial Registrable Securities are included in the Registration Statement as a result of the limitation described in this Section 11.1(v), then the Company will file additional Registration Statements each registering the Rule 415 Amount (each such Registration Statement a “Subsequent Registration Statement”), seriatim, until all of the Initial Registrable Securities have been registered. The Filing Date and Effective Date of each such additional Registration Statement shall be, respectively, fourteen (14) and forty-five (45) days after the first day such Subsequent Registration Statement may be filed without objection by the Commission based on Rule 415 of the 1933 Act.   (vi) Unless otherwise instructed in writing by a holder of Registrable Securities and only if the initial Registration Statement does not include all of the Registrable Securities, the Registrable Securities will be registered on behalf of each such holder in the Registration Statements based on Common Stock issuable upon conversion or exercise of Notes and Warrants, in the following order and priority:   (A) Notes (based on the multiple set forth above).   (B) Warrants.   (C) Warrants issued to the Subscribers at any time based on exercise prices, with the lower exercise priced Warrant Shares being registered first and then the higher exercise priced Warrant Shares. In the case of Warrants with the same exercise prices but different Issue Dates, the later issued Warrants will be registered first.   The foregoing notwithstanding, priority shall be given to Common Stock issuable upon conversion of actual outstanding Notes ahead of Warrant Shares.   11.2. Registration Procedures. If and whenever the Company is required by the provisions of Section 11.1(i), 11.1(ii) or 11.1(iv) to effect the registration of any Registrable Securities under the 1933 Act, the Company will, as expeditiously as possible:   (a) subject to the timelines provided in this Agreement, prepare and file with the Commission a registration statement required by Section 11, with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby (determined as herein provided), promptly provide to the holders of the Registrable Securities copies of all filings and Commission letters of comment and notify Subscribers (by telecopier and by e-mail addresses provided by Subscribers) and Grushko & Mittman, P.C. (by telecopier and by email to [email protected]) on or before 6:00 PM EST on the same business day that the Company receives notice that (i) the Commission has no comments or no further comments on the Registration Statement, and (ii) the registration statement has been declared effective (failure to timely provide notice as required by this Section 11.2(a) shall be a material breach of the Company’s obligation and an Event of Default as defined in the Notes and a Non-Registration Event as defined in Section 11.4 of this Agreement);     21 --------------------------------------------------------------------------------   (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until such registration statement has been effective for a period of two (2) years, and comply with the provisions of the 1933 Act with respect to the disposition of all of the Registrable Securities covered by such registration statement in accordance with the Sellers’ intended method of disposition set forth in such registration statement for such period;   (c) furnish to the Sellers, at the Company’s expense, such number of copies of the registration statement and the prospectus included therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or their disposition of the securities covered by such registration statement or make them electronically available;   (d) use its commercially reasonable best efforts to register or qualify the Registrable Securities covered by such registration statement under the securities or “blue sky” laws of New York and such jurisdictions as the Sellers shall request in writing, provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction;   (e) if applicable, list the Registrable Securities covered by such registration statement with any securities exchange on which the Common Stock of the Company is then listed;   (f) notify the Subscribers within two hours of the Company’s becoming aware that a prospectus relating thereto is required to be delivered under the 1933 Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing or which becomes subject to a Commission, state or other governmental order suspending the effectiveness of the registration statement covering any of the Shares;   (g) provided same would not be in violation of the provision of Regulation FD under the 1934 Act, make available for inspection by the Sellers, and any attorney, accountant or other agent retained by the Seller or underwriter, all publicly available, non-confidential financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all publicly available, non-confidential information reasonably requested by the seller, attorney, accountant or agent in connection with such registration statement; and   (h) provide to the Sellers copies of the Registration Statement and amendments thereto five business days prior to the filing thereof with the Commission.   11.3. Provision of Documents. In connection with each registration described in this Section 11, each Seller will furnish to the Company in writing such information and representation letters with respect to itself and the proposed distribution by it as reasonably shall be necessary in order to assure compliance with federal and applicable state securities laws.     22 --------------------------------------------------------------------------------   11.4. Non-Registration Events. The Company and the Subscribers agree that the Sellers will suffer damages if the Registration Statement is not filed by the Filing Date and not declared effective by the Commission by the Effective Date, and any registration statement required under Section 11.1(i) or 11.1(ii) is not filed within 60 days after written request and declared effective by the Commission within 120 days after such request, and maintained in the manner and within the time periods contemplated by Section 11 hereof, and it would not be feasible to ascertain the extent of such damages with precision. Accordingly, if (A) the Registration Statement is not filed on or before the Filing Date, (B) is not declared effective on or before the Effective Date, (C) due to the action or inaction of the Company the Registration Statement is not declared effective within three (3) business days after receipt by the Company or its attorneys of a written or oral communication from the Commission that the Registration Statement will not be reviewed or that the Commission has no further comments, (D) if the registration statement described in Sections 11.1(i) or 11.1(ii) is not filed within 60 days after such written request, or is not declared effective within 120 days after such written request, or (E) any registration statement described in Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and declared effective but shall thereafter cease to be effective without being succeeded within fifteen (15) business days by an effective replacement or amended registration statement or for a period of time which shall exceed thirty (30) days in the aggregate per year (defined as a period of 365 days commencing on the Actual Effective Date (each such event referred to in clauses A through E of this Section 11.4 is referred to herein as a "Non-Registration Event"), then the Company shall deliver to the holder of Registrable Securities, as Liquidated Damages, an amount equal to two percent (2%) for each thirty (30) days or part thereof of the Aggregate Principal Amount of the Notes remaining unconverted and purchase price of Shares issued upon conversion of the Notes and exercise of the Warrants owned of record by such holder which are subject to such Non-Registration Event. The Company must pay the Liquidated Damages in cash. The Liquidated Damages must be paid within ten (10) days after the end of each thirty (30) day period or shorter part thereof for which Liquidated Damages are payable. In the event a Registration Statement is filed by the Filing Date but is withdrawn prior to being declared effective by the Commission, then such Registration Statement will be deemed to have not been filed. All oral or written comments received from the Commission relating to the Registration Statement must be satisfactorily responded to within ten (10) business days after receipt of comments from the Commission. Failure to timely respond to Commission comments is a Non-Registration Event for which Liquidated Damages shall accrue and be payable by the Company to the holders of Registrable Securities at the same rate set forth above. Notwithstanding the foregoing, the Company shall not be liable to the Subscriber under this Section 11.4 for any events or delays occurring as a consequence of the acts or omissions of the Subscribers contrary to the obligations undertaken by Subscribers in this Agreement. Liquidated Damages will not accrue nor be payable pursuant to this Section 11.4 nor will a Non-Registration Event be deemed to have occurred for times during which Registrable Securities are transferable by the holder of Registrable Securities pursuant to Rule 144(k) under the 1933 Act.   11.5. Expenses. All expenses incurred by the Company in complying with Section 11, including, without limitation, all registration and filing fees, printing expenses (if required), fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, and fees of transfer agents and registrars, are called “Registration Expenses.” All underwriting discounts and selling commissions applicable to the sale of Registrable Securities are called "Selling Expenses." The Company will pay all Registration Expenses in connection with the registration statement under Section 11. Selling Expenses in connection with each registration statement under Section 11 shall be borne by the Seller and may be apportioned among the Sellers in proportion to the number of shares sold by the Seller relative to the number of shares sold under such registration statement or as all Sellers thereunder may agree.     23 --------------------------------------------------------------------------------   11.6. Indemnification and Contribution.   (a) In the event of a registration of any Registrable Securities under the 1933 Act pursuant to Section 11, the Company will, to the extent permitted by law, indemnify and hold harmless the Seller, each officer of the Seller, each director of the Seller, each underwriter of such Registrable Securities thereunder and each other person, if any, who controls such Seller or underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which the Seller, or such underwriter or controlling person may become subject under the 1933 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 any registration statement under which such Registrable Securities was registered under the 1933 Act pursuant to Section 11, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances when made, and will subject to the provisions of Section 11.6(c) reimburse the Seller, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company shall not be liable to the Seller to the extent that any such damages arise out of or are based upon an untrue statement or omission made in any preliminary prospectus if (i) the Seller failed to send or deliver a copy of the final prospectus delivered by the Company to the Seller with or prior to the delivery of written confirmation of the sale by the Seller to the person asserting the claim from which such damages arise, (ii) the final prospectus would have corrected such untrue statement or alleged untrue statement or such omission or alleged omission, or (iii) 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 or omission or alleged omission so made in conformity with information furnished by any such Seller, or any such controlling person in writing specifically for use in such registration statement or prospectus.   (b) In the event of a registration of any of the Registrable Securities under the 1933 Act pursuant to Section 11, each Seller severally but not jointly will, to the extent permitted by law, indemnify and hold harmless the Company, and each person, if any, who controls the Company within the meaning of the 1933 Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the 1933 Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the 1933 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 registration statement under which such Registrable Securities were registered under the 1933 Act pursuant to Section 11, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, provided, however, that the Seller will be liable hereunder in any such case if and only 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 or omission or alleged omission made in reliance upon and in conformity with information pertaining to such Seller, as such, furnished in writing to the Company by such Seller specifically for use in such registration statement or prospectus, and provided, further, however, that the liability of the Seller hereunder shall be limited to the net proceeds actually received by the Seller from the sale of Registrable Securities covered by such registration statement.     24 --------------------------------------------------------------------------------   (c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 11.6(c) and shall only relieve it from any liability which it may have to such indemnified party under this Section 11.6(c), except and only if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 11.6(c) for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected, provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified parties, as a group, shall have the right to select one separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred.   (d) In order to provide for just and equitable contribution in the event of joint liability under the 1933 Act in any case in which either (i) a Seller, or any controlling person of a Seller, makes a claim for indemnification pursuant to this Section 11.6 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 11.6 provides for indemnification in such case, or (ii) contribution under the 1933 Act may be required on the part of the Seller or controlling person of the Seller in circumstances for which indemnification is not provided under this Section 11.6; then, and in each such case, the Company and the Seller will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that the Seller is responsible only for the portion represented by the percentage that the public offering price of its securities offered by the registration statement bears to the public offering price of all securities offered by such registration statement, provided, however, that, in any such case, (y) the Seller will not be required to contribute any amount in excess of the public offering price of all such securities sold by it pursuant to such registration statement; and (z) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.   11.7. Delivery of Unlegended Shares.   (a) Within three (3) business days (such third business day being the “Unlegended Shares Delivery Date”) after the business day on which the Company has received (i) a notice that Shares or Warrant Shares or any other Common Stock held by a Subscriber have been sold pursuant to the Registration Statement or Rule 144 under the 1933 Act, (ii) a representation that the prospectus delivery requirements, or the requirements of Rule 144, as applicable and if required, have been satisfied, and (iii) the original share certificates representing the shares of Common Stock that have been sold, and (iv) in the case of sales under Rule 144, customary representation letters of the Subscriber and/or Subscriber’s broker regarding compliance with the requirements of Rule 144, the Company at its expense, (y) shall deliver, and shall cause legal counsel selected by the Company to deliver to its transfer agent (with copies to Subscriber) an appropriate instruction and opinion of such counsel, directing the delivery of shares of Common Stock without any legends including the legend set forth in Section 4(i) above (the “Unlegended Shares”); and (z) cause the transmission of the certificates representing the Unlegended Shares together with a legended certificate representing the balance of the submitted Shares certificate, if any, to the Subscriber at the address specified in the notice of sale, via express courier, by electronic transfer or otherwise on or before the Unlegended Shares Delivery Date.     25 --------------------------------------------------------------------------------   (b) In lieu of delivering physical certificates representing the Unlegended Shares, if the Company’s transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer program, upon request of a Subscriber, so long as the certificates therefor do not bear a legend and the Subscriber is not obligated to return such certificate for the placement of a legend thereon, the Company shall cause its transfer agent to electronically transmit the Unlegended Shares by crediting the account of Subscriber’s prime Broker with DTC through its Deposit Withdrawal Agent Commission system. Such delivery must be made on or before the Unlegended Shares Delivery Date. (c) The Company understands that a delay in the delivery of the Unlegended Shares pursuant to Section 11 hereof later than two business days after the Unlegended Shares Delivery Date could result in economic loss to a Subscriber. As compensation to a Subscriber for such loss, the Company agrees to pay late payment fees (as liquidated damages and not as a penalty) to the Subscriber for late delivery of Unlegended Shares in the amount of $100 per business day after the Delivery Date for each $10,000 of purchase price of the Unlegended Shares subject to the delivery default. If during any 360 day period, the Company fails to deliver Unlegended Shares as required by this Section 11.7 for an aggregate of thirty (30) days, then each Subscriber or assignee holding Securities subject to such default may, at its option, require the Company to redeem all or any portion of the Shares and Warrant Shares subject to such default at a price per share equal to 120% of the Purchase Price of such Common Stock and Warrant Shares (“Unlegended Redemption Amount”). The amount of the aforedescribed liquidated damages that have accrued or been paid for the twenty day period prior to the receipt by the Subscriber of the Unlegended Redemption Amount shall be credited against the Unlegended Redemption Amount. The Company shall pay any payments incurred under this Section in immediately available funds upon demand.   (d) In addition to any other rights available to a Subscriber, if the Company fails to deliver to a Subscriber Unlegended Shares as required pursuant to this Agreement, within seven (7) business days after the Unlegended Shares Delivery Date and the Subscriber or a broker on the Subscriber’s behalf, purchases (in an open market transaction or otherwise) shares of common stock to deliver in satisfaction of a sale by such Subscriber of the shares of Common Stock which the Subscriber was entitled to receive from the Company (a "Buy-In"), then the Company shall pay in cash to the Subscriber (in addition to any remedies available to or elected by the Subscriber) the amount by which (A) the Subscriber's total purchase price (including brokerage commissions, if any) for the shares of common stock so purchased exceeds (B) the aggregate purchase price of the shares of Common Stock delivered to the Company for reissuance as Unlegended Shares  together with interest thereon at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty). For example, if a Subscriber purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase price of shares of Common Stock delivered to the Company for reissuance as Unlegended Shares, the Company shall be required to pay the Subscriber $1,000, plus interest. The Subscriber shall provide the Company written notice indicating the amounts payable to the Subscriber in respect of the Buy-In.   (e) In the event a Subscriber shall request delivery of Unlegended Shares as described in Section 11.7 and the Company is required to deliver such Unlegended Shares pursuant to Section 11.7, the Company may not refuse to deliver Unlegended Shares based on any claim that such Subscriber or any one associated or affiliated with such Subscriber has been engaged in any violation of law, or for any other reason, unless, an injunction or temporary restraining order from a court, on notice, restraining and or enjoining delivery of such Unlegended Shares or exercise of all or part of said Warrant shall have been sought and obtained and the Company has posted a surety bond for the benefit of such Subscriber in the amount of 120% of the amount of the aggregate purchase price of the Common Stock and Warrant Shares which are subject to the injunction or temporary restraining order, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Subscriber to the extent Subscriber obtains judgment in Subscriber’s favor.   26 --------------------------------------------------------------------------------   12. (a) Right of First Refusal. Until one year after the Actual Effective Date, the Subscribers shall be given not less than ten (10) business days prior written notice of any proposed sale by the Company of its common stock or other securities or debt obligations, except in connection with (i) full or partial consideration in connection with a strategic merger, acquisition, consolidation or purchase of substantially all of the securities or assets of corporation or other entity which holders of such securities or debt are not at any time granted registration rights, (ii) the Company’s issuance of securities in connection with strategic license agreements and other partnering arrangements so long as such issuances are not for the purpose of raising capital and which holders of such securities or debt are not at any time granted registration rights, (iii) the Company’s issuance of Common Stock or the issuances or grants of options to purchase Common Stock pursuant to stock option plans and employee stock purchase plans described on Schedule 5(d) hereto at prices equal to or higher than the closing price of the Common Stock on the issue date of any of the foregoing, (iv) as a result of the exercise of Warrants or conversion of Notes which are granted or issued pursuant to this Agreement or that have been issued prior to the Closing Date, the issuance of which has been disclosed in a Report filed not less than five (5) days prior to the Closing Date, and (v) the payment of any interest on the Notes and Liquidated Damages pursuant to the Transaction Documents (collectively the foregoing are “Excepted Issuances”). The Subscribers who exercise their rights pursuant to this Section 12(a) shall have the right during the ten (10) business days following receipt of the notice to purchase such offered common stock, debt or other securities in accordance with the terms and conditions set forth in the notice of sale in the same proportion to each other as their purchase of Notes in the Offering. In the event such terms and conditions are modified during the notice period, the Subscribers shall be given prompt notice of such modification and shall have the right during the ten (10) business days following the notice of modification to exercise such right.   (b) Favored Nations Provision. Other than in connection with the Excepted Issuances, if at any time while Notes or Warrants are outstanding the Company shall offer, issue or agree to issue any common stock or securities convertible into or exercisable for shares of common stock (or modify any of the foregoing which may be outstanding) to any person or entity at a price per share or conversion or exercise price per share which shall be less than the Conversion Price in respect of the Shares, or if less than the Warrant exercise price in respect of the Warrant Shares, without the consent of each Subscriber holding Notes, Shares, Warrants, or Warrant Shares, then the Company shall issue, for each such occasion, additional shares of Common Stock to each Subscriber so that the average per share purchase price of the shares of Common Stock issued to the Subscriber (of only the Common Stock or Warrant Shares still owned by the Subscriber) is equal to such other lower price per share and the maximum Conversion Price and maximum Warrant exercise price shall automatically be adjusted to such other lower price per Share. The average Purchase Price of the Shares and average exercise price in relation to the Warrant Shares shall be calculated separately for the Shares and Warrant Shares. The foregoing calculation and issuance shall be made separately for Shares received upon conversion and separately for Warrant Shares. The delivery to the Subscriber of the additional shares of Common Stock shall be not later than two (2) business days after the closing date of the transaction giving rise to the requirement to issue additional shares of Common Stock. The Subscriber is granted the registration rights described in Section 11 hereof in relation to such additional shares of Common Stock except that the Filing Date and Effective Date vis-à-vis such additional common shares shall be, respectively, the thirtieth (30th) and sixtieth (60th) date after the closing date giving rise to the requirement to issue the additional shares of Common Stock. For purposes of the issuance and adjustment described in this paragraph, the issuance of any security of the Company carrying the right to convert such security into shares of Common Stock or of any warrant, right or option to purchase Common Stock shall result in the issuance of the additional shares of Common Stock upon the sooner of the agreement to or actual issuance of such convertible security, warrant, right or option and again at any time upon any subsequent issuances of shares of Common Stock upon exercise of such conversion or purchase rights if such issuance is at a price lower than the Conversion Price or Warrant exercise price in effect upon such issuance. The rights of the Subscriber set forth in this Section 12 are in addition to any other rights the Subscriber has pursuant to this Agreement, the Note, any Transaction Document, and any other agreement referred to or entered into in connection herewith. The Subscriber is also given the right to elect to substitute any term or terms of any other offering in connection with which the Subscriber has rights as described in Section 12(a), for any term or terms of the Offering in connection with Securities owned by Subscriber as of the date the notice described in Section 12(a) is required to be given to Subscriber.     27 --------------------------------------------------------------------------------   (c) Maximum Exercise of Rights. In the event the exercise of the rights described in Sections 12(a) and 12(b) would result in the issuance of an amount of common stock of the Company that would exceed the maximum amount that may be issued to a Subscriber calculated in the manner described in Section 7.3 of this Agreement, then the issuance of such additional shares of common stock of the Company to such Subscriber will be deferred in whole or in part until such time as such Subscriber is able to beneficially own such common stock without exceeding the maximum amount set forth calculated in the manner described in Section 7.3 of this Agreement. The determination of when such common stock may be issued shall be made by each Subscriber as to only such Subscriber.   13. Miscellaneous.   (a) Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: (i) if to the Company, to: Diamond Entertainment Corporation, 800 Tucker Lane, Walnut, California 91789, Attn: James Lu, CEO, telecopier: (909) 869-1990, with a copy by telecopier only to: Owen M. Naccarato, Esq., Naccarato & Associates, 18301 Von Karman Avenue, Suite 430, Irvine, CA 92612, telecopier: (949) 851-9262, and (ii) if to the Subscriber, to: the one or more addresses and telecopier numbers indicated on the signature pages hereto, with an additional copy by telecopier only to: Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, telecopier: (212) 697-3575.   (b) Entire Agreement; Assignment. This Agreement and other documents delivered in connection herewith represent the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by both parties. Neither the Company nor the Subscribers have relied on any representations not contained or referred to in this Agreement and the documents delivered herewith. No right or obligation of the Company shall be assigned without prior notice to and the written consent of the Subscribers.     28 --------------------------------------------------------------------------------   (c)  Counterparts/Execution. This Agreement may be executed in any number of counterparts and by the different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. This Agreement may be executed by facsimile signature and delivered by facsimile transmission.   (d) Law Governing this Agreement. 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 principles that would result in the application of the substantive laws of another jurisdiction. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the civil or state courts of New York or in the federal courts located in New York County. The parties and the individuals executing this Agreement and other agreements referred to herein or delivered in connection herewith 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 Agreement or any other agreement delivered in connection herewith 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 any agreement.   (e) Specific Enforcement, Consent to Jurisdiction. To the extent permitted by law, the Company and Subscriber acknowledge and 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 one or more preliminary and final injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which any of them may be entitled by law or equity. Subject to Section 13(d) hereof, each of the Company, Subscriber and any signator hereto in his personal capacity hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction in New York of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law.   (f) Damages. In the event the Subscriber is entitled to receive any liquidated damages pursuant to the Transactions, the Subscriber may elect to receive the greater of actual damages or such liquidated damages.     29 --------------------------------------------------------------------------------   (g) Independent Nature of Subscribers.     The Company acknowledges that the obligations of each Subscriber under the Transaction Documents are several and not joint with the obligations of any other Subscriber, and no Subscriber shall be responsible in any way for the performance of the obligations of any other Subscriber under the Transaction Documents. The Company acknowledges that each Subscriber has represented that the decision of each Subscriber to purchase Securities has been made by such Subscriber independently of any other Subscriber and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company which may have been made or given by any other Subscriber or by any agent or employee of any other Subscriber, and no Subscriber or any of its agents or employees shall have any liability to any Subscriber (or any other person) relating to or arising from any such information, materials, statements or opinions.  The Company acknowledges that nothing contained in any Transaction Document, and no action taken by any Subscriber pursuant hereto or thereto (including, but not limited to, the (i) inclusion of a Subscriber in the Registration Statement and (ii) review by, and consent to, such Registration Statement by a Subscriber) shall be deemed to constitute the Subscribers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Subscribers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  The Company acknowledges that each Subscriber shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of the Transaction Documents, and it shall not be necessary for any other Subscriber to be joined as an additional party in any proceeding for such purpose.  The Company acknowledges that it has elected to provide all Subscribers with the same terms and Transaction Documents for the convenience of the Company and not because Company was required or requested to do so by the Subscribers.  The Company acknowledges that such procedure with respect to the Transaction Documents in no way creates a presumption that the Subscribers are in any way acting in concert or as a group with respect to the Transaction Documents or the transactions contemplated thereby.   (h) Consent. As used in the Agreement, “consent of the Subscribers” or similar language means the consent of holders of not less than 75% of the total of the Shares issued and issuable upon conversion of outstanding Notes owned by Subscribers on the date consent is requested.   (i) Equal Treatment. No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of the Transaction Documents unless the same consideration is also offered and paid to all the parties to the Transaction Documents.   [THIS SPACE INTENTIONALLY LEFT BLANK]   30 --------------------------------------------------------------------------------     SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)   Please acknowledge your acceptance of the foregoing Subscription Agreement by signing and returning a copy to the undersigned whereupon it shall become a binding agreement between us.           DIAMOND ENTERTAINMENT CORPORATION a New Jersey corporation               By:   /s/ /s/ James Lu   --------------------------------------------------------------------------------   Name: James Lu Title: President Dated: November 30, 2006   SUBSCRIBER INITIAL CLOSING PURCHASE PRICE SECOND CLOSING PURCHASE PRICE LONGVIEW FUND, LP 600 Montgomery Street, 44th Floor San Francisco, CA 94111 Fax: (415) 981-5301       _______________________________________ (Signature) $1,000,000.00 $1,000,000.00 31 --------------------------------------------------------------------------------   SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)   Please acknowledge your acceptance of the foregoing Subscription Agreement by signing and returning a copy to the undersigned whereupon it shall become a binding agreement between us.             DIAMOND ENTERTAINMENT CORPORATION a New Jersey corporation               By:   /s/ /s/ James Lu   --------------------------------------------------------------------------------   Name: James Lu Title: President Dated: November 30, 2006   SUBSCRIBER INITIAL CLOSING PURCHASE PRICE SECOND CLOSING PURCHASE PRICE ALPHA CAPITAL ANSTALT Pradafant 7 9490 Furstentums Vaduz, Lichtenstein Fax: 011-42-32323196           _______________________________________ (Signature) $150,000.00 $150,000.00 32

Exhibit 10.13   POWER SALE, FUEL SUPPLY AND SERVICES AGREEMENT   THIS POWER SALE, FUEL SUPPLY AND SERVICES AGREEMENT (this “Agreement”), dated as of January 3, 2006 (the “Agreement Date”), is by and between MIRANT AMERICAS ENERGY MARKETING, LP, a Delaware limited partnership (“MAEM”), and MIRANT ZEELAND, LLC, a Delaware limited liability company (the “Project Company”).   RECITALS   WHEREAS, Project Company owns and operates a certain electric generating facility as set forth on Exhibit A hereto (the “Generating Station”); and   WHEREAS, Project Company may enter into contracts with third parties to sell capacity, electricity, ancillary services and/or other related products generated by, or available from, the Generating Station;   WHEREAS, in the absence of such third party contracts, Project Company desires to contract herein to sell all or a portion of the capacity, electricity, ancillary services and/or other related products generated by, or available from, the Generating Station to MAEM, and MAEM desires to purchase such capacity, electricity, ancillary services and/or other related products on the terms and conditions set forth herein; and   WHEREAS, Project Company desires that MAEM perform certain services related to the management and operation of the Generating Station, and MAEM desires to perform such services.   NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Parties, the Parties hereby agree as follows:   ARTICLE 1. DEFINITIONS   The following capitalized terms, whether used in the singular or plural, shall be defined as provided in this Article 1.   “Agreement” has the meaning set forth in the first paragraph hereof.   “Agreement Date” has the meaning set forth in the first paragraph of this Agreement.   “Asset Book” has the meaning set forth in Section 5.1   1 --------------------------------------------------------------------------------   “Asset Companies” means any affiliates of MAEM either directly or indirectly owned by Mirant Corporation, other than Mirant Zeeland, LLC, which own electric generating stations in the United States.   “Claims” means all claims or actions, threatened or filed, whether groundless, false or fraudulent, that directly or indirectly relate to the subject matter of an indemnity, and the resulting losses, damages, expenses, attorneys’ fees and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement.   “Collateral Costs” means an amount determined on a monthly basis by MAEM, in good faith, as the cost incurred by MAEM or Mirant North America, LLC to post collateral in the form of cash and/or letters of credit to third parties as required under the terms of the transactions attributed to the Asset Book based on the weighted average of the borrowing rates under the senior credit facilities, senior notes and other indebtedness for borrowed money of Mirant North America, LLC.   “Delivery Point” means, with respect to Products generated by, or available from, the Generating Station, the high side of the generation step-up transformer located at the Generating Station, where it connects to the Transmission Provider’s transmission system; and, with respect to Products generated by, or available from, sources other than the Generating Station, such other point on the Transmission Provider’s transmission system as MAEM and the Project Company may determine.   “Direct Contracts” has the meaning set forth in Section 4.1.   “DTEET Tolling Agreement” means the Tolling Agreement dated March 3, 2005, with respect to Zeeland Phase 2, between MAEM and DTE Energy Trading, Inc.   “Duke Tolling Agreement” means the Tolling Agreement dated May 3, 2000, with respect to Zeeland Phase 1, between MAEM and Duke Energy Marketing America, LLC.   “Emissions Allowances” means authorizations under state or federal (as applicable) air quality regulations to emit either one ton of nitrogen oxides (“NOx”) or sulfur dioxide (“SO2”), in the former case between May 1 through September 30 of any given year, and in the latter case at any time during any applicable calendar year.   “Event of Default” has the meaning set forth in Section 9.1.   “Expenses” has the meaning set forth in Section 8.2.   “FERC” means the Federal Energy Regulatory Commission, or its successor.   “Force Majeure” means an event or circumstance which prevents one Party from performing its obligations, which event or circumstance was not anticipated as of the date the   2 --------------------------------------------------------------------------------   transaction was agreed to, which is not within the reasonable control of, or the result of the negligence of, the claiming Party, and which, by the exercise of due diligence, the claiming Party is unable to overcome or avoid or cause to be avoided. Force Majeure shall not be based on (i) the loss of MAEM’s markets; (ii) MAEM’s inability economically to use or resell the Product purchased hereunder; (iii) the loss or failure of Project Company’s supply; or (iv) Project Company’s ability to sell the Product at a price greater than the Contract Price. Neither Party may raise a claim of Force Majeure based in whole or in part on curtailment by a Transmission Provider unless (i) such Party has contracted for firm transmission with a transmission provider for the Product to be delivered to or received at the Delivery Point and (ii) such curtailment is due to “force majeure” or “uncontrollable force” or a similar term as defined under the Transmission Provider’s tariff; provided, however, that existence of the foregoing factors shall not be sufficient to conclusively or presumptively prove the existence of a Force Majeure absent a showing of other facts and circumstances which in the aggregate with such factors establish that a Force Majeure as defined in the first sentence hereof has occurred.   “Fuel” means fuel oil or natural gas, as applicable.   “Fuel Delivery Point(s)” means the Fuel Oil Delivery Point and/or Natural Gas Delivery Point, as applicable.   “Fuel Oil Delivery Point” means the physical location at the Generating Station where MAEM shall fuel oil to Project Company.   “Generating Station” has the meaning provided in the recitals.   “Good Utility Practices” mean any of the practices, methods or acts engaged in or approved by a significant portion of the electric energy industry with respect to similar facilities during the relevant time period which in each case, in the exercise of reasonable judgment in light of the facts known or that should have been known at the time a decision was made, could have been expected to accomplish the desired result at reasonable cost consistent with good business practices, reliability, safety, law, regulation, environmental protection and expedition. Good Utility Practices are not intended to be limited to the optimum practices, methods or acts to the exclusion of all others, but rather to delineate the acceptable practices, methods or acts generally accepted in such industry.   “Gross Revenues” has the meaning set forth in Section 8.2.   “Implementation Order” means the Implementing Order Regarding Transfer of Letters of Credit, Guarantees and Certain Collateral Securing Trading Obligations Transferred Pursuant to the Plan, dated December 9, 2005, issued by the United States Bankruptcy Court for the Northern District of Texas, Forth Worth Division in the chapter 11 cases of Mirant Corporation and its affiliated debtors, styled as In re Mirant Corporation, et al., Chapter 11 Case No. 03-46590 (DML) Jointly Administered.   3 --------------------------------------------------------------------------------   “Interest Rate” means, for any date, two percent (2%) over the per annum rate of interest equal to the prime lending rate as may from time to time be published in the Wall Street Journal under “Money Rates”; provided that the Interest Rate shall never exceed the maximum interest rate permitted by applicable law.   “ISO” means the Midwest Independent Transmission System Operator, Inc., or its successor.   “ISO FERC Tariff” means the Open Access Transmission and Energy Markets Tariff for the Midwest Independent Transmission System Operator, Inc., as amended from time to time, as on file with and approved by the FERC.   “MAEM” has the meaning set forth in the first paragraph of this Agreement.   “MET” has the meaning set forth in Section 11.1(b).   “Natural Gas Delivery Point” means the meter at the Generating Station where MAEM shall deliver natural gas to Project Company.   “Net Market Revenues” has the meaning set forth in Section 8.2.   “Offer” has the meaning set forth in Section 2.2(a).   “Party” means any of MAEM or Project Company. In the context where MAEM is referenced as a “Party,” a reference to the “other Party” shall mean Project Company. In the context where Project Company is referenced as a “Party,” a reference to the “other Party” shall mean MAEM. References to “either Party” or the “Parties” shall have comparable meanings.   “Plan” means the Amended and Restated Second Amended Joint Chapter 11 Plan of Reorganization for Mirant Corporation and its Affiliated Debtors, dated September 30, 2005, confirmed by the United States Bankruptcy Court for the Northern District of Texas, Forth Worth Division, on December 9, 2005, in the chapter 11 cases of Mirant Corporation and its affiliated debtors, styled as In re Mirant Corporation, et al., Chapter 11 Case No. 03-46590 (DML) Jointly Administered.   “Products” or “Product” means electric capacity, energy, ancillary services and/or any other related products, which are or may become commercially recognized in the ISO markets during the term of this Agreement.   “Purchased Power” has the meaning set forth in Section 4.2.   “Scheduling” or “Schedule” means the acts of MAEM and/or its designated representatives of notifying, requesting and confirming to its counterparties and their designated representatives (including, but not limited to, the ISO) the quantity and type of Products to be delivered on any given day or days during the period of delivery at a specified Delivery Point.   4 --------------------------------------------------------------------------------   “Service Fee” has the meaning set forth in Section 8.1.   “Third Party Contracts” has the meaning set forth in Section 2.2(b).   “Transmission Providers” means the entity or entities transmitting or transporting Products on behalf of Project Company or MAEM to or from the Delivery Point including, but not limited to, the ISO or a regional transmission organization.   “Transportation Providers” means the entity or entities transporting Fuel on behalf of Project Company or MAEM to or from the Generating Station.   ARTICLE 2. PRODUCT SALES   2.1           Intercompany Product Sales.   (a)           Transactions. With the exception of any Direct Contracts as described in Section 4.1, Project Company shall sell and deliver, and MAEM shall purchase and receive, or cause to be received, at the Delivery Point, all Products generated by, and/or available from, the Generating Station. MAEM shall resell such Products as described in Section 2.2. MAEM shall pay Net Market Revenues to Project Company, on a monthly basis, for all Products purchased by MAEM hereunder. In selling Products generated by, or available from, the Generating Station, MAEM shall attempt to maximize Net Market Revenues for Project Company.   (b)           Transmission and Scheduling. Project Company shall be responsible for delivery of Products to the Delivery Point. MAEM shall arrange and be responsible for transmission service at and from the Delivery Point. MAEM shall serve as Scheduling agent on behalf of Project Company to Schedule and deliver Products with respect to all transaction involving the Generating Station.   (c)           Title, Risk of Loss and Indemnity. The following provision shall apply to all transactions involving the Generating Station except for Direct Contracts as described in Section 4.1. As between the Parties, Project Company shall be deemed to be in exclusive possession and control (and be responsible for any damages or injury caused thereby) of the Products prior to delivery thereof at the Delivery Point, and MAEM shall be deemed to be in exclusive possession and control (and be responsible for any damages or injury caused thereby) of the Products at and after delivery thereof at the Delivery Point. Project Company warrants that it will deliver to MAEM all Products free and clear of all liens, claims and encumbrances arising prior to delivery thereof at the Delivery Point. Title to and risk of loss related to delivered Products shall transfer from Project Company to MAEM at the Delivery Point. Each Party shall indemnify, defend and hold harmless each other Party from any Claims arising from any act or incident occurring during the period when possession, control and title to Products is vested or deemed to be vested in the indemnifying Party, except to the extent such Claims arise from such other Party’s breach of this Agreement or its gross negligence or willful misconduct.   5 --------------------------------------------------------------------------------   2.2           Resale of Products by MAEM.   (a)           Offers. MAEM may resell the Products purchased from Project Company by submitting offers to sell such Products in the day-ahead and/or real-time markets administered by the ISO (“Offers”).   (b)           Third Party Contracts. In addition to submitting Offers, MAEM may resell the Products purchased from Project Company by entering into bilateral contracts, forward sales, financial transactions (including, but not limited to, hedges, swaps, contracts for differences and options), tolling agreements, power purchase agreements and other transactions (“Third Party Contracts”).   (c)           Costs and Revenues. All costs and revenues associated with Offers and Third Party Contracts will be charged, or paid, to Project Company as such costs and revenues are actually incurred or received by MAEM, as further described in the calculation of Net Market Revenues pursuant to Section 8.2.   (d)           Strategies. MAEM’s strategies with respect to all Offers, Third Party Contracts and all Scheduling activities shall be consistent with:   (i)            the operating parameters and limitations of the Generating Station, as provided by the Project Company to MAEM;   (ii)           the limitations imposed by any transmission service reservations for the purpose of transmitting Products from the Generating Station;   (iii)          Project Company’s scheduled maintenance plans with respect to the Generating Station, as agreed to between the Parties;   (iv)          the availability of the Generating Station (including Fuel handling and storage facilities), as communicated by Project Company to MAEM;   (v)           the ISO FERC Tariff and other ISO rules and procedures in effect from time to time;   (vi)          applicable requirements of any Transmission Provider and/or Transportation Provider;   (vii)         Fuel availability;   (viii)        Good Utility Practices;   (ix)           any environmental limitations applicable to the Generating Station; and   (x)            operating protocols agreed to from time to time by the Parties.   6 --------------------------------------------------------------------------------   ARTICLE 3. FUEL SERVICES   3.1           All Requirements Fuel Supply. With the exception of any Direct Contracts as described in Section 4.1, MAEM shall procure and supply to Project Company, on an exclusive basis, all Fuel required by the Generating Station in accordance with Good Utility Practices and the terms and conditions of this Agreement. Project Company shall reimburse MAEM for such Fuel at MAEM’s actual cost. MAEM has entered into or will enter into Fuel hedges and trading activities (including, but not limited to, physical and financial hedges, swaps and options) in connection with MAEM’s Fuel supply obligations pursuant to this Section 3.1. The costs and revenues associated with such Fuel hedging and trading activities will be attributed to the Asset Book and charged to, or paid to, Project Company as such costs and revenues are actually incurred or received by MAEM, as further described in the calculation of Net Market Revenues pursuant to Section 8.2.   3.2           Transportation and Scheduling. MAEM shall schedule or arrange for scheduling services with its Transportation Providers to deliver Fuel to the Fuel Delivery Point. MAEM shall manage Fuel imbalances on behalf of Project Company and all costs and revenues associated with Fuel imbalances will be attributed to the Asset Book and charged to, or paid to, Project Company as such costs and revenues are actually incurred or received by MAEM.   3.3           Title, Risk of Loss and Indemnity. As between the Parties, MAEM shall be deemed to be in exclusive possession and control (and be responsible for any damages or injury caused thereby) of the Fuel prior to delivery thereof at the Fuel Delivery Point, and Project Company shall be deemed to be in exclusive possession and control (and be responsible for any damages or injury caused thereby) of the Fuel at and after delivery thereof at the Fuel Delivery Point. MAEM warrants that it will deliver to Project Company all Fuel free and clear of all liens, claims and encumbrances arising prior to delivery thereof at the Fuel Delivery Point. Title to and risk of loss related to delivered Fuel shall transfer from MAEM to Project Company at the Fuel Delivery Point. Each Party shall indemnify, defend and hold harmless each other Party from any Claims arising from any act or incident occurring during the period when possession, control and title to Products is vested or deemed to be vested in the indemnifying Party, except to the extent such Claims arise from such other Party’s breach of this Agreement or its gross negligence or willful misconduct.   ARTICLE 4. DIRECT CONTRACTS   4.1           Direct Contracts.   (a)           Agency Services. Notwithstanding anything to the contrary in Sections 2.1 or 3.1 of this Agreement, Project Company may enter into contracts to (i) sell the Products available from the Generating Station directly to a third party rather than selling such Products to MAEM and/or (ii) purchase Fuel required by the Generating Station directly from a third party rather than purchasing such Fuel from MAEM (collectively “Direct Contracts”). Project Company hereby appoints   7 --------------------------------------------------------------------------------   MAEM as its agent in administering any Direct Contract including, but not limited to, Scheduling, billing, settlements with the ISO (if applicable) and other services required by Project Company pursuant to the terms of such Direct Contract. Project Company shall continue to pay MAEM the Service Fee for the agency services provided by MAEM during the term of a Direct Contract. As agent, MAEM shall neither directly purchase or sell, or contract for the purchase or sale, nor take title to or possession and control of any Products or Fuel. Rather, as between MAEM and Project Company, when MAEM is acting as agent under any Direct Contract, Project Company shall be deemed to have title and exclusive possession and control of all Products sold to, and all Fuel purchased from, third parties, and Project Company shall bear the risk of loss associated with such Products and Fuel.   (b)           Costs and Revenues. The calculation of Net Market Revenues shall exclude any costs or revenues associated with a Direct Contract. All such costs and revenues shall be paid and received by Project Company. If a third party customer or other entity pays MAEM any amounts due Project Company under a Direct Contract, MAEM shall hold such amounts in trust for the applicable Project Company and remit such funds to Project Company on or before the twentieth (20th) day of each month, or if such day is not a business day, the immediately following business day.   4.2           Cooperation. The Parties shall cooperate to fulfill the obligations of Project Company and/or MAEM as set forth in the Direct Contract and/or Third Party Contract, as applicable. Notwithstanding the foregoing, all payment obligations under any Direct Contract shall be the sole responsibility of Project Company. In an effort to maximize Net Market Revenues, Project Company agrees that MAEM shall have the right to purchase Products from third parties or the market, in lieu of the Generating Station producing such Products, for the purpose of meeting the supply obligations of Project Company or MAEM under any Direct Contract or Third Party Contract (“Purchased Power”); provided, however, any such purchase should only occur when the Project Company’s cost to generate the Products exceeds the prevailing market price for such Products. Project Company and MAEM shall notify the others promptly if it becomes aware of any dispute under, or any proposed amendment to, a Direct Contract or Third Party Contract. Project Company and MAEM acknowledge and agree that certain provisions of this Agreement including, without limitation, MAEM’s scheduling and fuel supply obligations, may not be consistent with the provisions of a Direct Contract or a Third Party Contract (such as a tolling agreement for example). In the event of such inconsistency, the provisions of the Direct Contract or Third Party Contract shall control.   ARTICLE 5. ASSET BOOK; ADDITIONAL SERVICES   5.1           Asset Book. MAEM will maintain an asset management book (the “Asset Book”) to track and measure the financial performance of all transactions with respect to the Generating Station including, but not limited to, (i) the sale of Products generated by, or available from, the Generating Station pursuant to any Offers, Third Party Contracts and/or Direct Contracts, (ii) Purchased Power, (iii) the purchase of Fuel and any related Fuel hedges and trading activities, (iv) the purchase of Emissions Allowances and any related emissions hedges and trading   8 --------------------------------------------------------------------------------   activities and (v) the purchase of transmission and/or transportation capacity. The Asset Book shall be separate from any MAEM trading book or any other asset book maintained by MAEM for other Asset Companies.   5.2           Emissions Planning and Related Responsibilities. MAEM shall provide Project Company emissions planning, in consultation with Project Company, to assist in the compliance of the Generating Station at all times and on an ongoing basis with all currently effective emissions requirements, permits and regulations. Upon Project Company’s request, MAEM will procure all Emission Allowances necessary for the operation of the Generating Station, and dispose of excess Emission Allowances, which are not needed for the operation of the Generating Station. MAEM will charge Project Company MAEM’s actual cost of acquiring the Emission Allowances and remit the actual proceeds of any Emission Allowances sales to Project Company, as adjusted for any gains or losses on emission hedges and trading activities.   5.3           Regulatory Reports. MAEM will make all quarterly filings to the FERC required for Products produced by the Generating Stations.   ARTICLE 6. TERM AND TERMINATION   6.1           Term. This Agreement shall become effective on the Agreement Date and shall continue in effect unless terminated pursuant to Section 6.2 or Section 9.2(a).   6.2           Early Termination Event.   (a)           In the event the Generating Station is no longer partially owned by an affiliate of MAEM, this Agreement shall automatically terminate, without any further action required by either Party, as of the effective date of the transfer of ownership of the Generating Station.   (b)           Either Party may terminate this Agreement upon thirty (30) days written notice to the other Party.   6.3           Obligations upon Termination.   (a)           Upon any termination of this Agreement pursuant to Section 6.2 hereof, MAEM shall endeavor to (i) terminate any transactions entered into by MAEM in connection with this Agreement which extend beyond such termination including, but not limited to, Third Party Contracts entered into pursuant to Section 2.2(b), (ii) assign such transactions to the new owner of the Generating Station(s) and/or (iii) enter into an agreement with the new owner to allow MAEM to continue to fulfill its obligations under any existing transactions. Any such terminations and/or assignments shall be consummated in such a manner as to fully release MAEM and Project Company from any liability or obligation thereunder as of the termination date and/or the assignment effective date of the applicable transactions. Any costs or revenues associated with termination payments or settlement amounts as a result of liquidating and terminating any transactions shall be charged to or paid to Project Company as described under   9 --------------------------------------------------------------------------------   Section 2.2(c).   (b)           Upon any termination of this Agreement pursuant to Section 9.2(a) hereof, the Parties shall transfer or settle any outstanding transactions entered into by MAEM in connection with this Agreement which extend beyond such termination including, but not limited to, Third Party Contracts entered into pursuant to Section 2.2(b). Any such transfer or settlement shall be consummated in such a manner as to assign or convey to Project Company the full benefits and obligations of such transactions, and to fully release MAEM from any liability or obligation thereunder. To the extent that MAEM’s rights or obligations under any such transaction may not be assigned without the consent of a third party, and such consent has not or cannot be obtained with the commercially reasonable efforts of the Parties, this provision shall not constitute an agreement to assign the same if an attempted assignment would constitute a breach thereof or be unlawful, and the Parties, to the maximum extent permitted by law and the applicable transaction, shall enter into such commercially reasonable arrangements as are necessary to fulfill the intent of this Section 6.3(b). The Parties further agree to take such actions, and execute and deliver such agreements, documents, instruments and certificates, as are necessary to consummate the transactions contemplated by this Section 6.3(b).   ARTICLE 7. REPRESENTATIONS AND WARRANTIES   7.1           Project Company’s Representations and Warranties. Project Company makes the following representations and warranties as a basis for its undertakings contained herein:   (a)           Project Company is a limited liability company duly organized and validly existing under the laws of the State of Delaware, is qualified to do business in each foreign jurisdiction in which it transacts business, and is in good standing under its certificate of formation and the laws of the State of Delaware, has the requisite power and authority to own its properties, and to carry on its business as now being conducted.   (b)           Project Company has full power and authority to enter this Agreement and perform its obligations hereunder. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary limited liability company action and do not and will not contravene its organizational documents or conflict with, result in a breach of, or entitle any party (with due notice or lapse of time or both) to terminate, accelerate or declare a default under, any agreement or instrument to which Project Company is a party or by which Project Company is bound. The execution, delivery and performance by Project Company of this Agreement will not result in any violation by Project Company of any law, rule or regulation applicable to it. Project Company is not a party to, nor subject to or bound by, any judgment, injunction or decree of any court or other governmental entity which may restrict or interfere with the performance of this Agreement by it. This Agreement is Project Company’s legal, valid and binding obligation, enforceable against Project Company in accordance with its terms, except as (i) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights generally, and (ii) the remedy of specific performance and   10 --------------------------------------------------------------------------------   injunctive relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.   (c)           No consent, waiver, order, approval, authorization, permit or order of, or registration, qualification or filing with, any court or other governmental agency or authority is required for the execution, delivery and performance by Project Company of this Agreement and the consummation by Project Company of the transactions contemplated hereby.   (d)           Project Company has obtained all necessary governmental authorizations, approvals, consents, waivers, exceptions, licenses, filings, registrations, rulings, permits, tariffs, certifications and exemptions to perform its obligations under this Agreement.   (e)           There is not pending or, to its knowledge, threatened against it, any legal proceedings that could materially adversely affect its ability to perform its obligations under this Agreement.   (f)            No Event of Default or event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default with respect to Project Company has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any other document relating to this Agreement.   7.2           MAEM’s Representations and Warranties. MAEM makes the following representations and warranties as a basis for its undertakings contained herein:   (a)           MAEM is a limited partnership duly organized and validly existing under the laws of the State of Delaware, is in good standing under its certificate of limited partnership and the laws of the State of Delaware, is qualified to do business in each foreign jurisdiction in which it transacts business, has the requisite power and authority to own its properties, and to carry on its business as now being conducted.   (b)           MAEM has full power and authority to enter this Agreement and perform its obligations hereunder. The execution, delivery and performance of this Agreement and the consummation of the Transactions contemplated hereby have been duly authorized by all necessary limited partnership action by MAEM and do not and will not contravene its organizational documents or conflict with, result in a breach of, or entitle any party (with due notice or lapse of time or both) to terminate, accelerate or declare a default under, any agreement or instrument to which MAEM is a party or by which MAEM is bound. The execution, delivery and performance by MAEM of this Agreement will not result in any violation by MAEM of any law, rule or regulation applicable to it. MAEM is not a party to, nor subject to or bound by, any judgment, injunction or decree of any court or other governmental entity which may restrict or interfere with the performance of this Agreement by it. This Agreement is MAEM’s legal, valid and binding obligation, enforceable against MAEM in accordance with its terms, except as (i) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) the remedy of specific performance and injunctive relief may be subject to equitable defenses and to the   11 --------------------------------------------------------------------------------   discretion of the court before which any proceeding therefor may be brought.   (c)           No consent, waiver, order, approval, authorization, permit or order of, or registration, qualification or filing with, any court or other governmental agency or authority is required for the execution, delivery and performance by MAEM of this Agreement and the consummation by MAEM of the transactions contemplated hereby.   (d)           MAEM has obtained all necessary governmental authorizations, approvals, consents, waivers, exceptions, licenses, filings, registrations, rulings, permits, tariffs, certifications and exemptions to perform its obligations under this Agreement.   (e)           There is not pending or, to its knowledge, threatened against it, any legal proceedings that could materially adversely affect its ability to perform its obligations under this Agreement.   (f)            No Event of Default or event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default with respect to MAEM has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement.   ARTICLE 8. BILLING AND PAYMENT   8.1           Cost Allocation. For services rendered by MAEM to Project Company under this Agreement and/or any Direct Contracts, Project Company shall pay MAEM its monthly share of allocated costs for fulfilling its responsibilities to the Project Company under this Agreement and/or any Direct Contract, including, but not limited to, personnel costs (“Service Fee”). For purposes of determining the Project Company’s share of allocated costs, MAEM shall apply an industry standard methodology which is applied uniformly across the Asset Companies. Each of MAEM and the Project Company acknowledges that the monthly allocations may be adjusted from time to time.   8.2           Billing and Payment. MAEM shall pay Project Company the Net Market Revenues due for the prior month (or, if Net Market Revenues for such month are negative, Project Company shall pay MAEM an amount equal to such negative balance) by wire transfer to the payment address provided by the recipient on or before the twentieth (20th) day of each month, or if such day is not a business day, the immediately following business day. At the time of each monthly payment, MAEM shall render to Project Company a statement detailing the Net Market Revenues for the prior month, and shall provide Project Company with supporting documentation for each such monthly statement, identifying calculations underlying such Net Market Revenues. If any person later adjusts amounts payable by or paid to MAEM with respect to transactions in the Asset Book, such amounts will be credited to, or paid by, Project Company in the month in which MAEM receives notice of the adjustment. The preceding sentence shall survive termination of this Agreement. If a third party fails to pay MAEM any amount due for Products sold to such party, MAEM shall only be required to pay the Asset Company the amount   12 --------------------------------------------------------------------------------   received by MAEM from such third party. In other words, MAEM shall not be responsible for non-payment by a third party customer, and any Gross Revenues shall not be adjusted upward to account for any such non-payment.   “Net Market Revenues” means Gross Revenues minus Expenses. Net Market Revenues shall be calculated in accordance with GAAP.   “Gross Revenues” means all revenues attributed to the Asset Book for a certain month including, without limitation, the actual revenues received by MAEM from (a) sales of all Products generated by, or available from, the Generating Station, (b) sales of Purchased Power, (c) excess Fuel sales, (d) sales or trades of excess Emissions Allowances from the Generating Station and (e) gains associated with physical and/or financial products (including, but not limited to, swaps, contracts for differences and options) purchased for the Asset Book related to hedges and trading activities.   “Expenses” means all costs attributed to the Asset Book for a certain month, including costs reimbursed to MAEM for actual costs in performing the services including, but not limited to, costs for (a) purchases of Fuel, (b) purchases of Emissions Allowances, (c) losses associated with physical and/or financial products (including, but not limited to, swaps, contracts for differences and options) purchased for the Asset Book related to hedges and trading activities, (d) broker and/or transaction fees, (e) transmission congestion contracts for sales from the Generating Station, (f) Collateral Costs, (g) transmission and/or transportation costs related to delivery of the Products and/or Fuel, (h) Purchased Power and (i) other actual costs in connection with the services described in Articles 2, 3 and 4 hereof.   8.3           Monthly Statements. Project Company and MAEM will cooperate to provide monthly statements in reasonable detail showing the calculation of the Net Market Revenues, to enable Project Company to track Net Market Revenues. Project Company shall have the right, upon reasonable notice, to examine and/or audit the Asset Book from time to time.   8.4           Interest and Disputed Amounts. If either Party fails to make any payment on or before the applicable payment due date, such overdue amounts shall accrue interest at the Interest Rate from, and including, the applicable payment due date to, but excluding, the date of payment. Any disputed invoiced amounts, except amounts which are manifestly inaccurate, shall be paid in full on the applicable payment due date, subject to later return together with interest accrued at the Interest Rate depending on the resolution of the dispute. Overpayments or underpayments identified by the Parties shall be returned or credited, together with interest accrued at the Interest Rate, to their rightful owners in the first following month.   8.5           FERC Refunds. In the event MAEM is ordered by FERC to refund any payments received by MAEM from third parties related to any transactions in the Asset Book, Project Company agrees to pay, or reimburse MAEM if MAEM has paid, the refund amount to FERC or a third party. The Project Company’s obligation to pay FERC or a third party, or reimburse MAEM, any refund amount shall be without regard to the cause or causes related thereto   13 --------------------------------------------------------------------------------   including, without limitation, the negligence of MAEM. Any such payment to FERC or a third party shall be made within the time period ordered by FERC.   ARTICLE 9. DEFAULTS AND REMEDIES   9.1           Events of Default. Any one or more of the following shall constitute an “Event of Default” hereunder with respect to a Party:   (a)           default shall occur in the payment of any amounts due from such Party hereunder which shall continue for more than ten (10) days after written notice from the other Party;   (b)           other than as provided in Section 9.1(a) above, default shall occur in the performance of any covenant or condition to be performed by such Party under this Agreement and such default shall continue unremedied for a period of thirty (30) days after written notice from the other Party specifying the nature of such default; or   (c)           a representation or warranty made by such Party herein shall have been false or misleading in any material respect when made; provided, however, if such representation or warranty is capable of being corrected, no Event of Default shall have occurred if such Party is diligently pursuing such correction and such representation or warranty is corrected within thirty (30) days of such Party obtaining knowledge of the false and misleading nature of the statement.   9.2           Remedies. The Parties shall have the following remedies available to them hereunder:   (a)           Upon the occurrence of an Event of Default by either Party hereunder, the non-defaulting Party shall have the right (i) to collect all amounts then or thereafter due to it from the defaulting Party hereunder, and (ii) upon written notice to the other Party, to terminate this Agreement at any time during the continuation of such Event of Default. The terminating Party shall have all rights and remedies available to it under applicable law, subject to the limitations set forth in Section 11.8.   (b)           Without limiting the foregoing, any unexcused breach of this Agreement or failure of either Party to perform its obligations hereunder shall subject such Party to the payment of actual damages to the other Party, regardless of any cure period.   ARTICLE 10. FORCE MAJEURE   10.1         Force Majeure. If either Party is rendered wholly or partly unable to perform its obligations under this Agreement because of a Force Majeure event, that Party will be excused from whatever performance is affected by the Force Majeure event to the extent so affected, provided that (a) the non-performing Party, as soon as practical after knowing of the occurrence of the Force Majeure event, gives the other Party written notice describing the particulars of the   14 --------------------------------------------------------------------------------   occurrence; (b) the suspension of performance is of no greater scope and of no longer duration than is reasonably required by the Force Majeure event; (c) the non-performing Party uses commercially reasonable efforts to overcome or mitigate the effects of such occurrence, provided, however, that this provision shall not require Project Company to deliver, or MAEM to receive, any Products at points other than the Delivery Point; and (d) when the non-performing Party is able to resume performance of its obligations hereunder, that Party shall give the other Party written notice to that effect and shall promptly resume such performance.   ARTICLE 11. MISCELLANEOUS PROVISIONS   11.1         Assignment; Successors and Assigns.   (a)           No assignment or delegation by either Party (or any successor or assignee thereof) of this Agreement, in whole or in part, shall be made or become effective without the prior written consent of the other Party in each case obtained, which consent may not be unreasonably withheld. Any assignments or delegations by either Party shall be in such form as to assure that such Party’s obligations under this Agreement will be honored fully and timely by any succeeding party.   (b)           Notwithstanding Section 11.1(a), this Agreement shall be assigned from MAEM to Mirant Energy Trading, LLC (“MET”) without any action required by the Parties pursuant to the terms of the Plan and the Implementation Order. The assignment shall occur on the MAEM/MET Effective Date (as such term is defined in the Plan) and thereafter, all references to MAEM in this Agreement shall be references to MET. As of the MAEM/MET Effective Date, Section 7.2(a) shall be amended to delete “limited partnership” and replace it with “limited liability company”.   11.2         Notices. All notices, requests and other communications hereunder (herein collectively a “notice” or “notices”) shall be deemed to have been duly delivered, given or made to or upon any Party hereto if in writing and delivered by hand against receipt, or by certified or registered mail, postage pre-paid, return receipt requested, or to a courier who guarantees next business day delivery or sent by telecopy (with confirmation) to such Party at its address set forth below or to such other address as such Party may at any time, or from time to time, direct by notice given in accordance with this Section 10.2.   IF TO PROJECT     COMPANY:   Mirant Zeeland, LLC     1155 Perimeter Center West     Atlanta, Georgia 30338     Attention: President       IF TO MAEM:   Mirant Americas Energy Marketing, LP     1155 Perimeter Center West     Atlanta, Georgia 30338   15 --------------------------------------------------------------------------------       Attention: Legal Department       IF TO MET:   Mirant Energy Trading, LLC     1155 Perimeter Center West     Atlanta, Georgia 30338     Attention: Legal Department   The date of delivery of any such notice, request or other communication shall be the earlier of (i) the date of actual receipt or (ii) three (3) business days after such notice, request or other communication is sent by certified or registered mail, (iii) if sent by courier who guarantees next business day delivery, the business day next following the day of such notice, request or other communication is actually delivered to the courier or (iv) the day actually telecopied.   11.3         GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW THAT WOULD OTHERWISE CAUSE THE LAW OF ANY STATE OTHER THAN NEW YORK TO APPLY.   11.4         Compliance With Laws. At all times during the term of this Agreement, the Parties shall comply with all laws, rules, regulations, and codes of all governmental authorities having jurisdiction over each of their respective businesses which are now applicable, or may be applicable hereafter, including without limitation, all special laws, policies, ordinances, or regulations now in force, as amended or hereafter enacted. The Parties hereto shall maintain all licenses, permits and other consents from all governmental authorities having jurisdiction for the necessary use and operation of their respective business. Nothing herein shall be deemed a waiver of the Parties’ right to challenge the validity of any such law, rule or regulation.   11.5         Entire Agreement. This Agreement sets forth the entire agreement of the Parties with respect to the subject matter herein and takes precedence over all prior understandings. This Agreement supersedes and terminates all previously executed agreements between Project Company and MAEM.   11.6         Amendments. This Agreement may not be amended except by a writing signed by the Parties.   11.7         Severability. The invalidity or unenforceability of any provisions of this Agreement shall not affect the other provisions hereof. If any provision of this Agreement is held to be invalid, such provisions shall not be severed from this Agreement; instead, the scope of the rights and duties created thereby shall be reduced by the smallest extent necessary to conform such provision to the applicable law, preserving to the greatest extent the intent of the Parties to create such rights and duties as set out herein. If necessary to preserve the intent of the Parties hereto, the Parties shall negotiate in good faith to amend this Agreement, adopting a substitute provision for the one deemed invalid or unenforceable that is legally binding and enforceable and which restores to the two Parties to the greatest extent possible the benefit of their respective bargains on the Agreement Date.   16 --------------------------------------------------------------------------------   11.8         Limitation on Damages. NEITHER PARTY SHALL BE ENTITLED TO RECOVER SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES HEREUNDER.   11.9         Risk Management Policy. The Parties acknowledge and agree that this Agreement is subject to the Risk Management Policy approved by the Parties’ Board of Directors. In the event of a conflict between the provisions of this Agreement and the terms of the Risk Management Policy, the terms of the Risk Management Policy shall govern and control.   [SIGNATURES APPEAR ON THE FOLLOWING PAGE]   17 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, and intending to be legally bound hereby, the Parties hereto have caused this Agreement to be duly executed as an instrument under seal by their respective duly authorized officers as of the date and year first above written.     Mirant Americas Energy Marketing, LP By: Mirant Americas Development, LLC   Its General Partner   By: New MAEM Holdco, LLC Its: Sole Member   By: /s/ J. William Holden III   Name: J. William Holden III Title: Senior Vice President & Treasurer   Mirant Zeeland, LLC   By: /s/ J. William Holden III   Name: J. William Holden III Title: Senior Vice President & Treasurer   As of the MAEM/MET Effective Date:   Mirant Energy Trading, LLC   By: /s/ J. William Holden III   Name: J. William Holden III Title: Senior Vice President, Chief Financial Officer & Treasurer   18 --------------------------------------------------------------------------------   EXHIBIT A   Unit   Location   Nameplate Capacity   Commercial Operation Date Zeeland 1   Zeeland, Michigan   298 MW   June 2001 Zeeland 2   Zeeland, Michigan   540 MW   June 2002   19 --------------------------------------------------------------------------------

SECURITIES PURCHASE AGREEMENT   This Securities Purchase Agreement (this “Agreement”) is dated as of May __, 2006, among Innovative Card Technologies, Inc., a Delaware corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, 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 “Securities Act”) and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.   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 agree as follows:   ARTICLE I. DEFINITIONS   1.1           Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings indicated in this Section 1.1:   “Action” shall have the meaning ascribed to such term in Section 3.1(j).   “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 under the Securities Act. With respect to a Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.   “Business Day” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.   “Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.   “Closing Date” means the Trading Day when all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities have been satisfied or waived.   “Closing Price” means on any particular date (a) the last reported closing bid price per share of Common Stock on such date on the Trading Market (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (b) if there is no such price on such date, then the closing bid price on the Trading Market on the date nearest preceding such date (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (c)  if the Common Stock is not then listed or quoted on the Trading Market and if prices for the Common Stock are then reported in the “pink sheets” published by Pink Sheets LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) if the shares of Common Stock are not then publicly traded the fair market value of a share of Common Stock as determined by an appraiser selected in good faith by the Purchasers of a majority in interest of the Shares then outstanding.     1 --------------------------------------------------------------------------------   “Commission” means the Securities and Exchange Commission.   “Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed into.   “Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.   “Company Counsel” means Richardson & Patel, LLP.   “Disclosure Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.   “Effective Date” means the date that the initial Registration Statement filed by the Company pursuant to the Registration Rights Agreement is first declared effective by the Commission.   “Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(r).   “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. “Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise, exchange or conversion price of any such securities, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.     2 --------------------------------------------------------------------------------   “FW” means Feldman Weinstein LLP with offices located at 420 Lexington Avenue, Suite 2620, New York, New York 10170-0002.   “GAAP” shall have the meaning ascribed to such term in Section 3.1(h).   “Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).   “Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).   “Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.   “Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).   “Material Permits” shall have the meaning ascribed to such term in Section 3.1(m).   “Participation Maximum” shall have the meaning ascribed to such term in Section 4.13.   “Per Share Purchase Price” equals $___,1  subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.   “Person” means an 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 other entity of any kind.   “Placement Agent” means T. R. Winston & Company, LLC.   “Placement Agent Fee” means a fee payable in cash at Closing in an amount equal to 5% of the aggregate Subscription Amounts paid by the Purchasers pursuant to this Agreement.   “Placement Agent Warrant” means a Common Stock purchase warrant to purchase up to a number of shares of Common Stock equal to 3% of the aggregate number of Shares purchased hereunder, with an exercise price equal to $___2  (subject to adjustment therein) and a term of exercise equal to 5 years, in the form of Exhibit C attached hereto     -------------------------------------------------------------------------------- 1 To be determined prior to Closing, but shall not be lower than $3.00.   3 --------------------------------------------------------------------------------   “Pre-Notice” shall have the meaning ascribed to such term in Section 4.13.   “Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.   “Purchaser Party” shall have the meaning ascribed to such term in Section 4.9.   “Registration Rights Agreement” means the Registration Rights Agreement, dated the date hereof, among the Company and the Purchasers, in the form of Exhibit A attached hereto.   “Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale by the Purchasers of the Shares and the shares underlying the Placement Agent Warrant.   “Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).   “Rule 144” means Rule 144 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 effect as such Rule.   “SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).   “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.   “Shares” means the shares of Common Stock issued or issuable to each Purchaser pursuant to this Agreement.   “Short Sales” shall include all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).    “Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for Shares purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.     -------------------------------------------------------------------------------- 2 110% of the Per Share Purchase Price.   4 --------------------------------------------------------------------------------   “Subsequent Financing” shall have the meaning ascribed to such term in Section 4.13.   “Subsequent Financing Notice” shall have the meaning ascribed to such term in Section 4.13.   “Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a).   “Trading Day” means a day on which the Common Stock is traded on a Trading Market.   “Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the Nasdaq Capital Market, the American Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board.   “Transaction Documents” means this Agreement and the Registration Rights Agreement and any other documents or agreements executed in connection with the transactions contemplated hereunder.   “Transfer Agent” means American Stock Transfer and Trust Company, with a mailing address of 59 Maiden Lane, New York, New York, 10038 and a facsimile number of (718) 921-8336, and any successor transfer agent of the Company.   ARTICLE II. PURCHASE AND SALE   2.1           Closing. On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and each Purchaser agrees to purchase in the aggregate, severally and not jointly, up to $___________ of Shares. Each Purchaser shall deliver to the Company via wire transfer or a certified check immediately available funds equal to their Subscription Amount and the Company shall deliver to each Purchaser their respective Shares as determined pursuant to Section 2.2(a) and the other items set forth in Section 2.2 issuable at the Closing. Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of FW or such other location as the parties shall mutually agree.   2.2           Deliveries                    (a)  On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:                      (i)        this Agreement duly executed by the Company;                      (ii)  a legal opinion of Company Counsel, in the form of Exhibit B attached hereto;     5 --------------------------------------------------------------------------------                      (iii)      a copy of the irrevocable instructions to the Company’s Transfer Agent instructing the Transfer Agent to deliver, on an expedited basis, a certificate evidencing a number of Shares equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser;                      (iv)     the Placement Agent Fee by wire transfer to the account as specified in writing by the Placement Agent;                      (v)      the Placement Agent Warrant, registered in the name of the Placement Agent; and                      (vi)     the Registration Rights Agreement duly executed by the Company.                    (b)      On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:                      (i)       this Agreement duly executed by such Purchaser;                      (ii)      such Purchaser’s Subscription Amount by wire transfer to the account as specified in writing by the Company; and                      (iii)     the Registration Rights Agreement duly executed by such Purchaser.   2.3           Closing Conditions.                     (a)      The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:                      (i)       the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Purchasers contained herein;                      (ii)      all obligations, covenants and agreements of the Purchasers required to be performed at or prior to the Closing Date shall have been performed; and                      (iii)     the delivery by the Purchasers of the items set forth in Section 2.2(b) of this Agreement.                    (b)     The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:                      (i)       the accuracy in all material respects on the Closing Date of the representations and warranties of the Company contained herein;                      (ii)      all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;     6 --------------------------------------------------------------------------------                      (iii)     the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;                      (iv)     there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and                      (v)      from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s principal Trading Market (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the Closing), and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of each Purchaser, makes it impracticable or inadvisable to purchase the Shares at the Closing.   ARTICLE III. REPRESENTATIONS AND WARRANTIES   1.1           Representations and Warranties of the Company.                   3.1     Except as set forth under the corresponding section of the disclosure schedules delivered to the Purchasers concurrently herewith (the “Disclosure Schedules”) which Disclosure Schedules shall be deemed a part hereof, the Company hereby makes the representations and warranties set forth below to each PurchaserExcept as set forth under the corresponding section of the Disclosure Schedules which Disclosure Schedules shall be deemed a part hereof and to qualify any representation or warranty otherwise made herein to the extent of such disclosure, the Company hereby makes the representations and warranties set forth below to each Purchaser:   (a)  Subsidiaries. All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, then all other references in the Transaction Documents to the Subsidiaries or any of them will be disregarded.   (b)  Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise 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 or default 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 conduct 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, could not have or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.     7 --------------------------------------------------------------------------------   (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 action is required by the Company, its board of directors or its stockholders in connection therewith other than in connection with the Required Approvals. Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.   (d)  No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company, the issuance and sale of the Shares and the consummation by the Company of the other transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.     8 --------------------------------------------------------------------------------   (e)  Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission of the Registration Statement, (iii) application(s) to each applicable Trading Market for the listing of the Shares for trading thereon in the time and manner required thereby and (iv) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).   (f)  Issuance of the Securities. The Shares are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from its duly authorized capital stock the maximum number of Shares issuable pursuant to this Agreement.   (g)  Capitalization. The capitalization of the Company is as set forth on Schedule 3.1(g). The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plan and pursuant to the conversion or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as a result of the purchase and sale of the Shares, 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 Common Stock Equivalents. The issuance 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 Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors of the Company or others is required for the issuance and sale of the Shares. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.     9 --------------------------------------------------------------------------------   (h)  SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.   (i)  Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans. The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Shares contemplated by this Agreement or as set forth on Schedule 3.1(i), no event, liability or development has occurred or exists with respect to the Company or its Subsidiaries or their respective business, properties, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made that has not been publicly disclosed at least 1 Trading Day prior to the date that this representation is made.     10 --------------------------------------------------------------------------------   (j)  Litigation. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Shares or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.   (k)  Labor Relations. No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company, and neither the Company or any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. No executive officer, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.   (l)  Compliance. 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 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 applicable to its business and all such laws that affect the environment, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.     11 --------------------------------------------------------------------------------   (m)  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 could not have or reasonably be expected to 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.   (n)  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 as 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 and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.   (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, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). Neither the Company nor any Subsidiary has received a notice (written or otherwise) that the Intellectual Property Rights used by the Company or any Subsidiary 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 and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.   (p)  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, including, but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount. 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.     12 --------------------------------------------------------------------------------   (q)  Transactions With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $60,000 other than (i) for payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) for other employee benefits, including stock option agreements under any stock option plan of the Company.   (r)  Sarbanes-Oxley; Internal Accounting Controls. The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing Date. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by the Company’s most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the Company’s internal control over financial reporting (as such term is defined in the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.   (s)  Certain Fees. 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 the Transaction Documents. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.     13 --------------------------------------------------------------------------------   (t)  Private Placement. Assuming the accuracy of the Purchasers representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Shares by the Company to the Purchasers as contemplated hereby. The issuance and sale of the Shares hereunder does not contravene the rules and regulations of the Trading Market.   (u)  Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Shares, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act.   (v)  Registration Rights. Other than each of the Purchasers and as set forth on Schedule 3.1(v), no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company.   (w)  Listing and Maintenance Requirements. The Company’s Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.   (x)  Application of Takeover Protections. The Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Certificate of Incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the 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.   (y)  Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that, neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information. The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company. All disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company, its business and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, with respect to the representations and warranties made herein are true and correct with respect to such representations and warranties and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. 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 hereof.     14 --------------------------------------------------------------------------------   (z)  No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither the Company, nor any of its affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Shares to be integrated with prior offerings by the Company for purposes of the Securities Act or any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.    (aa)  Solvency. Based on the financial condition of the Company as of the Closing Date after giving effect to the receipt by the Company of the proceeds from the sale of the Shares hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature; (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof; and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. The SEC Reports set forth as of the dates thereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.     15 --------------------------------------------------------------------------------   (bb)  Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each Subsidiary has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company or any Subsidiary.   (cc)  No General Solicitation. Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Shares by any form of general solicitation or general advertising. The Company has offered the Shares for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.   (dd)  Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.   (ee)  Accountants. The Company’s accountants are set forth on Schedule 3.1(ee) of the Disclosure Schedule. To the knowledge of the Company, such accountants, who the Company expects will express their opinion with respect to the financial statements to be included in the Company’s Annual Report on Form 10-KSB for the year ending December 31, 2006, are a registered public accounting firm as required by the Securities Act.   (ff)  Acknowledgment Regarding Purchasers’ Purchase of Securities. 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 the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Shares. The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.     16 --------------------------------------------------------------------------------   (gg)  Acknowledgement Regarding Purchasers’ Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(f) and 4.15 hereof), it is understood and acknowledged by the Company (i) that none of the Purchasers have been asked to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Shares for any specified term; (ii) that past or future open market or other transactions by any Purchaser, including Short Sales, and specifically including, without limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities; (iii) that any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, presently may have a “short” position in the Common Stock; and (iv) that each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands and acknowledges that (a) one or more Purchasers may engage in hedging activities at various times during the period that the Shares are outstanding and (b) such hedging activities (if any) could reduce the value of the existing stockholders' equity interests in the Company at and after the time that the hedging activities are being conducted.  The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.   (hh)  Manipulation of Price.  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Shares, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Shares, or (iii) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Placement Agent in connection with the placement of the Shares.   3.2           Representations and Warranties of the Purchasers. Each Purchaser hereby, for itself and for no other Purchaser, represents and warrants as of the date hereof and as of the Closing Date 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 full right, 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 execution, delivery and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate or similar action on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.     17 --------------------------------------------------------------------------------   (b)  Own Account. Such Purchaser understands that the Shares are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Shares as principal for its own account and not with a view to or for distributing or reselling such Shares or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Shares in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Shares (this representation and warranty not limiting such Purchaser’s right to sell the Shares pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws) in violation of the Securities Act or any applicable state securities law. Such Purchaser is acquiring the Shares hereunder in the ordinary course of its business.   (c)  Purchaser Status. At the time such Purchaser was offered the Shares, it was, and at the date hereof it is, either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange 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.   (e)  General Solicitation. Such Purchaser is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.   (f)  Short Sales and Confidentiality Prior To The Date Hereof. Other than the transaction contemplated hereunder, such Purchaser has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any disposition, including Short Sales, in the securities of the Company during the period commencing from the time that such Purchaser first received a term sheet (written or oral) from the Company or any other Person setting forth the material terms of the transactions contemplated hereunder until the date hereof (“Discussion Time”). Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser's assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser's assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Shares covered by this Agreement. Other than to other Persons party to this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).     18 --------------------------------------------------------------------------------   ARTICLE IV. OTHER AGREEMENTS OF THE PARTIES   4.1            Transfer Restrictions.   (a)  The Shares may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Shares other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Shares under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement and the Registration Rights Agreement.   (b)  The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Shares in the following form:   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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.     19 --------------------------------------------------------------------------------   The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Shares to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and the Registration Rights Agreement and, if required under the terms of such 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 legal counsel 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 reasonable documentation as a pledgee or secured party of Shares may reasonably request in connection with a pledge or transfer of the Shares, including, if the Shares are subject to registration pursuant to the Registration Rights Agreement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder.   (c)  Certificates evidencing the Shares shall not contain any legend (including the legend set forth in Section 4.1(b)), (i) while a registration statement (including the Registration Statement) covering the resale of such security 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) ), provided that, as to clauses (ii) through (iv) only, the Purchaser shall have delivered any customary and reasonable supporting documentation requested in writing by the Company. The Company shall cause its counsel to issue a legal opinion to the Transfer Agent promptly after the Effective Date if required by the Transfer Agent to effect the removal of the legend hereunder. The Company agrees that following the Effective Date or at such time as such legend is no longer required under this Section 4.1(c), it will, no later than 5 Trading Days following the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing Shares issued with a restrictive legend (such fifth Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section. Certificates for Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchasers by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System. (d)  In addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of Shares (based on the Closing Price of the Common Stock on the date such Shares are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five (5) Trading Days after such damages have begun to accrue) for each Trading Day after the Legend Removal Date until such certificate is delivered without a legend. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Company’s failure to deliver certificates representing any Shares as required by the Transaction Documents, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.     20 --------------------------------------------------------------------------------   (e)  Each Purchaser, severally and not jointly with the other Purchasers, agrees that the removal of the restrictive legend from certificates representing Shares as set forth in this Section 4.1 is predicated upon the Company’s reliance that the Purchaser will sell any Shares pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Shares are sold pursuant to a Registration Statement, they will be sold in compliance with the plan of distribution set forth therein.   4.2           Furnishing of Information   . As long as any Purchaser owns Shares, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. As long as any Purchaser owns Shares, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Shares under Rule 144. The Company further covenants that it will take such further action as any holder of Shares may reasonably request, to the extent required from time to time to enable such Person to sell such Shares without registration under the Securities Act within the requirements of the exemption provided by Rule 144.   4.3           Integration   . The Company shall not 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 Purchasers or that would be integrated with the offer or sale of the Shares for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.   4.4           Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m. New York City time on the second Trading Day immediately following the date hereof, issue a Current Report on Form 8-K disclosing the material terms of the transactions contemplated hereby and attaching the Transaction Documents thereto. The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release or otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, 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 or 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 written consent of such Purchaser, except (i) as required by federal securities law in connection with (A) any registration statement contemplated by the Registration Rights Agreement and (B) the filing of final Transaction Documents (including signature pages thereto) with the Commission and (ii) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (ii).     21 --------------------------------------------------------------------------------   4.5           Shareholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Shares under the Transaction Documents or under any other agreement between the Company and the Purchasers.   4.6           Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants and agrees that neither it nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that each Purchaser shall be relying on the foregoing representations in effecting transactions in securities of the Company.   4.7           Use of Proceeds. Except as set forth on Schedule 4.7 attached hereto, the Company shall use the net proceeds from the sale of the Shares hereunder for working capital purposes and not for the satisfaction of any portion of the Company’s debt (other than payment of trade payables in the ordinary course of the Company’s business and prior practices), to redeem any Common Stock or Common Stock Equivalents or to settle any outstanding litigation.   4.8           Reimbursement. If any Purchaser becomes involved in any capacity in any Proceeding by or against any Person who is a stockholder of the Company (except as a result of sales, pledges, margin sales and similar transactions by such Purchaser to or with any other stockholder), solely as a result of such Purchaser’s acquisition of the Shares under this Agreement, the Company will reimburse such Purchaser for its reasonable legal and other expenses (including the cost of any investigation preparation and travel in connection therewith) incurred in connection therewith, as such expenses are incurred. The reimbursement obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any Affiliates of the Purchasers who are actually named in such action, proceeding or investigation, and partners, directors, agents, employees and controlling persons (if any), as the case may be, of the Purchasers and any such Affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, the Purchasers and any such Affiliate and any such Person. The Company also agrees that neither the Purchasers nor any such Affiliates, partners, directors, agents, employees or controlling persons shall have any liability to the Company or any Person asserting claims on behalf of or in right of the Company solely as a result of acquiring the Shares under this Agreement, except if such claim arises primarily from a breach of such Purchaser’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser may have with any such stockholder or any violations by the Purchaser of state or federal securities laws or any conduct by such Purchaser which constitutes fraud, gross negligence, willful misconduct or malfeasance.     22 --------------------------------------------------------------------------------   4.9           Indemnification of Purchasers. Subject to the provisions of this Section 4.9, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against a Purchaser, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser may have with any such stockholder or any violations by the Purchaser of state or federal securities laws or any conduct by such Purchaser which constitutes fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of such separate counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (ii) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents.     23 --------------------------------------------------------------------------------   4.10         Reservation of Common Stock. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue Shares pursuant to this Agreement.   4.11          Listing of Common Stock.   The Company hereby agrees to use best efforts (i) to apply to have the Common Stock listed for trading on the Nasdaq Capital Market or the American Stock Exchange as soon as reasonably practicable but in no event later than 150 calendar days following the Closing Date and (ii) to respond to any comments on its application for listing from the Nasdaq Capital Market or the American Stock Exchange as soon as reasonably practicable but in no event later than 30 calendar days following receipt of such comments. The Company further agrees that, when the Company applies to have the Common Stock listed for trading on Nasdaq Capital Market or the American Stock Exchange, it will include in such application all of the Shares, and will take such other action as is necessary to cause all of the Shares to be listed on the Nasdaq Capital Market or the American Stock Exchange as promptly as possible. The Company will take all action reasonably necessary to continue the listing and trading of its Common Stock on Nasdaq Capital Market or the American Stock Exchange and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of Nasdaq Capital Market or the American Stock Exchange, as applicable.   4.12         Equal Treatment of Purchasers. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended to treat for the Company the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Shares or otherwise.   4.13          Participation in Future Financing.   (a)  From the date hereof until the date that is the 12 month anniversary of the Effective Date, upon any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents (a “Subsequent Financing”), each Purchaser shall have the right to purchase Common Stock or Common Stock Equivalents on the same terms, conditions and price provided for in the Subsequent Financing in an amount which shall increase such Purchaser’s Percentage Ownership of the Company to equal such Purchaser’s Percentage Ownership prior to the Subsequent Financing. “Percentage Ownership” means a fraction in which (i) the numerator is the aggregate number of shares of Common Stock owned by such Purchaser, plus additional shares of Common Stock that would be owned by such Purchaser upon the conversion or exercise of all Common Stock Equivalents (irrespective of exercise limitations contained therein) held by such Purchaser and (ii) the denominator is the aggregate number of issued and outstanding shares of Common Stock of the Company, plus additional shares of Common Stock that would be issued and outstanding upon the conversion or exercise of all Common Stock Equivalents (irrespective of exercise limitations contained therein) issued by the Company.     24 --------------------------------------------------------------------------------   (b)  At least 5 Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Purchaser a written notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”).  Upon the request of a Purchaser, and only upon a request by such Purchaser, for a Subsequent Financing Notice, the Company shall promptly, but no later than 1 Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser.  The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder, the Person or Persons through or with whom such Subsequent Financing is proposed to be effected, and attached to which shall be a term sheet or similar document relating thereto.      (c)  Any Purchaser desiring to participate in such Subsequent Financing must provide written notice to the Company by not later than 5:30 p.m. (New York City time) on the 5th Trading Day after all of the Purchasers have received the Pre-Notice that the Purchaser is willing to participate in the Subsequent Financing, the amount of the Purchaser’s participation, and that the Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent Financing Notice. If the Company receives no notice from a Purchaser as of such 5th Trading Day, such Purchaser shall be deemed to have notified the Company that it does not elect to participate.    (d)  The Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of participation set forth above in this Section 4.13, if the Subsequent Financing subject to the initial Subsequent Financing Notice is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within 60 Trading Days after the date of the initial Subsequent Financing Notice.   (e)  Notwithstanding the foregoing, this Section 4.13 shall not apply in respect of (i) an Exempt Issuance or (ii) an underwritten public offering of Common Stock.   4.14          Subsequent Equity Sales.   (a)  From the date hereof until 90 days after the Effective Date, neither the Company nor any Subsidiary shall issue shares of Common Stock or Common Stock Equivalents; provided, however, the 90 day period set forth in this Section 4.14 shall be extended for the number of Trading Days during such period in which (i) trading in the Common Stock is suspended by any Trading Market, or (ii) following the Effective Date, the Registration Statement is not effective or the prospectus included in the Registration Statement may not be used by the Purchasers for the resale of the Shares.     25 --------------------------------------------------------------------------------   (b)  From the date hereof until the 12 month anniversary of the Effective Date, the Company shall be prohibited from effecting or entering into an agreement to effect any Subsequent Financing involving a “Variable Rate Transaction”. The term “Variable Rate Transaction” shall mean a transaction in which the Company issues or sells (i) any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company may sell securities at a future determined price. Any Purchaser shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages. For purposes of clarity, the issuance of the Placement Agent Warrant hereunder shall not be deemed a Variable Rate Transaction.   (c)  Notwithstanding the foregoing, this Section 4.14 shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance.   4.15          Short Sales and Confidentiality After The Date Hereof. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any Short Sales during the period commencing at the Discussion Time and ending on the earlier of (i) the Effective Date or (ii) the Effectiveness Date (as defined in the Registration Rights Agreement) of the initial Registration Statement. Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company as described in Section 4.4, such Purchaser will maintain the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Each Purchaser, severally and not jointly with any other Purchaser, understands and acknowledges that the Commission currently takes the position that coverage of short sales of shares of the Common Stock “against the box” prior to the Effective Date of the Registration Statement with the Securities is a violation of Section 5 of the Securities Act, as set forth in Item 65, Section A, of the Manual of Publicly Available Telephone Interpretations, dated July 1997, compiled by the Office of Chief Counsel, Division of Corporation Finance. Notwithstanding the foregoing, no Purchaser makes any representation, warranty or covenant hereby that it will not engage in Short Sales in the securities of the Company after the earlier of (i) the Effective Date or (ii) the Effectiveness Date (as defined in the Registration Rights Agreement) of the initial Registration Statement.   4.16          Delivery of Securities After Closing. The Company shall deliver, or cause to be delivered, the respective Shares purchased by each Purchaser to such Purchaser within 5 Trading Days of the Closing Date.     26 --------------------------------------------------------------------------------   4.17         Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Shares as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Shares for, sale to the Purchasers at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser.   4.18         Capital Changes. Until the one year anniversary of the Effective Date, the Company shall not undertake a reverse or forward stock split or reclassification of the Common Stock without the prior written consent of the Purchasers holding a majority in interest of the Shares.   4.19  Per Share Purchase Price Protection. From the date hereof until the date that is the 12 month anniversary of the Effective Date, if in connection with a Subsequent Financing, the Company or any Subsidiary shall issue any Common Stock or Common Stock Equivalents entitling any person or entity to acquire shares of Common Stock at an effective price per share less than the Per Share Purchase Price (subject to reverse and forward stock splits and the like) (the “Discounted Purchase Price,” as further defined below), the Company shall issue to such Purchaser that number of additional shares of Common Stock equal to (a) the Subscription Amount paid by such Purchaser at the Closing divided by the Discounted Purchase Price, less (b) the Shares issued to such Purchaser at the Closing pursuant to this Agreement and pursuant to this Section 4.19. The term “Discounted Purchase Price” shall mean the amount actually paid in new cash consideration by third parties for each share of Common Stock. The sale of Common Stock Equivalents shall be deemed to have occurred at the time of the issuance of the Common Stock Equivalents and the Discounted Purchase Price covered thereby shall also include the actual exercise or conversion price thereof at the time of the conversion or exercise (in addition to the consideration per share of Common Stock underlying the Common Stock Equivalents received by the Company upon such sale or issuance of the Common Stock Equivalents). In the case of any Subsequent Financing involving a Variable Rate Transaction or an “MFN Transaction” (as defined below), the Discounted Purchase Price shall be deemed to be the lowest actual conversion or exercise price at which such securities are converted or exercised in the case of a Variable Rate Transaction, or the lowest adjustment price in the case of an MFN Transaction. If shares are issued for a consideration other than cash, the per share selling price shall be the fair value of such consideration as determined in good faith by the Board of Directors of the Company. The term “MFN Transaction” shall mean a transaction in which the Company issues or sells any securities in a capital raising transaction or series of related transactions which grants to an investor the right to receive additional shares based upon future transactions of the Company on terms more favorable than those granted to the such investor in such offering. The Company shall not refuse to issue a Purchaser additional Shares hereunder based on any claim that such Purchaser or any one associated or affiliated with such Purchaser has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice, restraining and or enjoining an issuance hereunder shall have been sought and obtained. Nothing herein shall limit a Purchaser’s right to pursue actual damages for the Company's failure to deliver Shares hereunder and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. Notwithstanding anything to the contrary herein, this Section 4.19 not apply in respect of an Exempt Issuance. Additionally, prior to any issuance to a Purchaser pursuant to this Section 4.19, such Purchaser shall have the right to irrevocably defer such issuances to such Purchaser under this Section 4.19, in whole or in part, for continuous periods of not less than 75 days.     27 --------------------------------------------------------------------------------   ARTICLE V. MISCELLANEOUS   5.1            Termination.  This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before June 30, 2006; provided, however, that no such termination will affect the right of any party to sue for any breach by the other party (or parties).   5.2           Fees and Expenses. The Company shall deliver, prior to the Closing, a completed and executed copy of the Closing Statement, attached hereto as Annex A. 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 delivery of any Shares to the Purchasers.   5.3           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.   5.4           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 set forth on the signature pages attached hereto prior to 5:30 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 set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the 2nd 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 address for such notices and communications shall be as set forth on the signature pages attached hereto.   5.5           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 of 66% of the Shares purchased hereunder or, in the case of a waiver, by the party against whom enforcement of any such waived provision 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 any party to exercise any right hereunder in any manner impair the exercise of any such right.     28 --------------------------------------------------------------------------------   5.6            Headings. 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.   5.7            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 each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement 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 of the Transaction Documents that apply to the “Purchasers”.   5.8           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 as otherwise set forth in Section 4.9.   5.9            Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, 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 and any other Transaction Documents (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 City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or 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 waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. 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 other manner permitted by law. 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 the Transaction Documents, 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.   5.10          Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Shares.     29 --------------------------------------------------------------------------------   5.11          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 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.   5.12          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.   5.13          Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other 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.   5.14          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 (in the case of mutilation), 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. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Shares.   5.15          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 contained in the Transaction Documents and hereby agrees to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.   5.16          Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights 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, 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.     30 --------------------------------------------------------------------------------   5.17         Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in their review and negotiation of the Transaction Documents. For reasons of administrative convenience only, Purchasers and their respective counsel have chosen to communicate with the Company through FW. FW does not represent all of the Purchasers but only the Placement Agent, who has acted as placement agent to the transaction. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by the Purchasers.   5.18          Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.   5.19          Construction. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, 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 the Transaction Documents or any amendments hereto.   (Signature Pages Follow)     31 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.   INNOVATIVE CARD TECHNOLOGIES, INC.   Address for Notice: By:__________________________________________ Name: Title: 11601 Wilshire Boulevard Suite 2160 Los Angeles, California 90025 Facsimile: (310) 496-2693 Attention: Bennet P. Tchaikovsky With a copy to (which shall not constitute notice): Lisa Klein Richardson & Patel, LLP 10800 Wilshire Boulevard Suite 500 Los Angeles, CA 90024 Facsimile: 310 208-1154           32 --------------------------------------------------------------------------------   [PURCHASER SIGNATURE PAGES TO INVC SECURITIES PURCHASE AGREEMENT] IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.     Name of Purchaser: ________________________________________________________   Signature of Authorized Signatory of Purchaser: __________________________________   Name of Authorized Signatory: ____________________________________________________   Title of Authorized Signatory: _____________________________________________________   Email Address of Purchaser:________________________________________________   Fax Number of Purchaser: ________________________________________________   Address for Notice of Purchaser: Address for Delivery of Securities for Purchaser (if not same as above): Subscription Amount: Shares (minimum of 100,000): EIN Number: [PROVIDE THIS UNDER SEPARATE COVER] [SIGNATURE PAGES CONTINUE]     33 --------------------------------------------------------------------------------   Annex A CLOSING STATEMENT Pursuant to the attached Securities Purchase Agreement, dated as of the date hereto, the purchasers shall purchase up to $______ of Common Stock from Innovative Card Technologies, Inc. (the “Company”). All funds will be wired into a trust account maintained by ____________, counsel to the Company. All funds will be disbursed in accordance with this Closing Statement. Disbursement Date: May __, 2006   -------------------------------------------------------------------------------- I. PURCHASE PRICE                   Gross Proceeds to be Received in Trust   $             II. DISBURSEMENTS                     T. R. Winston & Company, LLC   $               Feldman Weinstein, LLP   $       $       $       $             Total Amount Disbursed:   $                                 WIRE INSTRUCTIONS:           To: _____________________________________                 To: _____________________________________                   34 --------------------------------------------------------------------------------  

Exhibit 10.45 COMPENSATION INFORMATION FOR CERTAIN OFFICERS The table below provides information regarding the 2007 annual base salary and 2007 target cash bonus of the principal executive officer and principal financial officer of Kosan Biosciences Incorporated*.   Executive Officer    2007 Annual Base Salary    2007 Target Cash Bonus**   Robert G. Johnson, Jr., M.D., Ph.D., President and Chief Executive Officer    $ 416,000    45 % Gary S. Titus, Senior Vice President and Chief Financial Officer    $ 312,000    35 % -------------------------------------------------------------------------------- * This table includes all of the named executive officers (as defined under applicable securities laws) of Kosan Biosciences Incorporated   ** Target cash bonus is based on 100% achievement of corporate and, if applicable, individual objectives. Actual bonus payments may represent a higher or lower percentage of the officer’s 2007 annual base salary, depending on the extent to which actual performance meets, exceeds or falls short of the specified corporate objectives and applicable individual performance objectives, as determined by the Compensation Committee in its discretion.

Exhibit 10.1 SECOND AMENDED AND RESTATED REVOLVING CREDIT LOAN AND SECURITY AGREEMENT STEEL CITY CAPITAL FUNDING, A DIVISION OF PNC BANK, NATIONAL ASSOCIATION (AS LENDER AND AS AGENT) WITH INTELLIGROUP, INC. AND EMPOWER, INC. (BORROWERS) May 23, 2006 TABLE OF CONTENTS I DEFINITIONS. 1 1.1. Accounting Terms. 1 1.2. General Terms. 1 1.3. Uniform Commercial Code Terms. 20 1.4. Certain Matters of Construction. 20       II ADVANCES, PAYMENTS. 21 2.1. Revolving Advances. 21 2.2. Procedure for Revolving Advances Borrowing. 21 2.3. Disbursement of Advance Proceeds. 22 2.4. [Loans. 22 2.5. Maximum Advances. 22 2.6. Repayment of Advances. 22 2.7. Repayment of Excess Advances. 23 2.8. Statement of Account. 23 2.9. [Letters of Credit [and Acceptances]. 23 2.10. [Issuance of Letters of Credit[; Creation of Acceptances]. 23 2.11. [Requirements For Issuance of Letters of Credit [and Acceptances]. 24 2.12. Disbursements, Reimbursement. 24 2.13. Repayment of Participation Advances. 26 2.14. Documentation. 26 2.15. Determination to Honor Drawing Request. 26 2.16. Nature of Participation and Reimbursement Obligations. 26 2.17. Indemnity. 28 2.18. Liability for Acts and Omissions. 28 2.19. Additional Payments. 29 2.20. Manner of Borrowing and Payment. 29 2.21. [Mandatory Prepayments. 31 2.22. Use of Proceeds. 31 2.23. Defaulting Lender. 32       III INTEREST AND FEES. 33 3.1. Interest. 33 3.2. [Letter of Credit [and Acceptance] Fees. 33 3.3. Closing Fee and Facility Fee. 34 3.4. Collateral Evaluation Fee, Collateral Monitoring Fee and Fee Letter. 34 3.5. Computation of Interest and Fees. 34 3.6. Maximum Charges. 34 3.7. Increased Costs. 34 3.8. [Basis For Determining Interest Rate Inadequate or Unfair.   3.9. Capital Adequacy. 35 3.10. Gross Up for Taxes. 36 3.11. Withholding Tax Exemption. 36       IV COLLATERAL: GENERAL TERMS 37 4.1. Security Interest in the Collateral. 37 i 4.2. Perfection of Security Interest. 37 4.3. Disposition of Collateral. 38 4.4. Preservation of Collateral. 38 4.5. Ownership of Collateral. 38 4.6. Defense of Agent’s and Lenders’ Interests. 39 4.7. Books and Records. 39 4.8. Financial Disclosure. 39 4.9. Compliance with Laws. 40 4.10. Inspection of Premises. 40 4.11. Insurance. 40 4.12. Failure to Pay Insurance. 41 4.13. Payment of Taxes. 41 4.14. Payment of Leasehold Obligations. 41 4.15. Receivables. 41 4.16. Inventory. 44 4.17. Maintenance of Equipment. 44 4.18. Exculpation of Liability. 44 4.19. Environmental Matters. 44 4.20. Financing Statements. 46       V REPRESENTATIONS AND WARRANTIES. 46 5.1. Authority. 46 5.2. Formation and Qualification. 47 5.3. Survival of Representations and Warranties. 47 5.4. Tax Returns. 47 5.5. Financial Statements. 47 5.6. Entity Names. 48 5.7. O.S.H.A. and Environmental Compliance. 48 5.8. Solvency; No Litigation, Violation, Indebtedness or Default. 48 5.9. Patents, Trademarks, Copyrights and Licenses. 50 5.10. Licenses and Permits. 50 5.11. Default of Indebtedness. 50 5.12. No Default. 50 5.13. No Burdensome Restrictions. 50 5.14. No Labor Disputes. 51 5.15. Margin Regulations. 51 5.16. Investment Company Act. 51 5.17. Disclosure. 51 5.18. [Delivery of Acquisition Agreement [and Subordinated Loan Documentation.   5.19. Swaps. 51 5.20. Conflicting Agreements. 51 5.21. Application of Certain Laws and Regulations. 51 5.22. Business and Property of Borrowers. 51 5.23. Section 20 Subsidiaries. 52 5.24. Anti-Terrorism Laws. 52 5.25. Trading with the Enemy. 53 5.26. Federal Securities Laws. 53 ii VI AFFIRMATIVE COVENANTS. 53 6.1. Payment of Fees. 53 6.2. Conduct of Business and Maintenance of Existence and Assets. 53 6.3. Violations. 53 6.4. Government Receivables. 53 6.5. Financial Covenants. 54 6.6. Execution of Supplemental Instruments. 54 6.7. Payment of Indebtedness. 54 6.8. Standards of Financial Statements. 54 6.9. Federal Securities Laws. 54 6.10. [Exercise of Rights.         VII NEGATIVE COVENANTS. 54 7.1. Merger, Consolidation, Acquisition and Sale of Assets. 54 7.2. Creation of Liens. 55 7.3. Guarantees. 55 7.4. Investments. 55 7.5. Loans. 55 7.6. Capital Expenditures. 55 7.7. [CORPORATE BORROWERS - Dividends. 55 7.8. Indebtedness. 56 7.9. Nature of Business. 56 7.10. Transactions with Affiliates. 56 7.11. Leases. 56 7.12. Subsidiaries. 56 7.13. Fiscal Year and Accounting Changes. 56 7.14. Pledge of Credit. 56 7.15. Amendment of [Articles of Incorporation, By-Laws] [Certificate of Formation, Operating Agreement. 56 7.16. Compliance with ERISA. 57 7.17. Prepayment of Indebtedness. 57 7.18. Anti-Terrorism Laws. 57 7.19. Membership/Partnership Interests. 57 7.20. Trading with the Enemy Act. 58 7.21. [Subordinated Note.   7.22. Other Agreements.         VIII CONDITIONS PRECEDENT. 58 8.1. Conditions to Initial Advances. 58 8.2. Conditions to Each Advance. 60 8.3. [Conditions to Each Equipment Loan.         IX INFORMATION AS TO BORROWERS. 61 9.1. Disclosure of Material Matters. 61 9.2. Schedules. 61 9.3. Environmental Reports. 61 9.4. Litigation. 62 9.5. Material Occurrences. 62 iii 9.6. Government Receivables. 62 9.7. Annual Financial Statements. 62 9.8. Quarterly Financial Statements. 63 9.9. Monthly Financial Statements. 63 9.10. Other Reports. 63 9.11. Additional Information. 63 9.12. Projected Operating Budget. 63 9.13. Variances From Operating Budget. 63 9.14. Notice of Suits, Adverse Events. 64 9.15. ERISA Notices and Requests. 64 9.16. Additional Documents. 64       X EVENTS OF DEFAULT. 65 10.1. Nonpayment. 65 10.2. Breach of Representation. 65 10.3. Financial Information. 65 10.4. Judicial Actions. 65 10.5. Noncompliance. 65 10.6. Judgments. 65 10.7. Bankruptcy. 66 10.8. Inability to Pay. 66 10.9. Affiliate Bankruptcy. 66 10.10. Material Adverse Effect. 66 10.11. Lien Priority. 66 10.12. [Subordinated Loan Default.   10.13. Cross Default. 66 10.14. [Breach of Guaranty. 66 10.15. Change of Ownership. 66 10.16. Invalidity. 66 10.17. Licenses. 67 10.18. Seizures. 67 10.19. Operations. 67 10.20. Pension Plans. 67       XI LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT. 67 11.1. Rights and Remedies. 67 11.2. Agent’s Discretion. 69 11.3. Setoff. 69 11.4. Rights and Remedies not Exclusive. 69 11.5. Allocation of Payments After Event of Default. 69       XII WAIVERS AND JUDICIAL PROCEEDINGS. 70 12.1. Waiver of Notice. 70 12.2. Delay. 70 12.3. Jury Waiver. 71       XIII EFFECTIVE DATE AND TERMINATION. 71 13.1. Term. 71 13.2. Termination. 71 iv XIV REGARDING AGENT. 72 14.1. Appointment. 72 14.2. Nature of Duties. 72 14.3. Lack of Reliance on Agent and Resignation. 73 14.4. Certain Rights of Agent. 73 14.5. Reliance. 73 14.6. Notice of Default. 74 14.7. Indemnification. 74 14.8. Agent in its Individual Capacity. 74 14.9. Delivery of Documents. 74 14.10. Borrowers’ Undertaking to Agent. 74 14.11. No Reliance on Agent’s Customer Identification Program. 74 14.12. Other Agreements. 75       XV BORROWING AGENCY. 75 15.1. Borrowing Agency Provisions. 75 15.2. Waiver of Subrogation. 76       XVI MISCELLANEOUS. 76 16.1. Governing Law. 76 16.2. Entire Understanding. 77 16.3. Successors and Assigns; Participations; New Lenders. 79 16.4. Application of Payments. 80 16.5. Indemnity. 80 16.6. Notice. 81 16.7. Survival. 83 16.8. Severability. 83 16.9. Expenses. 83 16.10. Injunctive Relief. 84 16.11. Consequential Damages. 84 16.12. Captions. 84 16.13. Counterparts; Facsimile Signatures. 84 16.14. Construction. 84 16.15. Confidentiality; Sharing Information. 84 16.16. Publicity. 85 16.17. Certifications From Banks and Participants; US PATRIOT Act. 85       XVII CONTINUING NATURE OF OBLIGATIONS AND SECURITY INTEREST   17.1 Amendment and Restatement 85 17.2 Continuing Obligations 85 17.3 Continuing Security Interests 85 v SECOND AMENDED AND RESTATED REVOLVING CREDIT LOAN AND SECURITY AGREEMENT           Second Amended and Restated Revolving Credit Loan and Security Agreement (this “Agreement”) dated as of May 23, 2006 among INTELLIGROUP, INC., a corporation organized under the laws of the State of New Jersey (“Intelligroup”) and EMPOWER, INC., a corporation organized under the laws of the State of Michigan (“Empower”) (Empower and Intelligroup each a “Borrower” and, collectively, “Borrowers”), the financial institutions which are now or which hereafter become a party hereto (collectively, the “Lenders” and individually a “Lender”) and STEEL CITY CAPITAL FUNDING, a division of PNC BANK, NATIONAL ASSOCIATION (“PNC”), as agent for Lenders (PNC, in such capacity, the “Agent”).           A.       Borrower and PNC, as a Lender and as Agent for Lenders, are parties to the Existing Loan Agreement (as defined below).           B.       Borrower and PNC have agreed that their revolving credit and other commercial financing facilities shall be transferred to the Steel City Capital Funding Division of PNC.           C.      Borrower and PNC have also agreed to amend certain of the terms and conditions of the Existing Loan Agreement and have determined that it is in the best interest of the parties to amend and restate the Existing Loan Agreement in its entirety.           NOW THEREFORE, IN CONSIDERATION of the mutual covenants and undertakings herein contained, Borrowers, Lenders and Agent hereby agree as follows: I DEFINITIONS.           1.1.     Accounting Terms.  As used in this Agreement, the Other Documents or any certificate, report or other document made or delivered pursuant to this Agreement, accounting terms not defined in Section 1.2 or elsewhere in this Agreement and accounting terms partly defined in Section 1.2 to the extent not defined, shall have the respective meanings given to them under GAAP; provided, however, whenever such accounting terms are used for the purposes of determining compliance with financial covenants in this Agreement, such accounting terms shall be defined in accordance with GAAP as applied in preparation of the audited financial statements of Borrowers for the fiscal year ended December 31, 2005.           1.2.     General Terms.  For purposes of this Agreement the following terms shall have the following meanings:           “Accountants” shall have the meaning set forth in Section 9.7 hereof.           “Advance Rates” shall mean, collectively, the Receivables Advance Rate and the Inventory Advance Rate.           “Advances” shall mean the Revolving Advances and Letters of Credit.           “Affiliate” of any Person shall mean (a) any Person which, directly or indirectly, is in control of, is controlled by, or is under common control with such Person, or (b) any Person who is a director, managing member, general partner or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in clause (a) above.  For purposes of this definition, control of a Person shall mean the power, direct or indirect, (x) to vote 5% or more of the Equity Interests having ordinary voting power for the election of directors of such Person or other Persons performing similar functions for any such Person, or (y) to direct or cause the direction of the management and policies of such Person whether by ownership of Equity Interests, contract or otherwise.  Notwithstanding the foregoing definition, any Person who may be deemed to control Intelligroup by virtue of owning five percent (5%) or more of Intelligroup’s outstanding common stock shall be deemed an Affiliate only for the purposes of the definition of Eligible Receivables (clause (a) thereof) and for the purposes of Sections 7.5 “Loans” and 7.10 “Transactions with Affiliates”.           “Agent” shall have the meaning set forth in the preamble to this Agreement and shall include its successors and assigns.           “Agreement” shall mean this Revolving Credit Loan and Security Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time.           “Alternate Termination Date” shall have the meaning set forth in Section 13.1 hereof.            “Anti-Terrorism Laws” shall mean any Applicable Laws relating to terrorism or money laundering, including Executive Order No. 13224, the USA PATRIOT Act, the Applicable Laws comprising or implementing the Bank Secrecy Act, and the Applicable Laws administered by the United States Treasury Department’s Office of Foreign Asset Control (as any of the foregoing Applicable Laws may from time to time be amended, renewed, extended, or replaced).           “Applicable Law” shall mean all laws, rules and regulations applicable to the Person, conduct, transaction, covenant, Other Document or contract in question, including all applicable common law and equitable principles; all provisions of all applicable state, federal and foreign constitutions, statutes, rules, regulations and orders of any Governmental Body, and all orders, judgments and decrees of all courts and arbitrators.           “Authority” shall have the meaning set forth in Section 4.19(d).           “Base Rate” shall mean the base commercial lending rate of PNC as publicly announced to be in effect from time to time, such rate to be adjusted automatically, without notice, on the effective date of any change in such rate.  This rate of interest is determined from time to time by PNC as a means of pricing some loans to its customers and is neither tied to any external rate of interest or index nor does it necessarily reflect the lowest rate of interest actually charged by PNC to any particular class or category of customers of PNC. 2           “Blocked Account Bank” shall have the meaning set forth in Section 4.15(h).           “Blocked Accounts” shall have the meaning set forth in Section 4.15(h).           “Blocked Person” shall have the meaning set forth in Section 5.23(b) hereof.           “Borrower” or “Borrowers” shall have the meaning set forth in the preamble to this Agreement and shall extend to all successors and assigns of such Persons consented to by Agent and Lenders in accordance with Section 16.3.           “Borrowers’ Account” shall have the meaning set forth in Section 2.8.           “Borrowers on a Consolidated Basis” shall mean the consolidation in accordance with GAAP of all or some of the financial records of the Borrowers and their respective Subsidiaries.           “Borrowing Agent” shall mean Intelligroup.           “Borrowing Base Certificate” shall mean a certificate in substantially the form of Exhibit 1.2 duly executed by the President, Chief Financial Officer or Controller of the Borrowing Agent and delivered to the Agent, appropriately completed, by which such officer shall certify to Agent the Formula Amount and calculation thereof as of the date of such certificate.           “Business Day” shall mean any day other than Saturday or Sunday or a legal holiday on which commercial banks are authorized or required by law to be closed for business in East Brunswick, New Jersey.           “Capital Expenditures” shall mean expenditures made or liabilities incurred for the acquisition of any fixed assets or improvements, replacements, substitutions or additions thereto which have a useful life of more than one year, including the total principal portion of Capitalized Lease Obligations, which, in accordance with GAAP, would be classified as capital expenditures.           “Capitalized Lease Obligation” shall mean any Indebtedness of any Borrower represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.           “CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq.           “Change of Management” shall mean any change in any of the members of Borrowers’ executive team who holds the position of Chief Executive Officer, President or Chief Financial Officer, which it is not acceptable to Agent in its discretion.           “Charges” shall mean all taxes, charges, fees, imposts, levies or other assessments, including all net income, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation and property taxes, custom duties, fees, assessments, liens, claims and charges of any kind whatsoever, together with any 3 interest and any penalties, additions to tax or additional amounts, imposed by any taxing or other authority, domestic or foreign (including the Pension Benefit Guaranty Corporation or any environmental agency or superfund), upon the Collateral, any Borrower or any of its Affiliates.           “Closing Date” shall mean May 23, 2006 or such other date as may be agreed to by the parties hereto.           “Code” shall mean the Internal Revenue Code of 1986, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect.           “Collateral” shall mean and include:                       (a)          all Receivables;                           (b)          all Equipment;                           (c)          all General Intangibles;                           (d)          all Inventory;                           (e)          all Investment Property;                           (f)          all Subsidiary Stock;                           (g)          all of each Borrower’s right, title and interest in and to, whether now owned or hereafter acquired and wherever located, (i) its respective goods and other property including, but not limited to, all merchandise returned or rejected by Customers, relating to or securing any of the Receivables; (ii) all of each Borrower’s rights as a consignor, a consignee, an unpaid vendor, mechanic, artisan, or other lienor, including stoppage in transit, setoff, detinue, replevin, reclamation and repurchase; (iii) all additional amounts due to any Borrower from any Customer relating to the Receivables; (iv) other property, including warranty claims, relating to any goods securing the Obligations; (v) all of each Borrower’s contract rights, rights of payment which have been earned under a contract right, instruments (including promissory notes), documents, chattel paper (including electronic chattel paper), warehouse receipts, deposit accounts, letters of credit and money; (vi) all commercial tort claims (whether now existing or hereafter arising); (vii) if and when obtained by any Borrower, all real and personal property of third parties in which such Borrower has been granted a lien or security interest as security for the payment or enforcement of Receivables; (viii) all letter of credit rights (whether or not the respective letter of credit is evidenced by a writing); (ix) all supporting obligations; and (x) any other goods, personal property or real property now owned or hereafter acquired in which any Borrower has expressly granted a security interest or may in the future grant a security interest to Agent hereunder, or in any amendment or supplement hereto or thereto, or under any other agreement between Agent and any Borrower;                           (h)          all of each Borrower’s ledger sheets, ledger cards, files, correspondence, records, books of account, business papers, computers, computer software (owned by any Borrower or in which it has an interest), computer programs, tapes, disks and documents relating to (a), (b), (c), (d), (e), (f) or (g) of this Paragraph; and 4                       (i)          all proceeds and products of (a), (b), (c), (d), (e), (f), (g) and (h) in whatever form, including, but not limited to:  cash, deposit accounts (whether or not comprised solely of proceeds), certificates of deposit, insurance proceeds (including hazard, flood and credit insurance), negotiable instruments and other instruments for the payment of money, chattel paper, security agreements, documents, eminent domain proceeds, condemnation proceeds and tort claim proceeds.           “Commitment Percentage” of any Lender shall mean the percentage set forth below such Lender’s name on the signature page hereof as same may be adjusted upon any assignment by a Lender pursuant to Section 16.3(b) hereof.           “Commitment Transfer Supplement” shall mean a document in the form of Exhibit 16.3 hereto, properly completed and otherwise in form and substance satisfactory to Agent by which the Purchasing Lender purchases and assumes a portion of the obligation of Lenders to make Advances under this Agreement.           “Compliance Certificate” shall mean a compliance certificate to be signed by the Chief Financial Officer or Controller of Borrowing Agent, which shall state that, based on an examination sufficient to permit such officer to make an informed statement, no Default or Event of Default exists, or if such is not the case, specifying such Default or Event of Default, its nature, when it occurred, whether it is continuing and the steps being taken by Borrowers with respect to such default and, such certificate shall have appended thereto calculations which set forth Borrowers’ compliance with the requirements or restrictions imposed by Sections 6.5, 7.4, 7.5, 7.6, 7.7, 7.8 and 7.11.           “Consents” shall mean all filings and all licenses, permits, consents, approvals, authorizations, qualifications and orders of Governmental Bodies and other third parties, domestic or foreign, necessary to carry on any Borrower’s business or necessary (including to avoid a conflict or breach under any agreement, instrument, other document, license, permit or other authorization) for the execution, delivery or performance of this Agreement, the Other Documents, including any Consents required under all applicable federal, state or other Applicable Law.           “Consigned Inventory” shall mean Inventory of any Borrower that is in the possession of another Person on a consignment, sale or return, or other basis that does not constitute a final sale and acceptance of such Inventory.           “Controlled Group” shall mean, at any time, each Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control and all other entities which, together with any Borrower, are treated as a single employer under Section 414 of the Code.           “Customer” shall mean and include the account debtor with respect to any Receivable and/or the prospective purchaser of goods, services or both with respect to any contract or contract right, and/or any party who enters into or proposes to enter into any contract or other arrangement with any Borrower, pursuant to which such Borrower is to deliver any personal property or perform any services. 5           “Default” shall mean an event, circumstance or condition which, with the giving of notice or passage of time or both, would constitute an Event of Default.           “Default Rate” shall have the meaning set forth in Section 3.1 hereof.           “Defaulting Lender” shall have the meaning set forth in Section 2.23(a) hereof.           “Depository Accounts” shall have the meaning set forth in Section 4.15(h) hereof.           “Documents” shall have the meaning set forth in Section 8.1(c) hereof.           “Dollar” and the sign “$” shall mean lawful money of the United States of America.           “Drawing Date” shall have the meaning set forth in Section 2.12(b) hereof.           “Earnings Before Interest and Taxes” shall mean for any period the sum of (i) net income (or loss) of Borrowers on a Consolidated Basis for such period (excluding extraordinary gains and losses, plus (ii) all interest expense of Borrowers on a Consolidated Basis for such period, plus (iii) all charges against income of Borrowers on a Consolidated Basis for such period for federal, state and local taxes actually paid.           “EBITDA” shall mean for any period the sum of (i) Earnings Before Interest and Taxes for such period plus (ii) depreciation expenses for such period, plus (iii) amortization expenses for such period.           “Eligible Receivables” shall mean and include with respect to each Borrower, each Receivable of such Borrower arising in the Ordinary Course of Business and which Agent, in its sole credit judgment, shall deem to be an Eligible Receivable, based on such considerations as Agent may from time to time deem appropriate.  A Receivable shall not be deemed eligible unless such Receivable is subject to Agent’s first priority perfected security interest and no other Lien (other than Permitted Encumbrances), and is evidenced by an invoice or other documentary evidence satisfactory to Agent.  In addition, no Receivable shall be an Eligible Receivable if:                       (a)          it arises out of a sale made by any Borrower to an Affiliate of any Borrower or to a Person controlled by an Affiliate of any Borrower;                           (b)          it is due or unpaid more than sixty (60) days after the original due date or one hundred and fifty (150) days from invoice date;                           (c)          fifty percent (50%) or more of the Receivables from such Customer are not deemed Eligible Receivables hereunder, however such percentage may, in Agent’s sole discretion, be increased or decreased from time to time;                           (d)          any covenant, representation or warranty contained in this Agreement with respect to such Receivable has been breached; 6                       (e)          the Customer shall (i) apply for, suffer, or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or call a meeting of its creditors, (ii) admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business, (iii) make a general assignment for the benefit of creditors, (iv) commence a voluntary case under any state or federal bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is filed against it in any involuntary case under such bankruptcy laws, or (viii) take any action for the purpose of effecting any of the foregoing;                           (f)          the sale is to a Customer outside the continental United States of America, unless the sale is on letter of credit, guaranty or acceptance terms, in each case acceptable to Agent in its sole discretion;                           (g)          the sale to the Customer is on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment or any other repurchase or return basis or is evidenced by chattel paper;                           (h)          Agent believes, in its sole judgment, that collection of such Receivable is insecure or that such Receivable may not be paid by reason of the Customer’s financial inability to pay;                           (i)          the Customer is the United States of America, any state or any department, agency or instrumentality of any of them, unless the applicable Borrower assigns its right to payment of such Receivable to Agent pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with other applicable statutes or ordinances;                           (j)          the goods giving rise to such Receivable have not been delivered to and accepted by the Customer or the services giving rise to such Receivable have not been performed by the applicable Borrower and accepted by the Customer or the Receivable otherwise does not represent a final sale;                           (k)          the Receivable is subject to any offset, deduction, defense, dispute, or counterclaim, the Customer is also a creditor or supplier of a Borrower or the Receivable is contingent in any respect or for any reason;                           (l)          the applicable Borrower has made any agreement with any Customer for any deduction therefrom, except for discounts or allowances made in the Ordinary Course of Business for prompt payment, all of which discounts or allowances are reflected in the calculation of the face value of each respective invoice related thereto;                           (m)          any return, rejection or repossession of the merchandise has occurred or the rendition of services has been disputed;                           (n)          such Receivable is not payable to a Borrower; or 7                       (o)          such Receivable is not otherwise satisfactory to Agent as determined in good faith by Agent in the exercise of its discretion in a reasonable manner.           “Eligible Unbilled Receivables” shall mean Eligible Receivables which have not been invoiced but for which the work has been performed and which shall be billed not more than forty-five (45) days after such Account is first included on the Borrowing Base Certificate or otherwise reported to Agent as Collateral.           “Environmental Complaint” shall have the meaning set forth in Section 4.19(d) hereof.           “Environmental Laws” shall mean all federal, state and local environmental, land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances and codes relating to the protection of the environment and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Substances and the rules, regulations, policies, guidelines, interpretations, decisions, orders and directives of federal, state and local governmental agencies and authorities with respect thereto.           “Equipment” shall mean and include as to each Borrower all of such Borrower’s goods (other than Inventory) whether now owned or hereafter acquired and wherever located including all equipment, machinery, apparatus, motor vehicles, fittings, furniture, furnishings, fixtures, parts, accessories and all replacements and substitutions therefor or accessions thereto.           “Equity Interests” of any Person shall mean any and all shares, rights to purchase, options, warrants, general, limited or limited liability partnership interests, member interests, participation or other equivalents of or interest in (regardless of how designated) equity of such Person, whether voting or nonvoting, including common stock, preferred stock, convertible securities or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act).           “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and the rules and regulations promulgated thereunder.           “Event of Default” shall have the meaning set forth in Article X hereof.           “Exchange Act” shall have the mean the Securities Exchange Act of 1934, as amended.           “Executive Order No. 13224” shall mean the Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.           “Existing Letters of Credit” shall mean those Letters of Credit which are outstanding on the Closing Date, issued pursuant to the Existing Letter of Credit and listed on Schedule 1-L/C attached hereto and made a part hereof.           “Existing Loan Agreement” shall mean that certain Amended and Restated Revolving Credit Loan and Security Agreement dated May 31, 2000, as amended by a First Amendment to Loan Agreement and Waiver Agreement dated March 27, 2002, a Second Amendment to Loan Agreement and Waiver Agreement dated January 6 2003, a Third Amendment to Loan 8 Documents dated July 21, 2003, a Fourth Amendment to Loan Documents and Waiver Agreement dated as of October 22, 2003, a Fifth Amendment to Loan Documents and Waiver Agreement dated as of September 29, 2004, and a Sixth Amendment to Loan Documents dated as of September 27, 2005.           “Existing Loans” shall mean the Revolving Advances which were advanced to Intelligroup pursuant to the Existing Loan Agreement and which have an outstanding principal balance of ______________ Dollars ($______________) as of the Closing Date, together with interest which has accrued and which is unpaid to the Closing Date pursuant to the Existing Loan Agreement.           “Federal Funds Effective Rate” for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed and rounded upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the “Federal Funds Effective Rate” as of the date of this Agreement; provided, if such Federal Reserve Bank (or its successor) does not announce such rate on any day, the “Federal Funds Effective Rate” for such day shall be the Federal Funds Effective Rate for the last day on which such rate was announced.           “Federal Funds Open Rate” shall mean the rate per annum determined by the Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the “open” rate for federal funds transactions as of the opening of business for federal funds transactions among members of the Federal Reserve System arranged by federal funds brokers on such day, as quoted by Garvin Guybutler Corporation, any successor entity thereto, or any other broker selected by the Agent, as set forth on the applicable Telerate display page; provided, however; that if such day is not a Business Day, the Federal Funds Open Rate for such day shall be the “open” rate on the immediately preceding Business Day, or if no such rate shall be quoted by a Federal funds broker at such time, such other rate as determined by the Agent in accordance with its usual procedures.           “Fixed Charge Coverage Ratio” shall mean and include, with respect to any fiscal period, the ratio of (a) EBITDA plus capitalized lease payments during such period, minus capitalized expenditures made during such period minus cash taxes paid during such period to (b) all Senior Debt Payments plus all Subordinated Debt Payments made during such period.           “Foreign Subsidiary” of any Person, shall mean any Subsidiary of such Person that is not organized or incorporated in the United States or any State or territory thereof.           “Formula Amount” shall have the meaning set forth in Section 2.1(a).           “Funded Debt” shall mean, with respect to any Person, without duplication, all Indebtedness for borrowed money evidenced by notes, bonds, debentures, or similar evidences of Indebtedness that by its terms matures more than one year from, or is directly or indirectly renewable or extendible at such Person’s option under a revolving credit or similar agreement 9 obligating the lender or lenders to extend credit over a period of more than one year from the date of creation thereof, and specifically including Capitalized Lease Obligations, current maturities of long-term debt, revolving credit and short-term debt extendible beyond one year at the option of the debtor, and also including, in the case of Borrower, the Obligations and, without duplication, Indebtedness consisting of guaranties of Funded Debt of other Persons.           “GAAP” shall mean generally accepted accounting principles in the United States of America in effect from time to time.           “General Intangibles” shall mean and include as to each Borrower all of such Borrower’s general intangibles, whether now owned or hereafter acquired, including all payment intangibles, all choses in action, causes of action, corporate or other business records, inventions, designs, patents, patent applications, equipment formulations, manufacturing procedures, quality control procedures, trademarks, trademark applications, service marks, trade secrets, goodwill, copyrights, design rights, software, computer information, source codes, codes, records and updates, registrations, licenses, franchises, customer lists, tax refunds, tax refund claims, computer programs, all claims under guaranties, security interests or other security held by or granted to such Borrower to secure payment of any of the Receivables by a Customer (other than to the extent covered by Receivables) all rights of indemnification and all other intangible property of every kind and nature (other than Receivables).           “Governmental Acts” shall have the meaning set forth in Section 2.17.           “Governmental Body” shall mean any nation or government, any state or other political subdivision thereof or any entity, authority, agency, division or department exercising the legislative, judicial, regulatory or administrative functions of or pertaining to a government.           “Guarantor” shall mean any of Borrowers’ Subsidiaries organized under the laws of one of the United States identified as guarantors on Schedule 5.2(b) and any other Person who may hereafter guarantee payment or performance of the whole or any part of the Obligations and “Guarantors” means collectively all such Persons.           “Guarantor Security Agreement” shall mean any Security Agreement executed by any Guarantor in favor of Agent securing the Guaranty of such Guarantor.           “Guaranty” shall mean any guaranty of the obligations of Borrowers executed by a Guarantor in favor of Agent for its benefit and for the ratable benefit of Lenders.           “Hazardous Discharge” shall have the meaning set forth in Section 4.19(d) hereof.           “Hazardous Substance” shall mean, without limitation, any flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or related materials as defined in CERCLA, the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et  seq.), RCRA, Articles 15 and 27 of the New York State Environmental Conservation Law or any other applicable Environmental Law and in the regulations adopted pursuant thereto. 10           “Hazardous Wastes” shall mean all waste materials subject to regulation under CERCLA, RCRA or applicable state law, and any other applicable Federal and state laws now in force or hereafter enacted relating to hazardous waste disposal.           “Hedge Liabilities” shall have the meaning provided in the definition of “Lender-Provided Interest Rate Hedge”.           “Indebtedness” of a Person at a particular date shall mean all obligations of such Person which in accordance with GAAP would be classified upon a balance sheet as liabilities (except capital stock and surplus earned or otherwise) and in any event, without limitation by reason of enumeration, shall include all indebtedness, debt and other similar monetary obligations of such Person whether direct or guaranteed, and all premiums, if any, due at the required prepayment dates of such indebtedness, and  all indebtedness secured by a Lien on assets owned by such Person, whether or not such indebtedness actually shall have been created, assumed or incurred by such Person.  Any indebtedness of such Person resulting from the acquisition by such Person of any assets subject to any Lien shall be deemed, for the purposes hereof, to be the equivalent of the creation, assumption and incurring of the indebtedness secured thereby, whether or not actually so created, assumed or incurred.           “Ineligible Security” shall mean any security which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.           “Intellectual Property” shall mean property constituting under any Applicable Law a patent, patent application, copyright, trademark, service mark, trade name, mask work, trade secret or license or other right to use any of the foregoing.           “Intellectual Property Claim” shall mean the assertion by any Person of a claim (whether asserted in writing, by action, suit or proceeding or otherwise) that any Borrower’s ownership, use, marketing, sale or distribution of any Inventory, Equipment, Intellectual Property or other property or asset is violative of any ownership of or right to use any Intellectual Property of such Person.           “Interest Rate Hedge” shall mean an interest rate exchange, collar, cap, swap, adjustable strike cap, adjustable strike corridor or similar agreements entered into by any Borrower or its Subsidiaries in order to provide protection to, or minimize the impact upon, such Borrower, any Guarantor and/or their respective Subsidiaries of increasing floating rates of interest applicable to Indebtedness.           “Inventory” shall mean and include as to each Borrower all of such Borrower’s now owned or hereafter acquired goods, merchandise and other personal property, wherever located, to be furnished under any consignment arrangement, contract of service or held for sale or lease, all raw materials, work in process, finished goods and materials and supplies of any kind, nature or description which are or might be used or consumed in such Borrower’s business or used in selling or furnishing such goods, merchandise and other personal property, and all documents of title or other documents representing them. 11           “Investment Property” shall mean and include as to each Borrower, all of such Borrower’s now owned or hereafter acquired securities (whether certificated or uncertificated), securities entitlements, securities accounts, commodities contracts and commodities accounts.           “Issuer” shall mean any Person who issues a Letter of Credit and/or accepts a draft pursuant to the terms hereof.           “Lender” and “Lenders” shall have the meaning ascribed to such term in the preamble to this Agreement and shall include each Person which becomes a transferee, successor or assign of any Lender.           “Lender-Provided Interest Rate Hedge” shall mean an Interest Rate Hedge which is provided by any Lender and with respect to which the Agent confirms meets the following requirements: such Interest Rate Hedge (i) is documented in a standard International Swap Dealer Association Agreement, (ii) provides for the method of calculating the reimbursable amount of the provider’s credit exposure in a reasonable and customary manner, and (iii) is entered into for hedging (rather than speculative) purposes.  The liabilities of any Borrower to the provider of any Lender-Provided Interest Rate Hedge (the “Hedge Liabilities”) shall be “Obligations” hereunder, guaranteed obligations under the Guaranty and secured obligations under the Guarantor Security Agreement and otherwise treated as Obligations for purposes of each of the Other Documents. The Liens securing the Hedge Liabilities shall be pari passu with the Liens securing all other Obligations under this Agreement and the Other Documents.           “Letter of Credit Borrowing” shall have the meaning set forth in Section 2.12(d).           “Letter of Credit Fees” shall have the meaning set forth in Section 3.2.           “Letter of Credit Sublimit” shall mean Two Million Dollars ($2,000,000.00).           “Letters of Credit” shall have the meaning set forth in Section 2.9.           “License Agreement” shall mean any agreement between any Borrower and a Licensor pursuant to which such Borrower is authorized to use any Intellectual Property in connection with the manufacturing, marketing, sale or other distribution of any Inventory of such Borrower or otherwise in connection with such Borrower’s business operations.           “Licensor” shall mean any Person from whom any Borrower obtains the right to use (whether on an exclusive or non-exclusive basis) any Intellectual Property in connection with such Borrower’s manufacture, marketing, sale or other distribution of any Inventory or otherwise in connection with such Borrower’s business operations.           “Licensor/Agent Agreement” shall mean an agreement between Agent and a Licensor, in form and content satisfactory to Agent, by which Agent is given the unqualified right, vis-à-vis such Licensor, to enforce Agent’s Liens with respect to and to dispose of any Borrower’s Inventory with the benefit of any Intellectual Property applicable thereto, irrespective of such Borrower’s default under any License Agreement with such Licensor. 12           “Lien” shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, security interest, lien (whether statutory or otherwise), Charge, claim or encumbrance, or preference, priority or other security agreement or preferential arrangement held or asserted in respect of any asset of any kind or nature whatsoever including any conditional sale or other title retention agreement, any lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction.           “Lien Waiver Agreement” shall mean an agreement which is executed in favor of Agent by a Person who owns or occupies premises at which any Collateral may be located from time to time and by which such Person shall waive any Lien that such Person may ever have with respect to any of the Collateral and shall authorize Agent from time to time to enter upon the premises to inspect or remove the Collateral from such premises or to use such premises to store or dispose of such Inventory.           “Material Adverse Effect” shall mean a material adverse effect on (a) the condition, results of operations, assets, or business of any Borrower or of the Guarantors (taken as a whole), (b) any Borrower’s ability to duly and punctually pay or perform the Obligations in accordance with the terms thereof, (c) the value of the Collateral, or Agent’s Liens on the Collateral or the priority of any such Lien or (d) the practical realization of the benefits of Agent’s and each Lender’s rights and remedies under this Agreement and the Other Documents.           “Maximum Face Amount” shall mean, with respect to any outstanding Letter of Credit, the face amount of such Letter of Credit including all automatic increases provided for in such Letter of Credit, whether or not any such automatic increase has become effective.           “Maximum Revolving Advance Amount” shall mean Fifteen Million Dollars ($15,000,000.00).           “Maximum Undrawn Amount” shall mean with respect to any outstanding Letter of Credit, the amount of such Letter of Credit that is or may become available to be drawn, including all automatic increases provided for in such Letter of Credit, whether or not any such automatic increase has become effective.           “Minimum Loan Amount” shall mean (i) From and including the Closing Date to the date which is the one-year anniversary of the Closing Date, Five Million Dollars ($5,000,000.00), and (ii) from and including the day which is the one-year anniversary of the Closing Date through and including the date upon which all of the Obligations are paid in full and this Agreement terminated, Two Million Five Hundred Thousand Dollars ($2,500,000.00).           “Multiemployer Plan” shall mean a “multiemployer plan” as defined in Sections 3(37) and 4001(a)(3) of ERISA.           “Multiple Employer Plan” shall mean a Plan which has two or more contributing sponsors (including any Borrower or any member of the Controlled Group) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.           “Note” shall mean the Revolving Credit Note. 13           “Obligations” shall mean and include any and all loans, advances, debts, liabilities, obligations, covenants and duties owing by any Borrower to Lenders or Agent or to any other direct or indirect subsidiary or affiliate of Agent or any Lender of any kind or nature, present or future (including any interest or other amounts accruing thereon after maturity, or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to any Borrower, whether or not a claim for post-filing or post-petition interest or other amounts is allowed in such proceeding), whether or not evidenced by any note, guaranty or other instrument, whether arising under any agreement, instrument or document, (including this Agreement and the Other Documents) whether or not for the payment of money, whether arising by reason of an extension of credit, opening of a letter of credit, loan, equipment lease or guarantee, under any interest or currency swap, future, option or other similar agreement, or in any other manner, whether arising out of overdrafts or deposit or other accounts or electronic funds transfers (whether through automated clearing houses or otherwise) or out of the Agent’s or any Lenders non-receipt of or inability to collect funds or otherwise not being made whole in connection with depository transfer check or other similar arrangements, whether direct or indirect (including those acquired by assignment or participation), absolute or contingent, joint or several, due or to become due, now existing or hereafter arising, contractual or tortious, liquidated or unliquidated, regardless of how such indebtedness or liabilities arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument, including, but not limited to, any and all of any Borrower’s Indebtedness and/or liabilities under this Agreement, the Other Documents or under any other agreement between Agent or Lenders and any Borrower and any amendments, extensions, renewals or increases and all costs and expenses of Agent and any Lender incurred in the documentation, negotiation, modification, enforcement, collection or otherwise in connection with any of the foregoing, including but not limited to reasonable attorneys’ fees and expenses and all obligations of any Borrower to Agent or Lenders to perform acts or refrain from taking any action.           “Ordinary Course of Business” shall mean with respect to any Borrower, the ordinary course of such Borrower’s business as conducted on the Closing Date.           “Other Documents” shall mean the Note, any Pledge Agreement or reaffirmation of same, any Guaranty, any Guarantor Security Agreement, any Lender-Provided Interest Rate Hedge and any and all other agreements, instruments and documents, including guaranties, pledges, powers of attorney, consents, interest or currency swap agreements or other similar agreements and all other writings heretofore, now or hereafter executed by any Borrower or any Guarantor and/or delivered to Agent or any Lender in respect of the transactions contemplated by this Agreement.           “Out-of-Formula Loans” shall have the meaning set forth in Section 16.2(b).           “Parent” of any Person shall mean a corporation or other entity owning, directly or indirectly at least 50% of the shares of stock or other ownership interests having ordinary voting power to elect a majority of the directors of the Person, or other Persons performing similar functions for any such Person. 14           “Participant” shall mean each Person who shall be granted the right by any Lender to participate in any of the Advances and who shall have entered into a participation agreement in form and substance satisfactory to such Lender.           “Participation Advance” shall have the meaning set forth in Section 2.12(d).           “Participation Commitment” shall mean each Lender’s obligation to buy a participation of the Letters of Credit issued hereunder.           “Payment Office” shall mean initially Two Tower Center Boulevard, East Brunswick, New Jersey 08816; thereafter, such other office of Agent, if any, which it may designate by notice to Borrowing Agent and to each Lender to be the Payment Office.           “PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor.           “Pension Benefit Plan” shall mean at any time any employee pension benefit plan (including a Multiple Employer Plan, but not a Multiemployer Plan) which is covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained by any member of the Controlled Group for employees of any member of the Controlled Group; or (ii) has at any time within the preceding five years been maintained by any entity which was at such time a member of the Controlled Group for employees of any entity which was at such time a member of the Controlled Group.           “Permitted Acquisition” shall mean and include the acquisition by either Borrower of all or substantially all of the assets or capital stock of a Person at such time as the following conditions are satisfied:                               (a)          No Default or Event of Default shall have occurred and be continuing;                               (b)          Undrawn Availability, after giving effect to the acquisition in question, shall equal or exceed the sum of Three Million Dollars ($3,000,000.00);                               (c)          Any new Subsidiary of Borrower resulting from such acquisition, if formed under the laws of a United States jurisdiction, shall become a Guarantor and shall execute and deliver a Guaranty and a Guarantor’s Security Agreement in form and substance acceptable to Agent in its discretion;                               (d)          Such Borrower shall pledge one hundred percent (100%) of the issued and Outstanding stock of such Subsidiary (or not less than sixty five percent (65%) in the case of a Subsidiary formed in a jurisdiction outside the United States) to Agent pursuant to a pledge agreement in form and substance acceptable to Agent in its discretion;                               (e)          After giving effect to such acquisition, not more than five million dollars ($5,000,000.00) of Revolving Advances in the aggregate shall be outstanding with respect to funds used for the purpose of making acquisitions; and 15                               (f)          The Required Lenders shall have given their prior written consent to such acquisition after an examination of a Borrowing Base Certificate to confirm Undrawn Availability which shall be delivered to Agent and Lenders not less than five (5) Business Days prior to the acquisition.           “Permitted Encumbrances” shall mean (a) Liens in favor of Agent for the benefit of Agent and Lenders; (b) Liens for taxes, assessments or other governmental charges not delinquent or being contested in good faith and by appropriate proceedings and with respect to which proper reserves have been taken by Borrowers; provided, that, the Lien shall have no effect on the priority of the Liens in favor of Agent or the value of the assets in which Agent has such a Lien and a stay of enforcement of any such Lien shall be in effect; (c) Liens disclosed in the financial statements referred to in Section 5.5, the existence of which Agent has consented to in writing; (d) deposits or pledges to secure obligations under worker’s compensation, social security or similar laws, or under unemployment insurance; (e) deposits or pledges to secure bids, tenders, contracts (other than contracts for the payment of money), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the Ordinary Course of Business; (f) Liens arising by virtue of the rendition, entry or issuance against any Borrower or any Subsidiary, or any property of any Borrower or any Subsidiary, of any judgment, writ, order, or decree for so long as each such Lien (i) is in existence for less than 20 consecutive days after it first arises or is being Properly Contested and (ii) is at all times junior in priority to any Liens in favor of Agent; (g) mechanics’, workers’, materialmen’s or other like Liens arising in the Ordinary Course of Business with respect to obligations which are not due or which are being contested in good faith by the applicable Borrower; (h) Liens placed upon fixed assets hereafter acquired to secure a portion of the purchase price thereof, provided that (x) any such lien shall not encumber any other property of any Borrower and (y) the aggregate amount of Indebtedness secured by such Liens incurred as a result of such purchases during any fiscal year shall not exceed the amount provided for in Section 7.6; (i) other Liens incidental to the conduct of any Borrower’s business or the ownership of its property and assets which were not incurred in connection with the borrowing of money or the obtaining of advances or credit, and which do not in the aggregate materially detract from Agent’s or Lenders’ rights in and to the Collateral or the value of any Borrower’s property or assets or which do not materially impair the use thereof in the operation of any Borrower’s business; and (j) Liens disclosed on Schedule 1.2.           “Person” shall mean any individual, sole proprietorship, partnership, corporation, business trust, joint stock company, trust, unincorporated organization, association, limited liability company, limited liability partnership, institution, public benefit corporation, joint venture, entity or Governmental Body (whether federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof).           “Plan” shall mean any employee benefit plan within the meaning of Section 3(3) of ERISA (including a Pension Benefit Plan), maintained for employees of any Borrower or any member of the Controlled Group or any such Plan to which any Borrower or any member of the Controlled Group is required to contribute on behalf of any of its employees.           “PNC” shall have the meaning set forth in the preamble to this Agreement and shall extend to all of its successors and assigns. 16           “Properly Contested” shall mean, in the case of any Indebtedness of any Person (including any taxes) that is not paid as and when due or payable by reason of such Person’s bona fide dispute concerning its liability to pay same or concerning the amount thereof, (i) such Indebtedness is being properly contested in good faith by appropriate proceedings promptly instituted and diligently conducted; (ii) such Person has established appropriate reserves as shall be required in conformity with GAAP; (iii) the non-payment of such Indebtedness could not reasonably be expected to have a Material Adverse Effect and will not result in the forfeiture of any assets of such Person; (iv) no Lien is imposed upon any of such Person’s assets with respect to such Indebtedness unless such Lien is at all times junior and subordinate in priority to the Liens in favor of the Agent (except only with respect to property taxes that have priority as a matter of applicable state law) and enforcement of such Lien is stayed during the period prior to the final resolution or disposition of such dispute; (v) if such Indebtedness results from, or is determined by the entry, rendition or issuance against a Person or any of its assets of a judgment, writ, order or decree, enforcement of such judgment, writ, order or decree is stayed pending a timely appeal or other judicial review; and (vi) if such contest is abandoned, settled or determined adversely (in whole or in part) to such Person, such Person forthwith pays such Indebtedness and all penalties, interest and other amounts due in connection therewith.           “Projections” shall have the meaning set forth in Section 5.5(a) hereof.           “Purchasing Lender” shall have the meaning set forth in Section 16.3 hereof.           “RCRA” shall mean the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., as same may be amended from time to time.           “Real Property” shall mean all of each Borrower’s right, title and interest in and to the owned and leased premises identified on Schedule 4.5 hereto.           “Receivables” shall mean and include, as to each Borrower, all of such Borrower’s accounts, contract rights, instruments (including those evidencing indebtedness owed to such Borrower by its Affiliates), documents, chattel paper (including electronic chattel paper), general intangibles relating to accounts, drafts and acceptances, credit card receivables and all other forms of obligations owing to such Borrower arising out of or in connection with the sale or lease of Inventory or the rendition of services, all supporting obligations, guarantees and other security therefor, whether secured or unsecured, now existing or hereafter created, and whether or not specifically sold or assigned to Agent hereunder.           “Receivables Advance Rate” shall have the meaning set forth in Section 2.1(a)(y)(i) hereof.           “Reimbursement Obligation” shall have the meaning set forth in Section 2.12(b)hereof.           “Release” shall have the meaning set forth in Section 5.7(c)(i) hereof.           “Reportable Event” shall mean a reportable event described in Section 4043(c) of ERISA or the regulations promulgated thereunder. 17           “Required Lenders” shall mean Lenders holding at least fifty-one percent  (51%) of the Advances and, if no Advances are outstanding, shall mean Lenders holding at lease fifty-one percent (51%) of the Commitment Percentages; provided, however, if there are fewer than three (3) Lenders, Required Lenders shall mean all Lenders.           “Revolving Advances” shall mean Advances made other than Letters of Credit.           “Revolving Credit Note” shall mean the promissory note referred to in Section 2.1(a) hereof.           “Revolving Interest Rate” shall mean an interest rate per annum equal to the sum of the Base Rate plus two percent (2%).           “SEC” shall mean the Securities and Exchange Commission or any successor thereto.           “Section 20 Subsidiary” shall mean the Subsidiary of the bank holding company controlling PNC, which Subsidiary has been granted authority by the Federal Reserve Board to underwrite and deal in certain Ineligible Securities.           “Securities Act” shall mean the Securities Act of 1933, as amended.           “Settlement Date” shall mean the Closing Date and thereafter Wednesday or Thursday of each week or more frequently if Agent deems appropriate unless such day is not a Business Day in which-h case it shall be the next succeeding Business Day.           “Subsidiary” of any Person shall mean a corporation or other entity of whose Equity Interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the directors of such corporation, or other Persons performing similar functions for such entity, are owned, directly or indirectly, by such Person.           “Subsidiary Stock” shall mean all of the issued and outstanding Equity Interests of any Subsidiary owned by any Borrower (not to exceed 65% of the Equity Interests of any Foreign Subsidiary).           “Tangible Net Worth” shall mean, at a particular date, (a) the aggregate amount of all assets of Borrowers on a Consolidated Basis as may be properly classified as such in accordance with GAAP consistently applied excluding such other assets as are properly classified as intangible assets under GAAP, less (b) the aggregate amount of all liabilities of Borrowers on a Consolidated Basis.           “Term” shall have the meaning set forth in Section 13.1 hereof.           “Termination Event” shall mean (i) a Reportable Event with respect to any Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower or any member of the Controlled Group from a Plan or Multiemployer Plan during a plan year in which such entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to terminate a Plan in a distress termination described in Section 4041(c) of ERISA; (iv) 18 the institution by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any event or condition (a) which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer Plan, or (b) that may result in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of any Borrower or any member of the Controlled Group from a Multiemployer Plan.           “Toxic Substance” shall mean and include any material present on the Real Property or the Leasehold Interests which has been shown to have significant adverse effect on human health or which is subject to regulation under the Toxic Substances Control Act (TSCA), 15 U.S.C. §§ 2601 et seq., applicable state law, or any other applicable Federal or state laws now in force or hereafter enacted relating to toxic substances.  “Toxic Substance” includes but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.           “Trading with the Enemy Act” shall mean the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any enabling legislation or executive order relating thereto.           “Transferee” and “Transferees” shall have the meaning set forth in Section 16.3(c) hereof.           “Undrawn Availability” at a particular date shall mean an amount equal to (a) the lesser of (i) the Formula Amount plus the redemption value of the BlackRock Account (specifically Account No. 26198) and (ii) the Maximum Revolving Advance Amount, minus (b) the sum of (i) the outstanding amount of Advances plus (ii) all amounts due and owing to Borrowers’ trade creditors which are outstanding sixty (60) days beyond normal trade terms, plus (iii) fees and expenses for which Borrowers are liable hereunder but which have not been paid or charged to Borrowers’ Account.           “Uniform Commercial Code” shall have the meaning set forth in Section 1.3 hereof.           “USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.           “Week” shall mean the time period commencing with the opening of business on a Wednesday and ending on the end of business the following Tuesday.           1.3.     Uniform Commercial Code Terms.  All terms used herein and defined in the Uniform Commercial Code as adopted in the State of New York from time to time (the “Uniform Commercial Code”) shall have the meaning given therein unless otherwise defined herein.  Without limiting the foregoing, the terms “accounts”, “chattel paper”, “instruments”, “general intangibles”, “payment intangibles”, “supporting obligations”, “securities”, “investment property”, “documents”, “deposit accounts”, “software”, “letter of credit rights”, “inventory”, “equipment” and “fixtures”, as and when used in the description of Collateral shall have the meanings given to such terms in Articles 8 or 9 of the Uniform Commercial Code.  To the extent the definition of any category or type of collateral is expanded by any amendment, modification or revision to the Uniform Commercial Code, such expanded definition will apply automatically as of the date of such amendment, modification or revision. 19           1.4.     Certain Matters of Construction.  The terms “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision.  All references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement.  Any pronoun used shall be deemed to cover all genders.  Wherever appropriate in the context, terms used herein in the singular also include the plural and vice versa.  All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations.  Unless otherwise provided, all references to any instruments or agreements to which Agent is a party, including references to any of the Other Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof.  All references herein to the time of day shall mean the time in New York City, New York, U.S.A.  Whenever the words “including” or “include” shall be used, such words shall be understood to mean “including, without limitation” or “include, without limitation”.  A Default or Event of Default shall be deemed to exist at all times during the period commencing on the date that such Default or Event of Default occurs to the date on which such Default or Event of Default is waived in writing pursuant to this Agreement or, in the case of a Default, is cured within any period of cure expressly provided for in this Agreement; and an Event of Default shall “continue” or be “continuing” until such Event of Default has been waived in writing by the Required Lenders.  Any Lien referred to in this Agreement or any of the Other Documents as having been created in favor of Agent, any agreement entered into by Agent pursuant to this Agreement or any of the Other Documents, any payment made by or to or funds received by Agent pursuant to or as contemplated by this Agreement or any of the Other Documents, or any act taken or omitted to be taken by Agent, shall, unless otherwise expressly provided, be created, entered into, made or received, or taken or omitted, for the benefit or account of Agent and Lenders. Wherever the phrase “to the best of Borrowers’ knowledge” or words of similar import relating to the knowledge or the awareness of any Borrower are used in this Agreement or Other Documents, such phrase shall mean and refer to (i) the actual knowledge of a senior officer of any Borrower or (ii) the knowledge that a senior officer would have obtained if he had engaged in good faith and diligent performance of his duties, including the making of such reasonably specific inquiries as may be necessary of the employees or agents of such Borrower and a good faith attempt to ascertain the existence or accuracy of the matter to which such phrase relates.  All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or otherwise within the limitations of, another covenant shall not avoid the occurrence of a default if such action is taken or condition exists.  In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect the incorrectness of a breach of a representation or warranty hereunder. 20 II ADVANCES, PAYMENTS.           2.1.     Revolving Advances.                               (a)          Amount of Revolving Advances.  Subject to the terms and conditions set forth in this Agreement including Section 2.1(b), each Lender, severally and not jointly, will make Revolving Advances to Borrowers in aggregate amounts outstanding at any time equal to such Lender’s Commitment Percentage of the lesser of (x) the Maximum Revolving Advance Amount less the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit or (y) an amount equal to the sum of:                                (i)          up to 85%, subject to the provisions of Section 2.1(b) hereof (“Receivables Advance Rate”), of Eligible Receivables, plus                               (ii)          up to 60%, subject to the provisions of Section 2.1(b) hereof (“Unbilled Receivables Advance Rate”), of Eligible Unbilled Receivables, minus                               (iii)          the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit, minus                               (iv)          such reserves as Agent may reasonably deem proper and necessary from time to time.           The amount derived from the sum of (x) Sections 2.1(a)(y)(i) and (ii) minus (y) Sections 2.1 (a)(y)(iii) and (iv) at any time and from time to time shall be referred to as the “Formula Amount”.  The Revolving Advances shall be evidenced by one or more secured promissory notes (collectively, the “Revolving Credit Note”) substantially in the form attached hereto as Exhibit 2.1(a).                               (b)          Discretionary Rights.  The Advance Rates may be increased or decreased by Agent at any time and from time to time in the exercise of its reasonable discretion.  Each Borrower consents to any such increases or decreases and acknowledges that decreasing the Advance Rates or increasing or imposing reserves may limit or restrict Advances requested by Borrowing Agent.  The rights of Agent under this subsection are subject to the provisions of Section 16.2(b).           2.2.     Procedure for Revolving Advances Borrowing.  Borrowing Agent on behalf of any Borrower may notify Agent prior to 10:00 a.m. on a Business Day of a Borrower’s request to incur, on that day, a Revolving Advance hereunder.  Should any amount required to be paid as interest hereunder, or as fees or other charges under this Agreement or any other agreement with Agent or Lenders, or with respect to any other Obligation, become due, same shall be deemed a request for a Revolving Advance as of the date such payment is due, in the amount required to pay in full such interest, fee, charge or Obligation under this Agreement or any other agreement with Agent or Lenders, and such request shall be irrevocable.           2.3.     Disbursement of Advance Proceeds.  All Advances shall be disbursed from whichever office or other place Agent may designate from time to time and, together with any and all other Obligations of Borrowers to Agent or Lenders, shall be charged to Borrowers’ 21 Account on Agent’s books. During the Term, Borrowers may use the Revolving Advances by borrowing, prepaying and reborrowing, all in accordance with the terms and conditions hereof.  The proceeds of each Revolving Advance requested by Borrowing Agent on behalf of any Borrower or deemed to have been requested by any Borrower under Section 2.2 hereof shall, with respect to requested Revolving Advances to the extent Lenders make such Revolving Advances, be made available to the applicable Borrower on the day so requested by way of credit to such Borrower’s operating account at PNC, or such other bank as Borrowing Agent may designate following notification to Agent, in immediately available federal funds or other immediately available funds or, with respect to Revolving Advances deemed to have been requested by any Borrower, be disbursed to Agent to be applied to the outstanding Obligations giving rise to such deemed request.           2.4.     Intentionally Omitted.           2.5.     Maximum Advances.  The aggregate balance of Revolving Advances outstanding at any time shall not exceed the lesser of (a) the Maximum Revolving Advance Amount less the aggregate Maximum Undrawn Amount of all issued and outstanding Letters of Credit or (b) the Formula Amount.           2.6.     Repayment of Advances.                       (a)          The Revolving Advances shall be due and payable in full on the last day of the Term or the Alternate Termination Date, unless sooner terminated in accordance with the terms hereof.                           (b)          Each Borrower recognizes that the amounts evidenced by checks, notes, drafts or any other items of payment relating to and/or proceeds of Collateral may not be collectible by Agent on the date received.  In consideration of Agent’s agreement to conditionally credit Borrowers’ Account as of the Business Day on which Agent receives those items of payment, each Borrower agrees that, in computing the charges under this Agreement, all items of payment shall be deemed applied by Agent on account of the Obligations one (1) Business Day after (i) the Business Day Agent receives such payments via wire transfer or electronic depository check or (ii) in the case of payments received by Agent in any other form, the Business Day such payment constitutes good funds in Agent’s account.  Agent is not, however, required to credit Borrowers’ Account for the amount of any item of payment which is unsatisfactory to Agent and Agent may charge Borrowers’ Account for the amount of any item of payment which is returned to Agent unpaid.                            (c)          All payments of principal, interest and other amounts payable hereunder, or under any of the Other Documents shall be made to Agent at the Payment Office not later than 1:00 P.M. (New York time) on the due date therefor in lawful money of the United States of America in federal funds or other funds immediately available to Agent.  Agent shall have the right to effectuate payment on any and all Obligations due and owing hereunder by charging Borrowers’ Account or by making Advances as provided in Section 2.2 hereof. 22                       (d)          Borrowers shall pay principal, interest, and all other amounts payable hereunder, or under any related agreement, without any deduction whatsoever, including, but not limited to, any deduction for any setoff or counterclaim.           2.7.     Repayment of Excess Advances.  The aggregate balance of Advances outstanding at any time in excess of the maximum amount of Advances permitted hereunder shall be immediately due and payable without the necessity of any demand, at the Payment Office, whether or not a Default or Event of Default has occurred.           2.8.     Statement of Account.  Agent shall maintain, in accordance with its customary procedures, a loan account (“Borrowers’ Account”) in the name of Borrowers in which shall be recorded the date and amount of each Advance made by Agent and the date and amount of each payment in respect thereof; provided, however, the failure by Agent to record the date and amount of any Advance shall not adversely affect Agent or any Lender.  Each month, Agent shall send to Borrowing Agent a statement showing the accounting for the Advances made, payments made or credited in respect thereof, and other transactions between Agent and Borrowers during such month.  The monthly statements shall be deemed correct and binding upon Borrowers in the absence of manifest error and shall constitute an account stated between Lenders and Borrowers unless Agent receives a written statement of Borrowers’ specific exceptions thereto within thirty (30) days after such statement is received by Borrowing Agent.  The records of Agent with respect to the loan account shall be conclusive evidence absent manifest error of the amounts of Advances and other charges thereto and of payments applicable thereto.           2.9.     Letters of Credit.  Subject to the terms and conditions hereof, Agent shall issue or cause the issuance of standby Letters of Credit (“Letters of Credit”) for the account of any Borrower; provided, however, that Agent will not be required to issue or cause to be issued any Letters of Credit to the extent that the issuance thereof would then cause the sum of (i) the outstanding Revolving Advances plus (ii) the Maximum Undrawn Amount of all outstanding Letters of Credit to exceed the lesser of (x) the Maximum Revolving Advance Amount or (y) the Formula Amount.  The Maximum Undrawn Amount of outstanding Letters of Credit shall not exceed in the aggregate at any time the Letter of Credit Sublimit.  All disbursements or payments related to Letters of Credit shall be deemed to be Revolving Advances and shall bear interest at the Revolving Interest Rate; Letters of Credit that have not been drawn upon shall not bear interest.            2.10.     Issuance of Letters of Credit.                       (a)          Borrowing Agent, on behalf of Borrowers, may request Agent to issue or cause the issuance of a Letter of Credit by delivering to Agent at the Payment Office, prior to 10:00 a.m., at least five (5)  Business Days’ prior to the proposed date of issuance, Agent’s form of Letter of Credit Application (the “Letter of Credit Application”) completed to the satisfaction of Agent; and, such other certificates, documents and other papers and information as Agent may reasonably request.  Borrowing Agent, on behalf of Borrowers, also has the right to give instructions and make agreements with respect to any application, any applicable letter of credit and security agreement, any applicable letter of credit reimbursement agreement and/or any other applicable agreement, any letter of credit and the disposition of documents, disposition of any unutilized funds, and to agree with Agent upon any amendment, extension or renewal of any Letter of Credit. 23                       (b)          Each Letter of Credit shall, among other things, (i) provide for the payment of sight drafts, other written demands for payment, or acceptances of usance drafts when presented for honor thereunder in accordance with the terms thereof and when accompanied by the documents described therein and (ii) have an expiry date not later than twelve (12) months after such Letter of Credit’s date of issuance, but in no event later than the last day of the Term.  Each standby Letter of Credit shall be subject either to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, and any amendments or revision thereof adhered to by the Issuer (“UCP 500”) or the International Standby Practices (ISP98-International Chamber of Commerce Publication Number 590) (the “ISP98 Rules”), as determined by Agent, and each trade Letter of Credit shall be subject to UCP 500.                           (c)          Agent shall use its reasonable efforts to notify Lenders of the request by Borrowing Agent for a Letter of Credit hereunder.           2.11.     Requirements For Issuance of Letters of Credit.  Borrowing Agent shall authorize and direct any Issuer to name the applicable Borrower as the “Applicant” or “Account Party” of each Letter of Credit.  If Agent is not the Issuer of any Letter of Credit, Borrowing Agent shall authorize and direct the Issuer to deliver to Agent all instruments, documents, and other writings and property received by the Issuer pursuant to the Letter of Credit and to accept and rely upon Agent’s instructions and agreements with respect to all matters arising in connection with the Letter of Credit, the application therefor or any acceptance therefor.           2.12.     Disbursements, Reimbursement.                       (a)          Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from Agent a participation in such Letter of Credit and each drawing thereunder in an amount equal to such Lender’s Commitment Percentage of the Maximum Face Amount of such Letter of Credit and the amount of such drawing, respectively.                           (b)          In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, Agent will promptly notify Borrowing Agent.  Provided that Borrowing Agent shall have received such notice, the Borrowers shall reimburse (such obligation to reimburse Agent shall sometimes be referred to as a “Reimbursement Obligation”) Agent prior to 12:00 Noon, on each date that an amount is paid by Agent under any Letter of Credit (each such date, a “Drawing Date”) in an amount equal to the amount so paid by Agent.  In the event Borrowers fail to reimburse Agent for the full amount of any drawing under any Letter of Credit by 12:00 Noon, on the Drawing Date, Agent will promptly notify each Lender thereof, and Borrowers shall be deemed to have requested that a Revolving Advance be made by the Lenders to be disbursed on the Drawing Date under such Letter of Credit, subject to the amount of the unutilized portion of the lesser of Maximum Revolving Advance Amount or the Formula Amount and subject to Section 8.2 hereof.  Any notice given by Agent pursuant to this Section 2.12(b) may be oral if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice. 24                       (c)          Each Lender shall upon any notice pursuant to Section 2.12(b) make available to Agent an amount in immediately available funds equal to its Commitment Percentage of the amount of the drawing, whereupon the participating Lenders shall (subject to Section 2.12(d)) each be deemed to have made a Revolving Advance to Borrowers in that amount.  If any Lender so notified fails to make available to Agent the amount of such Lender’s Commitment Percentage of such amount by no later than 2:00 p.m. on the Drawing Date, then interest shall accrue on such Lender’s obligation to make such payment, from the Drawing Date to the date on which such Lender makes such payment (i) at a rate per annum equal to the Federal Funds Effective Rate during the first three days following the Drawing Date and (ii) at a rate per annum equal to Revolving Loan Rate on and after the fourth day following the Drawing Date.  Agent will promptly give notice of the occurrence of the Drawing Date, but failure of Agent to give any such notice on the Drawing Date or in sufficient time to enable any Lender to effect such payment on such date shall not relieve such Lender from its obligation under this Section 2.12(c), provided that such Lender shall not be obligated to pay interest as provided in Section 2.12(c) (i) and (ii) until and commencing from the date of receipt of notice from Agent of a drawing.                           (d)          With respect to any unreimbursed drawing that is not converted into a Revolving Advance to Borrowers in whole or in part as contemplated by Section 2.12(b), because of Borrowers’ failure to satisfy the conditions set forth in Section 8.2 (other than any notice requirements) or for any other reason, Borrowers shall be deemed to have incurred from Agent a borrowing (each a “Letter of Credit Borrowing”) in the amount of such drawing. Such Letter of Credit Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Revolving Interest Rate.  Each Lender’s payment to Agent pursuant to Section 2.12(c) shall be deemed to be a payment in respect of its participation in such Letter of Credit Borrowing and shall constitute a “Participation Advance” from such Lender in satisfaction of its Participation Commitment under this Section 2.12 for such Letter(s) of Credit.                           (e)          Each Lender’s Participation Commitment shall continue until the last to occur of any of the following events:  (x) Agent ceases to be obligated to issue or cause to be issued Letters of Credit hereunder; (y) no Letter of Credit issued or created hereunder remains outstanding and uncancelled and (z) all Persons (other than the Borrowers) have been fully reimbursed for all payments made under or relating to Letters of Credit.            2.13.          Repayment of Participation Advances.                       (a)          Upon (and only upon) receipt by Agent for its account of immediately available funds from Borrowers (i) in reimbursement of any payment made by the Agent under the Letter of Credit with respect to which any Lender has made a Participation Advance to Agent, or (ii) in payment of interest on such a payment made by 25   Agent under such a Letter of Credit, Agent will pay to each Lender, in the same funds as those received by Agent, the amount of such Lender’s Commitment Percentage of such funds, except Agent shall retain the amount of the Commitment Percentage of such funds of any Lender that did not make a Participation Advance in respect of such payment by Agent.                           (b)          If Agent is required at any time to return to any Borrower, or to a trustee, receiver, liquidator, custodian, or any official in any insolvency proceeding, any portion of the payments made by Borrowers to Agent pursuant to Section 2.13(a) in reimbursement of a payment made under the Letter of Credit or interest or fee thereon, each Lender shall, on demand of Agent, forthwith return to Agent the amount of its Commitment Percentage of any amounts so returned by Agent plus interest at the Federal Funds Effective Rate.           2.14.     Documentation.  Each Borrower agrees to be bound by the terms of the Letter of Credit Application and by Agent’s interpretations of any Letter of Credit issued on behalf of such Borrower and by Agent’s written regulations and customary practices relating to letters of credit, though Agent’s interpretations may be different from such Borrower’s own.  In the event of a conflict between the Letter of Credit Application and this Agreement, this Agreement shall govern.  It is understood and agreed that, except in the case of gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment), Agent shall not be liable for any error, negligence and/or mistakes, whether of omission or commission, in following the Borrowing Agent’s or any Borrower’s instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto.           2.15.     Determination to Honor Drawing Request.  In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, Agent shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit and that any other drawing condition appearing on the face of such Letter of Credit has been satisfied in the manner so set forth.           2.16.     Nature of Participation and Reimbursement Obligations.  Each Lender’s obligation in accordance with this Agreement to make the Revolving Advances or Participation Advances as a result of a drawing under a Letter of Credit, and the obligations of Borrowers to reimburse Agent upon a draw under a Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Section 2.16 under all circumstances, including the following circumstances:                               (i)          any set-off, counterclaim, recoupment, defense or other right which such Lender may have against Agent, any Borrower or any other Person for any reason whatsoever;                               (ii)          the failure of any Borrower or any other Person to comply, in connection with a Letter of Credit Borrowing, with the conditions set forth in this Agreement for the making of a Revolving Advance, it being acknowledged that such conditions are not required for the making of a Letter of Credit Borrowing and the obligation of the Lenders to make Participation Advances under Section 2.12; 26                               (iii)          any lack of validity or enforceability of any Letter of Credit;                               (iv)          any claim of breach of warranty that might be made by Borrower or any Lender against the beneficiary of a Letter of Credit, or the existence of any claim, set-off, recoupment, counterclaim, crossclaim, defense or other right which any Borrower or any Lender may have at any time against a beneficiary, any successor beneficiary or any transferee of any Letter of Credit or the proceeds thereof (or any Persons for whom any such transferee may be acting), Agent or any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between any Borrower or any Subsidiaries of such Borrower and the beneficiary for which any Letter of Credit was procured);                               (v)          the lack of power or authority of any signer of (or any defect in or forgery of any signature or endorsement on) or the form of or lack of validity, sufficiency, accuracy, enforceability or genuineness of any draft, demand, instrument, certificate or other document presented under or in connection with any Letter of Credit, or any fraud or alleged fraud in connection with any Letter of Credit, or the transport of any property or provisions of services relating to a Letter of Credit, in each case even if Agent or any of Agent’s Affiliates has been notified thereof;                               (vi)          payment by Agent under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit;                               (vii)          the solvency of, or any acts or omissions by, any beneficiary of any Letter of Credit, or any other Person having a role in any transaction or obligation relating to a Letter of Credit, or the existence, nature, quality, quantity, condition, value or other characteristic of any property or services relating to a Letter of Credit;                               (viii)          any failure by the Agent or any of Agent’s Affiliates to issue any Letter of Credit in the form requested by Borrowing Agent, unless the Agent has received written notice from Borrowing Agent of such failure within three (3) Business Days after the Agent shall have furnished Borrowing Agent a copy of such Letter of Credit and such error is material and no drawing has been made thereon prior to receipt of such notice;                               (ix)          any Material Adverse Effect on any Borrower or any Guarantor;                               (x)          any breach of this Agreement or any Other Document by any party thereto;                               (xi)          the occurrence or continuance of an insolvency proceeding with respect to any Borrower or any Guarantor;                               (xii)          the fact that a Default or Event of Default shall have occurred and be continuing; 27                               (xiii)          the fact that the Term shall have expired or this Agreement or the Obligations hereunder shall have been terminated; and                               (xiv)          any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.           2.17.     Indemnity.  In addition to amounts payable as provided in Section 16.5, each Borrower hereby agrees to protect, indemnify, pay and save harmless Agent and any of Agent’s Affiliates that have issued a Letter of Credit from and against any and all claims, demands, liabilities, damages, taxes, penalties, interest, judgments, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs and reasonable fees of internal counsel) which the Agent or any of Agent’s Affiliates may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit, other than as a result of (A) the gross negligence or willful misconduct of the Agent as determined by a final and non-appealable judgment of a court of competent jurisdiction or (b) the wrongful dishonor by the Agent or any of Agent’s Affiliates of a proper demand for payment made under any Letter of Credit, except if such dishonor resulted from any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Body (all such acts or omissions herein called “Governmental Acts”).           2.18.     Liability for Acts and Omissions.  As between Borrowers and Agent and Lenders, each Borrower assumes all risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit.  In furtherance and not in limitation of the respective foregoing, Agent shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged (even if Agent shall have been notified thereof); (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such 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) the failure of the beneficiary of any such Letter of Credit, or any other party to which such Letter of Credit may be transferred, to comply fully with any conditions required in order to draw upon such Letter of Credit or any other claim of any Borrower against any beneficiary of such Letter of Credit, or any such transferee, or any dispute between or among any Borrower and any beneficiary of any Letter of Credit or any such transferee; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of Agent, including any governmental acts, and none of the above shall affect or impair, or prevent the vesting of, any of Agent’s rights or powers hereunder. Nothing in the preceding sentence shall relieve Agent from liability for Agent’s gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment) in connection with actions or omissions described in such clauses (i) through (viii) of such sentence.  In no event shall Agent or Agent’s Affiliates be liable to any Borrower for any 28 indirect, consequential, incidental, punitive, exemplary or special damages or expenses (including without limitation attorneys’ fees), or for any damages resulting from any change in the value of any property relating to a Letter of Credit.           Without limiting the generality of the foregoing, Agent and each of its Affiliates (i) may rely on any oral or other communication believed in good faith by Agent or  such Affiliate to have been authorized or given by or on behalf of the applicant for a Letter of Credit, (ii) may honor any presentation if the documents presented appear on their face substantially to comply with the terms and conditions of the relevant Letter of Credit; (iii) may honor a previously dishonored presentation under a Letter of Credit, whether such dishonor was pursuant to a court order, to settle or compromise any claim of wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the same extent as if such presentation had initially been honored, together with any interest paid by Agent or its Affiliates; (iv) may honor any drawing that is payable upon presentation of a statement advising negotiation or payment, upon receipt of such statement (even if such statement indicates that a draft or other document is being delivered separately), and shall not be liable for any failure of any such draft or other document to arrive, or to conform in any way with the relevant Letter of Credit; (v) may pay any paying or negotiating bank claiming that it rightfully honored under the laws or practices of the place where such bank is located; and (vi) may settle or adjust any claim or demand made on Agent or its Affiliate in any way related to any order issued at the applicant’s request to an air carrier, a letter of guarantee or of indemnity issued to a carrier or any similar document (each an “Order”) and honor any drawing in connection with any Letter of Credit that is the subject of such Order, notwithstanding that any drafts or other documents presented in connection with such Letter of Credit fail to conform in any way with such Letter of Credit.           In furtherance and extension and not in limitation of the specific provisions set forth above, any action taken or omitted by Agent under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith and without gross negligence (as determined by a court of competent jurisdiction in a final non-appealable judgment), shall not put Agent under any resulting liability to any Borrower or any Lender.           2.19.     Additional Payments.  Any sums expended by Agent or any Lender due to any Borrower’s failure to perform or comply with its obligations under this Agreement or any Other Document including any Borrower’s obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to Borrowers’ Account as a Revolving Advance and added to the Obligations.           2.20.     Manner of Borrowing and Payment.                       (a)          Each borrowing of Revolving Advances shall be advanced according to the applicable Commitment Percentages of Lenders.                           (b)          Each payment (including each prepayment) by any Borrower on account of the principal of and interest on the Revolving Advances, shall be applied to the Revolving Advances pro rata according to the applicable Commitment Percentages of Lenders.  Except as expressly provided herein, all payments (including prepayments) to be 29   made by any Borrower on account of principal, interest and fees shall be made without set off or counterclaim and shall be made to Agent on behalf of the Lenders to the Payment Office, in each case on or prior to 1:00 P.M., in Dollars and in immediately available funds.                     (c)     (i)            Notwithstanding anything to the contrary contained in Sections 2.20(a) and (b) hereof, commencing with the first Business Day following the Closing Date, each borrowing of Revolving Advances shall be advanced by Agent and each payment by any Borrower on account of Revolving Advances shall be applied first to those Revolving Advances advanced by Agent.  On or before 1:00 P.M., on each Settlement Date commencing with the first Settlement Date following the Closing Date, Agent and Lenders shall make certain payments as follows: (I) if the aggregate amount of new Revolving Advances made by Agent during the preceding Week (if any) exceeds the aggregate amount of repayments applied to outstanding Revolving Advances during such preceding Week, then each Lender shall provide Agent with funds in an amount equal to its applicable Commitment Percentage of the difference between (w) such Revolving Advances and (x) such repayments and (II) if the aggregate amount of repayments applied to outstanding Revolving Advances during such Week exceeds the aggregate amount of new Revolving Advances made during such Week, then Agent shall provide each Lender with funds in an amount equal to its applicable Commitment Percentage of the difference between (y) such repayments and (z) such Revolving Advances.                               (ii)          Each Lender shall be entitled to earn interest at the applicable Revolving Interest Rate on outstanding Advances which it has funded.                               (iii)          Promptly following each Settlement Date, Agent shall submit to each Lender a certificate with respect to payments received and Advances made during the Week immediately preceding such Settlement Date.  Such certificate of Agent shall be conclusive in the absence of manifest error.                       (d)          If any Lender or Participant (a “benefited Lender”) shall at any time receive any payment of all or part of its Advances, or interest thereon, or receive any Collateral in respect thereof (whether voluntarily or involuntarily or by set-off) in a greater proportion than any such payment to and Collateral received by any other Lender, if any, in respect of such other Lender’s Advances, or interest thereon, and such greater proportionate payment or receipt of Collateral is not expressly permitted hereunder, such benefited Lender shall purchase for cash from the other Lenders a participation in such portion of each such other Lender’s Advances, or shall provide such other Lender with the benefits of any such Collateral, or the proceeds thereof, as shall be necessary to cause such benefited Lender to share the excess payment or benefits of such Collateral or proceeds ratably with each of the other Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.  Each Lender so purchasing a portion of another Lender’s Advances may exercise all rights of payment (including rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion. 30                       (e)          Unless Agent shall have been notified by telephone, confirmed in writing, by any Lender that such Lender will not make the amount which would constitute its applicable Commitment Percentage of the Advances available to Agent, Agent may (but shall not be obligated to) assume that such Lender shall make such amount available to Agent on the next Settlement Date and, in reliance upon such assumption, make available to Borrowers a corresponding amount.  Agent will promptly notify Borrowing Agent of its receipt of any such notice from a Lender.  If such amount is made available to Agent on a date after such next Settlement Date, such Lender shall pay to Agent on demand an amount equal to the product of (i) the daily average Federal Funds Open Rate (computed on the basis of a year of 360 days) during such period as quoted by Agent, times (ii) such amount, times (iii) the number of days from and including such Settlement Date to the date on which such amount becomes immediately available to Agent.  A certificate of Agent submitted to any Lender with respect to any amounts owing under this paragraph (e) shall be conclusive, in the absence of manifest error.  If such amount is not in fact made available to Agent by such Lender within three (3) Business Days after such Settlement Date, Agent shall be entitled to recover such an amount, with interest thereon at the rate per annum then applicable to such Revolving Advances hereunder, on demand from Borrowers; provided, however, that Agent’s right to such recovery shall not prejudice or otherwise adversely affect Borrowers’ rights (if any) against such Lender.           2.21.     Mandatory Prepayments.  Subject to Section 4.3 hereof, when any Borrower sells or otherwise disposes of any Collateral other than Inventory in the Ordinary Course of Business, Borrowers shall repay the Advances in an amount equal to the net proceeds of such sale (i.e., gross proceeds less the reasonable costs of such sales or other dispositions), such repayments to be made promptly but in no event more than one (1) Business Day following receipt of such net proceeds, and until the date of payment, such proceeds shall be held in trust for Agent.  The foregoing shall not be deemed to be implied consent to any such sale otherwise prohibited by the terms and conditions hereof.  Such repayments shall be applied to the outstanding Revolving Advances in such order as Agent may determine, subject to Borrowers’ ability to reborrow Revolving Advances in accordance with the terms hereof.           2.22.     Use of Proceeds.                       (a)          Borrowers shall apply the proceeds of Advances to (i) pay fees and expenses relating to this transaction, and (ii) provide for their working capital needs and reimburse drawings under Letters of Credit.                           (b)          Without limiting the generality of Section 2.22(a) above, neither the Borrowers, the Guarantors nor any other Person which may in the future become party to this Agreement or the Other Documents as a Borrower or Guarantor, intends to use nor shall they use any portion of the proceeds of the Advances, directly or indirectly, for any purpose in violation of the Trading with the Enemy Act.           2.23.     Defaulting Lender.                       (a)          Notwithstanding anything to the contrary contained herein, in the event any Lender (x) has refused (which refusal constitutes a breach by such Lender of its 31   obligations under this Agreement) to make available its portion of any Advance or (y) notifies either Agent or Borrowing Agent that it does not intend to make available its portion of any Advance (if the actual refusal would constitute a breach by such Lender of its obligations under this Agreement) (each, a “Lender Default”), all rights and obligations hereunder of such Lender (a “Defaulting Lender”) as to which a Lender Default is in effect and of the other parties hereto shall be modified to the extent of the express provisions of this Section 2.23 while such Lender Default remains in effect.                           (b)          Advances shall be incurred pro rata from Lenders (the “Non-Defaulting Lenders”) which are not Defaulting Lenders based on their respective Commitment Percentages, and no Commitment Percentage of any Lender or any pro rata share of any Advances required to be advanced by any Lender shall be increased as a result of such Lender Default.  Amounts received in respect of principal of any type of Advances shall be applied to reduce the applicable Advances of each Lender (other than any Defaulting Lender) pro rata based on the aggregate of the outstanding Advances of that type of all Lenders at the time of such application; provided, that, Agent shall not be obligated to transfer to a Defaulting Lender any payments received by Agent for the Defaulting Lender’s benefit, nor shall a Defaulting Lender be entitled to the sharing of any payments hereunder (including any principal, interest or fees).  Amounts payable to a Defaulting Lender shall instead be paid to or retained by Agent.  Agent may hold and, in its discretion, re-lend to a Borrower the amount of such payments received or retained by it for the account of such Defaulting Lender.                           (c)          A Defaulting Lender shall not be entitled to give instructions to Agent or to approve, disapprove, consent to or vote on any matters relating to this Agreement and the Other Documents.  All amendments, waivers and other modifications of this Agreement and the Other Documents may be made without regard to a Defaulting Lender and, for purposes of the definition of “Required Lenders”, a Defaulting Lender shall be deemed not to be a Lender and not to have Advances outstanding.                           (d)          Other than as expressly set forth in this Section 2.23, the rights and obligations of a Defaulting Lender (including the obligation to indemnify Agent) and the other parties hereto shall remain unchanged.  Nothing in this Section 2.23 shall be deemed to release any Defaulting Lender from its obligations under this Agreement and the Other Documents, shall alter such obligations, shall operate as a waiver of any default by such Defaulting Lender hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender may have against any Defaulting Lender as a result of any default by such Defaulting Lender hereunder.                           (e)          In the event a Defaulting Lender retroactively cures to the satisfaction of Agent the breach which caused a Lender to become a Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall be treated as a Lender under this Agreement. 32 III INTEREST AND FEES.           3.1.     Interest.  Interest on Advances shall be payable in arrears on the first day of each month.  Interest charges shall be computed on the greater of (x) the Minimum Loan Amount or (y) the actual principal amount of Advances outstanding during the month at a rate per annum equal to the Revolving Interest Rate  Whenever, subsequent to the date of this Agreement, the Base Rate is increased or decreased, the Revolving Interest Rate shall be similarly changed without notice or demand of any kind by an amount equal to the amount of such change in the Base Rate during the time such change or changes remain in effect.  Upon and after the occurrence of an Event of Default, and during the continuation thereof, at the option of Agent or at the direction of Required Lenders, the Obligations shall bear interest at the Revolving Interest Rate plus two (2%) percent per annum (the “Default Rate”).           3.2.     Letter of Credit Fees.                     (a)          Borrowers shall pay (x) to Agent, for the ratable benefit of Lenders, fees for each Letter of Credit for the period from and excluding the date of issuance of same to and including the date of expiration or termination, equal to the average daily face amount of each outstanding Letter of Credit multiplied by two percent (2%) per annum, such fees to be calculated on the basis of a 360-day year for the actual number of days elapsed and to be payable quarterly in arrears on the first day of each quarter and on the last day of the Term, and (y) to the Issuer, a fronting fee of one quarter of one percent (0.25%) per annum, together with any and all administrative, issuance, amendment, payment and negotiation charges with respect to Letters of Credit and all fees and expenses as agreed upon by the Issuer and the Borrowing Agent in connection with any Letter of Credit, including in connection with the opening, amendment or renewal of any such Letter of Credit and shall reimburse Agent for any and all fees and expenses, if any, paid by Agent to the Issuer (all of the foregoing fees, the “Letter of Credit Fees”).  All such charges shall be deemed earned in full on the date when the same are due and payable hereunder and shall not be subject to rebate or pro-ration upon the termination of this Agreement for any reason.  Any such charge in effect at the time of a particular transaction shall be the charge for that transaction, notwithstanding any subsequent change in the Issuer’s prevailing charges for that type of transaction.  All Letter of Credit Fees payable hereunder shall be deemed earned in full on the date when the same are due and payable hereunder and shall not be subject to rebate or pro-ration upon the termination of this Agreement for any reason.                     (b)          On demand, Borrowers will cause cash to be deposited and maintained in an account with Agent, as cash collateral, in an amount equal to one hundred and five percent (105%) of the Maximum Undrawn Amount of all outstanding Letters of Credit, and each Borrower hereby irrevocably authorizes Agent, in its discretion, on such Borrower’s behalf and in such Borrower’s name, to open such an account and to make and maintain deposits therein, or in an account opened by such Borrower, in the amounts required to be made by such Borrower, out of the proceeds of Receivables or other Collateral or out of any other funds of such Borrower coming into any Lender’s possession at any time.  Agent will invest such cash collateral (less applicable reserves) in such short-term money-market items as to which Agent and such Borrower mutually agree and the net return on such investments shall be credited to such account and constitute additional cash collateral.  No Borrower may withdraw amounts credited to any such account except upon the occurrence of all of the following: (x) payment and performance in full of all Obligations, (y) expiration of all Letters of Credit and (z) termination of this Agreement. 33           3.3.     Facility Fee.   If, for any calendar quarter during the Term, the average daily unpaid balance of the Revolving Advances and undrawn amount of any outstanding Letters of Credit for each day of such calendar quarter does not equal the Maximum Revolving Advance Amount, then Borrowers shall pay to Agent for the ratable benefit of Lenders a fee at a rate equal to one-half of one percent (.50%) per annum on the amount by which the Maximum Revolving Advance Amount exceeds such average daily unpaid balance.  Such fee shall be payable to Agent in arrears on the first day of each calendar quarter with respect to the previous calendar quarter.           3.4.     Collateral Evaluation Fee and Collateral Monitoring Fee.                               (a)          Collateral Evaluation Fee.  Borrowers shall pay Agent a collateral evaluation fee equal to Three Thousand Dollars ($3,000.00) per month commencing on the first day of the month following the Closing Date and on the first day of each month thereafter during the Term.  The collateral evaluation fee shall be deemed earned in full on the date when same is due and payable hereunder and shall not be subject to rebate or proration upon termination of this Agreement for any reason.                               (b)          Collateral Monitoring Fee.  Borrowers shall pay to Agent on the first day of each month following any month in which Agent performs any collateral monitoring - namely any field examination, collateral analysis or other business analysis, the need for which is to be determined by Agent and which monitoring is undertaken by Agent or for Agent’s benefit - a collateral monitoring fee in an amount equal to Eight Hundred Fifty Dollars ($850.00) per day for each person employed to perform such monitoring, plus all costs and disbursements incurred by Agent in the performance of such examination or analysis.           3.5.     Computation of Interest and Fees.  Interest and fees hereunder shall be computed on the basis of a year of 360 days and for the actual number of days elapsed.  If any payment to be made hereunder becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day and interest thereon shall be payable at the Revolving Interest Rate during such extension.           3.6.     Maximum Charges.  In no event whatsoever shall interest and other charges charged hereunder exceed the highest rate permissible under law. In the event interest and other charges as computed hereunder would otherwise exceed the highest rate permitted under law, such excess amount shall be first applied to any unpaid principal balance owed by Borrowers, and if the then remaining excess amount is greater than the previously unpaid principal balance, Lenders shall promptly refund such excess amount to Borrowers and the provisions hereof shall be deemed amended to provide for such permissible rate.           3.7.     Increased Costs.  In the event that any Applicable Law, treaty or governmental regulation, or any change therein or in the interpretation or application thereof, or compliance by any Lender (for purposes of this Section 3.7, the term “Lender” shall include Agent or any Lender and any corporation or bank controlling Agent or any Lender) with any request or directive (whether or not having the force of law) from any central bank or other financial, monetary or other authority, shall: 34                     (a)          subject Agent or any Lender to any tax of any kind whatsoever with respect to this Agreement or any Other Document or change the basis of taxation of payments to Agent or any Lender of principal, fees, interest or any other amount payable hereunder or under any Other Documents (except for changes in the rate of tax on the overall net income of Agent or any Lender by the jurisdiction in which it maintains its principal office);                     (b)          impose, modify or hold applicable any reserve, special deposit, assessment or similar requirement against assets held by, or deposits in or for the account of, advances or loans by, or other credit extended by, any office of Agent or any Lender, including pursuant to Regulation D of the Board of Governors of the Federal Reserve System; or                     (c)          impose on Agent or any Lender any other condition with respect to this Agreement or any Other Document; and the result of any of the foregoing is to increase the cost to Agent or any Lender of making, renewing or maintaining its Advances hereunder by an amount that Agent or such Lender deems to be material or to reduce the amount of any payment (whether of principal, interest or otherwise) in respect of any of the Advances by an amount that Agent or such Lender deems to be material, then, in any case Borrowers shall promptly pay Agent or such Lender, upon its demand, such additional amount as will compensate Agent or such Lender for such additional cost or such reduction, as the case may be.  Agent or such Lender shall certify the amount of such additional cost or reduced amount to Borrowing Agent, and such certification shall be conclusive absent manifest error.           3.8.     Capital Adequacy.                       (a)          In the event that Agent or any Lender shall have determined that any Applicable Law, rule, regulation or guideline regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Body, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Agent or any Lender (for purposes of this Section 3.8, the term “Lender” shall include Agent or any Lender and any corporation or bank controlling Agent or any Lender) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on Agent or any Lender’s capital as a consequence of its obligations hereunder to a level below that which Agent or such Lender could have achieved but for such adoption, change or compliance (taking into consideration Agent’s and each Lender’s policies with respect to capital adequacy) by an amount deemed by Agent or any Lender to be material, then, from time to time, Borrowers shall pay upon demand to Agent or such Lender such additional amount or amounts as will compensate Agent or such Lender for such reduction.  In determining such amount or amounts, Agent or such Lender may use any reasonable averaging or attribution methods.  The protection of this Section 3.8 shall be available to Agent and each Lender regardless of any possible contention of invalidity or inapplicability with respect to the Applicable Law, regulation or condition. 35                           (b)          A certificate of Agent or such Lender setting forth such amount or amounts as shall be necessary to compensate Agent or such Lender with respect to Section 3.9(a) hereof when delivered to Borrowing Agent shall be conclusive absent manifest error.           3.9.     Gross Up for Taxes.  If any Borrower shall be required by Applicable Law to withhold or deduct any taxes from or in respect of any sum payable under this Agreement or any of the Other Documents to Agent, or any Lender, assignee of any Lender, or Participant (each, individually, a “Payee” and collectively, the “Payees”), (a) the sum payable to such Payee or Payees, as the case may be, shall be increased as may be necessary so that, after making all required withholding or deductions, the applicable Payee or Payees receives an amount equal to the sum it would have received had no such withholding or deductions been made (the “Gross-Up Payment”), (b) such Borrower shall make such withholding or deductions, and (c) such Borrower shall pay the full amount withheld or deducted to the relevant taxation authority or other authority in accordance with Applicable Law.  Notwithstanding the foregoing, no Borrower shall be obligated to make any portion of the Gross-Up Payment that is attributable to any withholding or deductions that would not have been paid or claimed had the applicable Payee or Payees properly claimed a complete exemption with respect thereto pursuant to Section 3.10 hereof.           3.10.     Withholding Tax Exemption.                       (a)          Each Payee that is not incorporated under the Laws of the United States of America or a state thereof (and, upon the written request of Agent, each other Payee) agrees that it will deliver to Borrowing Agent and Agent two (2) duly completed appropriate valid Withholding Certificates (as defined under §1.1441-1(c)(16) of the Income Tax Regulations (“Regulations”)) certifying its status (i.e., U.S. or foreign person) and, if appropriate, making a claim of reduced, or exemption from, U.S. withholding tax on the basis of an income tax treaty or an exemption provided by the Code.  The term “Withholding Certificate” means a Form W-9; a Form W-8BEN; a Form W-8ECI; a Form W-8IMY and the related statements and certifications as required under §1.1441-1(e)(2) and/or (3) of the Regulations; a statement described in §1.871-14(c)(2)(v) of the Regulations; or any other certificates under the Code or Regulations that certify or establish the status of a payee or beneficial owner as a U.S. or foreign person.                           (b)          Each Payee required to deliver to Borrowing Agent and Agent a valid Withholding Certificate pursuant to Section 3.10(a) hereof shall deliver such valid Withholding Certificate as follows:  (A) each Payee which is a party hereto on the Closing Date shall deliver such valid Withholding Certificate at least five (5) Business Days prior to the first date on which any interest or fees are payable by any Borrower hereunder for the account of such Payee; (B) each Payee shall deliver such valid Withholding Certificate at least five (5) Business Days before the effective date of such assignment or participation (unless Agent in its sole discretion shall permit such Payee to deliver such Withholding Certificate less than five (5) Business Days before such date in which case it shall be 36   due on the date specified by Agent).  Each Payee which so delivers a valid Withholding Certificate further undertakes to deliver to Borrowing Agent and Agent two (2) additional copies of such Withholding Certificate (or a successor form) on or before the date that such Withholding Certificate expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent Withholding Certificate so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by Borrowing Agent or Agent.                           (c)          Notwithstanding the submission of a Withholding Certificate claiming a reduced rate of or exemption from U.S. withholding tax required under Section 3.10(b) hereof, Agent shall be entitled to withhold United States federal income taxes at the full 30% withholding rate if in its reasonable judgment it is required to do so under the due diligence requirements imposed upon a withholding agent under §1.1441-7(b) of the Regulations.  Further, Agent is indemnified under §1.1461-1(e) of the Regulations against any claims and demands of any Payee for the amount of any tax it deducts and withholds in accordance with regulations under §1441 of the Code. IV COLLATERAL:   GENERAL TERMS           4.1.     Security Interest in the Collateral.  To secure the prompt payment and performance to Agent and each Lender of the Obligations, each Borrower hereby assigns, pledges and grants to Agent for its benefit and for the ratable benefit of each Lender a continuing security interest in and to and Lien on all of its Collateral, whether now owned or existing or hereafter acquired or arising and wheresoever located.  Each Borrower shall mark its books and records as may be necessary or appropriate to evidence, protect and perfect Agent’s security interest and shall cause its financial statements to reflect such security interest.  Each Borrower shall promptly provide Agent with written notice of all commercial tort claims which individually, or in the aggregate, exceed Two Hundred Fifty Thousand Dollars ($250,000.00), such notice to contain the case title together with the applicable court and a brief description of the claim(s).  Upon delivery of each such notice, such Borrower shall be deemed to hereby grant to Agent a security interest and lien in and to such commercial tort claims and all proceeds thereof.           4.2.     Perfection of Security Interest.  Each Borrower shall take all action that may be necessary or desirable, or that Agent may request, so as at all times to maintain the validity, perfection, enforceability and priority of Agent’s security interest in and Lien on the Collateral or to enable Agent to protect, exercise or enforce its rights hereunder and in the Collateral, including, but not limited to, (i) immediately discharging all Liens other than Permitted Encumbrances, (ii) obtaining Lien Waiver Agreements, (iii) delivering to Agent, endorsed or accompanied by such instruments of assignment as Agent may specify, and stamping or marking, in such manner as Agent may specify, any and all chattel paper, instruments, letters of credits and advices thereof and documents evidencing or forming a part of the Collateral, (iv) entering into warehousing, lockbox and other custodial arrangements satisfactory to Agent, and (v) executing and delivering financing statements, control agreements, instruments of pledge, mortgages, notices and assignments, in each case in form and substance satisfactory to Agent, relating to the creation, validity, perfection, maintenance or continuation of Agent’s security interest and Lien under the Uniform Commercial Code or other Applicable Law.  By its 37 signature hereto, each Borrower hereby authorizes Agent to file against such Borrower, one or more financing, continuation or amendment statements pursuant to the Uniform Commercial Code in form and substance satisfactory to Agent (which statements may have a description of collateral which is broader than that set forth herein).  All charges, expenses and fees Agent may incur in doing any of the foregoing, and any local taxes relating thereto, shall be charged to Borrowers’ Account as a Revolving Advance and added to the Obligations, or, at Agent’s option, shall be paid to Agent for its benefit and for the ratable benefit of Lenders immediately upon demand.           4.3.     Disposition of Collateral.  Each Borrower will safeguard and protect all Collateral for Agent’s general account and, except as otherwise permitted under this Agreement, make no disposition thereof whether by sale, lease or otherwise except the disposition or transfer of obsolete and worn-out Equipment in the Ordinary Course of Business during any fiscal year having an aggregate fair market value of not more than Five Hundred Thousand Dollars ($500,000.00), and only to the extent that (i) the proceeds of any such disposition are used to acquire replacement Equipment which is subject to Agent’s first priority security interest or (ii) the proceeds of which are remitted to Agent to be applied pursuant to Section 2.21.           4.4.     Preservation of Collateral.   In addition to the rights and remedies set forth in Section 11.1 hereof, Agent: (a) may at any time take such steps as Agent reasonably requests to protect Agent’s interest in and to preserve the Collateral, including the hiring of such security guards or the placing of other security protection measures as Agent may deem appropriate; (b) may employ and maintain at any of any Borrower’s premises a custodian who shall have full authority to do all acts necessary to protect Agent’s interests in the Collateral; (c) may lease warehouse facilities to which Agent may move all or part of the Collateral; (d) may use any Borrower’s owned or leased lifts, hoists, trucks and other facilities or equipment for handling or removing the Collateral; and (e) shall have, and is hereby granted, a right of ingress and egress to the places where the Collateral is located, and may proceed over and through any of Borrower’s owned or leased property.  Each Borrower shall cooperate fully with all of Agent’s reasonable efforts to preserve the Collateral and will take such actions to preserve the Collateral as Agent may reasonably direct.  All of Agent’s expenses of preserving the Collateral, including any expenses relating to the bonding of a custodian, shall be charged to Borrowers’ Account as a Revolving Advance and added to the Obligations.           4.5.     Ownership of Collateral.                       (a)          With respect to the Collateral, at the time the Collateral becomes subject to Agent’s security interest:  (i) each Borrower shall be the sole owner of and fully authorized and able to sell, transfer, pledge and/or grant a first priority security interest in each and every item of the its respective Collateral to Agent; and, except for Permitted Encumbrances the Collateral shall be free and clear of all Liens and encumbrances whatsoever; (ii) each document and agreement executed by each Borrower or delivered to Agent or any Lender in connection with this Agreement shall be true and correct in all respects; (iii) all signatures and endorsements of each Borrower that appear on such documents and agreements shall be genuine and each Borrower shall have full capacity to execute same; and (iv) each Borrower’s Equipment and Inventory shall be located as set forth on Schedule 4.5 and shall not be removed from such location(s) without the prior 38   written consent of Agent except with respect to the sale of Inventory in the Ordinary Course of Business and Equipment to the extent permitted in Section 4.3 hereof.                           (b)          (i) There is no location at which any Borrower has any Inventory (except for Inventory in transit) other than those locations listed on Schedule 4.5; (ii) Schedule 4.5 hereto contains a correct and complete list, as of the Closing Date, of the legal names and addresses of each warehouse at which Inventory of any Borrower is stored; (iii) Schedule 4.5 hereto sets forth a correct and complete list as of the Closing Date of (A) each place of business of each Borrower and (B) the chief executive office of each Borrower; and (iv) except for properties (A) subject to short-term rental or lease agreements which are entered into only for use by consultants retained or employed by Borrower and (B) where no Borrower keeps and maintains its books or records related to accounts receivables invoicing, Schedule 4.5 hereto sets forth a correct and complete list as of the Closing Date of the location, by state and street address, of all Real Property owned or leased by each Borrower, together with the names and addresses of any landlords.           4.6.     Defense of Agent’s and Lenders’ Interests.  Until (a) payment and performance in full of all of the Obligations and (b) termination of this Agreement, Agent’s interests in the Collateral shall continue in full force and effect.  During such period no Borrower shall, without Agent’s prior written consent, pledge, sell (except Equipment to the extent permitted in Section 4.3 hereof), assign, transfer, create or suffer to exist a Lien upon or encumber or allow or suffer to be encumbered in any way except for Permitted Encumbrances, any part of the Collateral.  Each Borrower shall defend Agent’s interests in the Collateral against any and all Persons whatsoever.  At any time following demand by Agent for payment of all Obligations, Agent shall have the right to take possession of the indicia of the Collateral and the Collateral in whatever physical form contained, including:  labels, stationery, documents, instruments and advertising materials.  If Agent exercises this right to take possession of the Collateral, Borrowers shall, upon demand, assemble it in accordance with the Agent’s instructions and make it available to Agent at a place reasonably convenient to Agent.  In addition, with respect to all Collateral, Agent and Lenders shall be entitled to all of the rights and remedies set forth herein and further provided by the Uniform Commercial Code or other Applicable Law.  Each Borrower shall, and Agent may, at its option, instruct all suppliers, carriers, forwarders, warehousers or others receiving or holding cash, checks, Inventory, documents or instruments in which Agent holds a security interest to deliver same to Agent and/or subject to Agent’s order and if they shall come into any Borrower’s possession, they, and each of them, shall be held by such Borrower in trust as Agent’s trustee, and such Borrower will immediately deliver them to Agent in their original form together with any necessary endorsement.           4.7.     Books and Records.  Each Borrower shall (a) keep proper books of record and account in which full, true and correct entries will be made of all dealings or transactions of or in relation to its business and affairs; (b) set up on its books accruals with respect to all taxes, assessments, charges, levies and claims; and (c) on a reasonably current basis set up on its books, from its earnings, allowances against doubtful Receivables, advances and investments and all other proper accruals (including by reason of enumeration, accruals for premiums, if any, due on required payments and accruals for depreciation, obsolescence, or amortization of properties), which should be set aside from such earnings in connection with its business.  All determinations 39 pursuant to this subsection shall be made in accordance with, or as required by, GAAP (to the extent applicable) consistently applied in the opinion of such independent public accountant as shall then be regularly engaged by Borrowers.           4.8.     Financial Disclosure.  Each Borrower hereby irrevocably authorizes and directs all accountants and auditors employed by such Borrower at any time during the Term to exhibit and deliver to Agent and each Lender copies of any of such Borrower’s financial statements, trial balances or other accounting records of any sort in the accountant’s or auditor’s possession, and to disclose to Agent and each Lender any information such accountants may have concerning such Borrower’s financial status and business operations.  Each Borrower hereby authorizes all Governmental Bodies to furnish to Agent and each Lender copies of reports or examinations relating to such Borrower, whether made by such Borrower or otherwise; however, Agent and each Lender will attempt to obtain such information or materials directly from such Borrower prior to obtaining such information or materials from such accountants or Governmental Bodies.           4.9.     Compliance with Laws.  Each Borrower shall comply with all Applicable Laws with respect to the Collateral or any part thereof or to the operation of such Borrower’s business the non-compliance with which could reasonably be expected to have a Material Adverse Effect.    The assets of Borrowers at all times shall be maintained in accordance with the requirements of all insurance carriers which provide insurance with respect to the assets of Borrowers so that such insurance shall remain in full force and effect.           4.10.     Inspection of Premises.  At all reasonable times Agent and each Lender shall have full access to and the right to audit, check, inspect and make abstracts and copies from each Borrower’s books, records, audits, correspondence and all other papers relating to the Collateral and the operation of each Borrower’s business.  Agent, any Lender and their agents may enter upon any premises of any Borrower at any time during business hours and at any other reasonable time, and from time to time, for the purpose of inspecting the Collateral and any and all records pertaining thereto and the operation of such Borrower’s business.           4.11.     Insurance.  The assets and properties of each Borrower at all times shall be maintained substantially in accordance with the customary requirements of reputable insurance carriers which provide insurance with respect to the assets and properties of such Borrower so that such insurance shall remain in full force and effect.  Each Borrower shall bear the full risk of any loss of any nature whatsoever with respect to the Collateral.  At each Borrower’s own cost and expense in amounts and with carriers acceptable to Agent, each Borrower shall (a) keep all its insurable properties and properties in which such Borrower has an interest insured against the hazards of fire, flood, sprinkler leakage, those hazards covered by extended coverage insurance and such other hazards, and for such amounts, as is customary in the case of companies engaged in businesses similar to such Borrower’s including business interruption insurance; (b) maintain a bond in such amounts as is customary in the case of companies engaged in businesses similar to such Borrower insuring against larceny, embezzlement or other criminal misappropriation of insured’s officers and employees who may either singly or jointly with others at any time have access to the assets or funds of such Borrower either directly or through authority to draw upon such funds or to direct generally the disposition of such assets; (c) maintain public and product liability insurance against claims for personal injury, death or property damage suffered by others; (d) maintain all such worker’s compensation or similar insurance as may be required 40 under the laws of any state or jurisdiction in which such Borrower is engaged in business; (e) furnish Agent with (i) copies of all policies and evidence of the maintenance of such policies by the renewal thereof at least thirty (30) days before any expiration date, and (ii) appropriate loss payable endorsements in form and substance satisfactory to Agent, naming Agent as a co-insured and loss payee as its interests may appear with respect to all insurance coverage referred to in clauses (a), and (c) above, and providing (A) that all proceeds thereunder shall be payable to Agent, (B) no such insurance shall be affected by any act or neglect of the insured or owner of the property described in such policy, and (C) that such policy and loss payable clauses may not be cancelled, amended or terminated unless at least thirty (30) days’ prior written notice is given to Agent.  In the event of any loss thereunder, the carriers named therein hereby are directed by Agent and the applicable Borrower to make payment for such loss to Agent and not to such Borrower and Agent jointly.  If any insurance losses are paid by check, draft or other instrument payable to any Borrower and Agent jointly, Agent may endorse such Borrower’s name thereon and do such other things as Agent may deem advisable to reduce the same to cash.  Agent is hereby authorized to adjust and compromise claims under insurance coverage referred to in clauses (a), and (b) above.  All loss recoveries received by Agent upon any such insurance and in accordance with the terms of this Agreement may be applied to the Obligations, in such order as Agent in its sole discretion shall determine.  Any surplus shall be paid by Agent to Borrowers or applied as may be otherwise required by law.  Any deficiency thereon shall be paid by Borrowers to Agent, on demand.           4.12.     Failure to Pay Insurance.  If any Borrower fails to obtain insurance as hereinabove provided, or to keep the same in force, Agent, if Agent so elects, may obtain such insurance and pay the premium therefor on behalf of such Borrower, and charge Borrowers’ Account therefor as a Revolving Advance and such expenses so paid shall be part of the Obligations.           4.13.     Payment of Taxes.  Each Borrower will pay, when due, all taxes, assessments and other Charges lawfully levied or assessed upon such Borrower or any of the Collateral including real and personal property taxes, assessments and charges and all franchise, income, employment, social security benefits, withholding, and sales taxes.  If any tax by any Governmental Body is or may be imposed on or as a result of any transaction between any Borrower and Agent or any Lender which Agent or any Lender may be required to withhold or pay or if any taxes, assessments, or other Charges remain unpaid after the date fixed for their payment, or if any claim shall be made which, in Agent’s or any Lender’s opinion, may possibly create a valid Lien on the Collateral, Agent may without notice to Borrowers pay the taxes, assessments or other Charges and each Borrower hereby indemnifies and holds Agent and each Lender harmless in respect thereof.  The amount of any payment by Agent under this Section 4.13 shall be charged to Borrowers’ Account as a Revolving Advance and added to the Obligations and, until Borrowers shall furnish Agent with an indemnity therefor (or supply Agent with evidence satisfactory to Agent that due provision for the payment thereof has been made), Agent may hold without interest any balance standing to Borrowers’ credit and Agent shall retain its security interest in and Lien on any and all Collateral held by Agent.           4.14.     Payment of Leasehold Obligations.  Each Borrower shall at all times pay, when and as due, its rental obligations under all leases under which it is a tenant, and shall otherwise comply, in all material respects, with all other material terms of such leases and keep them in full force and effect and, at Agent’s request will provide evidence of having done so. 41           4.15.     Receivables.                               (a)          Nature of Receivables.  Each of the Receivables shall be a bona fide and valid account representing a bona fide indebtedness incurred by the Customer therein named, for a fixed sum as set forth in the invoice relating thereto (provided immaterial or unintentional invoice errors shall not be deemed to be a breach hereof) with respect to an absolute sale or lease and delivery of goods upon stated terms of a Borrower, or work, labor or services theretofore rendered by a Borrower as of the date each Receivable is created.  Same shall be due and owing in accordance with the applicable Borrower’s standard terms of sale without dispute, setoff or counterclaim except as may be stated on the accounts receivable schedules delivered by Borrowers to Agent.                               (b)          Solvency of Customers.  Each Customer, to the best of each Borrower’s knowledge based upon Borrowers’ customary due diligence performed in the ordinary course of business, as of the date each Receivable is created, is and will be solvent and able to pay all Receivables on which the Customer is obligated in full when due or with respect to such Customers of any Borrower who are not solvent such Borrower has set up on its books and in its financial records bad debt reserves adequate to cover such Receivables.                               (c)          Location of Borrowers.  Each Borrower’s chief executive office is located as set forth on Schedule 4.15(c).  Until written notice is given to Agent by Borrowing Agent of any other office at which any Borrower keeps its records pertaining to Receivables, all such records shall be kept at such executive office.                               (d)          Collection of Receivables.  Until any Borrower’s authority to do so is terminated by Agent (which notice Agent may give at any time following the occurrence of an Event of Default or a Default or when Agent in its sole discretion deems it to be in Lenders’ best interest to do so), each Borrower will, at such Borrower’s sole cost and expense, but on Agent’s behalf and for Agent’s account, collect as Agent’s property and in trust for Agent all amounts received on Receivables, and shall not commingle such collections with any Borrower’s funds or use the same except to pay Obligations.  Each Borrower shall deposit in the Blocked Account or, upon request by Agent, deliver to Agent, in original form and on the date of receipt thereof, all checks, drafts, notes, money orders, acceptances, cash and other evidences of Indebtedness.                               (e)          Notification of Assignment of Receivables.  At any time after an Event of Default has occurred and is continuing, Agent shall have the right to send notice of the assignment of, and Agent’s security interest in and Lien on, the Receivables to any and all Customers or any third party holding or otherwise concerned with any of the Collateral.  Thereafter and so long as such Event of Default is continuing, Agent shall have the sole right to collect the Receivables, take possession of the Collateral, or both.  Agent’s actual collection expenses, including, but not limited to, stationery and postage, telephone and telegraph, secretarial and clerical expenses and the salaries of any collection personnel used for collection, may be charged to Borrowers’ Account and added to the Obligations.                               (f)          Power of Agent to Act on Borrowers’ Behalf.  Any time after an Event of Default has occurred and is continuing, Agent shall have the right to receive, endorse, assign and/or deliver in the name of Agent or any Borrower any and all checks, drafts and other 42 instruments for the payment of money relating to the Receivables, and each Borrower hereby waives notice of presentment, protest and non-payment of any instrument so endorsed; provided however, endorsements and negotiation of items by Agent in the ordinary course of managing Borrowers’ lockbox account is permitted at any time.  Each Borrower hereby constitutes Agent or Agent’s designee as such Borrower’s attorney with power (i) to endorse such Borrower’s name upon any notes, acceptances, checks, drafts, money orders or other evidences of payment or Collateral; (ii) to sign such Borrower’s name on any invoice or bill of lading relating to any of the Receivables, drafts against Customers, assignments and verifications of Receivables; (iii) to send verifications of Receivables to any Customer; (iv) to sign such Borrower’s name on all financing statements or any other documents or instruments deemed necessary or appropriate by Agent to preserve, protect, or perfect Agent’s interest in the Collateral and to file same; (v) to demand payment of the Receivables; (vi) to enforce payment of the Receivables by legal proceedings or otherwise; (vii) to exercise all of such Borrower’s rights and remedies with respect to the collection of the Receivables and any other Collateral; (viii) to settle, adjust, compromise, extend or renew the Receivables; (ix) to settle, adjust or compromise any legal proceedings brought to collect Receivables; (x) to prepare, file and sign such Borrower’s name on a proof of claim in bankruptcy or similar document against any Customer; (xi) to prepare, file and sign such Borrower’s name on any notice of Lien, assignment or satisfaction of Lien or similar document in connection with the Receivables; and (xii) to do all other acts and things necessary to carry out this Agreement.  All acts of said attorney or designee are hereby ratified and approved, and said attorney or designee shall not be liable for any acts of omission or commission nor for any error of judgment or mistake of fact or of law, unless done maliciously or with gross (not mere) negligence (as determined by a court of competent jurisdiction in a final non-appealable judgment); this power being coupled with an interest is irrevocable while any of the Obligations remain unpaid.  Agent shall act on any such power set forth herein only upon the occurrence and during the continuance of an Event of Default.  Agent shall have the right at any time following after an Event of Default has occurred and is continuing, to change the address for delivery of mail addressed to any Borrower to such address as Agent may designate and to receive, open and dispose of all mail addressed to any Borrower.                               (g)          No Liability   Neither Agent nor any Lender shall, under any circumstances or in any event whatsoever, have any liability for any error or omission or delay of any kind occurring in the settlement, collection or payment of any of the Receivables or any instrument received in payment thereof, or for any damage resulting therefrom.  At any time after an Event of Default has occurred and is continuing, Agent may, without notice or consent from any Borrower, sue upon or otherwise collect, extend the time of payment of, compromise or settle for cash, credit or upon any terms any of the Receivables or any other securities, instruments or insurance applicable thereto and/or release any obligor thereof.                               (h)          Establishment of a Lockbox Account, Dominion Account.     All proceeds of Collateral shall be deposited by Borrowers into either (i) a lockbox account, dominion account or such other “blocked account” (“Blocked Accounts”) established at a bank or banks (each such bank, a “Blocked Account Bank”) pursuant to an arrangement with such Blocked Account Bank as may be selected by Borrowing Agent and be acceptable to Agent or (ii) depository accounts (“Depository Accounts”) established at the Agent for the deposit of such proceeds.  Each applicable Borrower, Agent and each Blocked Account Bank shall enter into a deposit account control agreement in form and substance satisfactory to Agent directing such Blocked Account 43 Bank to transfer such funds so deposited to Agent, either to any account maintained by Agent at said Blocked Account Bank or by wire transfer to appropriate account(s) of Agent.  All funds deposited in such Blocked Accounts shall immediately become the property of Agent and Borrowing Agent shall obtain the agreement by such Blocked Account Bank to waive any offset rights against the funds so deposited.  Neither Agent nor any Lender assumes any responsibility for such blocked account arrangement, including any claim of accord and satisfaction or release with respect to deposits accepted by any Blocked Account Bank thereunder.  All deposit accounts and investment accounts of each Borrower and its Subsidiaries are set forth on Schedule 4.15(h).                               (i)          Adjustments.  No Borrower will, without Agent’s consent, compromise or adjust any Receivables (or extend the time for payment thereof) or grant any additional discounts, allowances or credits thereon except for those compromises, adjustments, discounts, credits and allowances as have been heretofore customary in the business of such Borrower.           4.16.     Inventory.  To the extent Inventory held for sale or lease has been produced by any Borrower, it has been and will be produced by such Borrower in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and all rules, regulations and orders thereunder.           4.17.     Maintenance of Equipment.  The Equipment shall be maintained in good operating condition and repair (reasonable wear and tear excepted) and all necessary replacements of and repairs thereto shall be made so that the value and operating efficiency of the Equipment shall be maintained and preserved.  No Borrower shall use or operate the Equipment in material violation of any Applicable Law.  Each Borrower shall have the right to sell Equipment to the extent set forth in Section 4.3 hereof.           4.18.     Exculpation of Liability.  Nothing herein contained shall be construed to constitute Agent or any Lender as any Borrower’s agent for any purpose whatsoever, nor shall Agent or any Lender be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located and regardless of the cause thereof.  Neither Agent nor any Lender, whether by anything herein or in any assignment or otherwise, assume any of any Borrower’s obligations under any contract or agreement assigned to Agent or such Lender, and neither Agent nor any Lender shall be responsible in any way for the performance by any Borrower of any of the terms and conditions thereof.           4.19.     Environmental Matters.                        (a)          Borrowers shall ensure that the Real Property and all operations and businesses conducted thereon remains in compliance with all Environmental Laws and they shall not place or permit to be placed any Hazardous Substances on any Real Property except as permitted by Applicable Law or appropriate governmental authorities.                         (b)          Borrowers shall establish and maintain a system to assure and monitor continued compliance with all applicable Environmental Laws which system shall include periodic reviews of such compliance.                         (c)          Borrowers shall (i) employ in connection with the use of the Real Property appropriate technology necessary to maintain compliance with any applicable Environmental 44 Laws and (ii) dispose of any and all Hazardous Waste generated at the Real Property only at facilities and with carriers that maintain valid permits under RCRA and any other applicable Environmental Laws.  Borrowers shall use their best efforts to obtain certificates of disposal, such as hazardous waste manifest receipts, from all treatment, transport, storage or disposal facilities or operators employed by Borrowers in connection with the transport or disposal of any Hazardous Waste generated at the Real Property.                         (d)          In the event any Borrower obtains, gives or receives notice of any Release or threat of Release of a reportable quantity of any Hazardous Substances at the Real Property (any such event being hereinafter referred to as a “Hazardous Discharge”) or receives any notice of violation, request for information or notification that it is potentially responsible for investigation or cleanup of environmental conditions at the Real Property, demand letter or complaint, order, citation, or other written notice with regard to any Hazardous Discharge or violation of Environmental Laws affecting the Real Property or any Borrower’s interest therein (any of the foregoing is referred to herein as an “Environmental Complaint”) from any Person, including any state agency responsible in whole or in part for environmental matters in the state in which the Real Property is located or the United States Environmental Protection Agency (any such person or entity hereinafter the “Authority”), then Borrowing Agent shall, within five (5) Business Days, give written notice of same to Agent detailing facts and circumstances of which any Borrower is aware giving rise to the Hazardous Discharge or Environmental Complaint.  Such information is to be provided to allow Agent to protect its security interest in and Lien on the Real Property and the Collateral and is not intended to create nor shall it create any obligation upon Agent or any Lender with respect thereto.                         (e)          Borrowing Agent shall promptly forward to Agent copies of any request for information, notification of potential liability, demand letter relating to potential responsibility with respect to the investigation or cleanup of Hazardous Substances at any other site owned, operated or used by any Borrower to dispose of Hazardous Substances and shall continue to forward copies of correspondence between any Borrower and the Authority regarding such claims to Agent until the claim is settled.  Borrowing Agent shall promptly forward to Agent copies of all documents and reports concerning a Hazardous Discharge at the Real Property that any Borrower is required to file under any Environmental Laws.  Such information is to be provided solely to allow Agent to protect Agent’s security interest in and Lien on the Real Property and the Collateral.                         (f)          Borrowers shall respond promptly to any Hazardous Discharge or Environmental Complaint and take all necessary action in order to safeguard the health of any Person and to avoid subjecting the Collateral or Real Property to any Lien.  If any Borrower shall fail to respond promptly to any Hazardous Discharge or Environmental Complaint or any Borrower shall fail to comply with any of the requirements of any Environmental Laws, Agent on behalf of Lenders may, but without the obligation to do so, for the sole purpose of protecting Agent’s interest in the Collateral:  (A) give such notices or (B) enter onto the Real Property (or authorize third parties to enter onto the Real Property) and take such actions as Agent (or such third parties as directed by Agent) deem reasonably necessary or advisable, to clean up, remove, mitigate or otherwise deal with any such Hazardous Discharge or Environmental Complaint.  All reasonable costs and expenses incurred by Agent and Lenders (or such third parties) in the exercise of any such rights, including any sums paid in connection with any judicial or 45 administrative investigation or proceedings, fines and penalties, together with interest thereon from the date expended at the Default Rate shall be paid upon demand by Borrowers, and until paid shall be added to and become a part of the Obligations secured by the Liens created by the terms of this Agreement or any other agreement between Agent, any Lender and any Borrower.                         (g)          Promptly upon the written request of Agent from time to time, Borrowers shall provide Agent, at Borrowers’ expense, with an environmental site assessment or environmental audit report prepared by an environmental engineering firm acceptable in the reasonable opinion of Agent, to assess with a reasonable degree of certainty the existence of a Hazardous Discharge and the potential costs in connection with abatement, cleanup and removal of any Hazardous Substances found on, under, at or within the Real Property.  Any report or investigation of such Hazardous Discharge proposed and acceptable to an appropriate Authority that is charged to oversee the clean-up of such Hazardous Discharge shall be acceptable to Agent.  If such estimates, individually or in the aggregate, exceed $100,000, Agent shall have the right to require Borrowers to post a bond, letter of credit or other security reasonably satisfactory to Agent to secure payment of these costs and expenses.                         (h)          Borrowers shall defend and indemnify Agent and Lenders and hold Agent, Lenders and their respective employees, agents, directors and officers harmless from and against all loss, liability, damage and expense, claims, costs, fines and penalties, including attorney’s fees, suffered or incurred by Agent or Lenders under or on account of any Environmental Laws, including the assertion of any Lien thereunder, with respect to any Hazardous Discharge, the presence of any Hazardous Substances affecting the Real Property, whether or not the same originates or emerges from the Real Property or any contiguous real estate, including any loss of value of the Real Property as a result of the foregoing except to the extent such loss, liability, damage and expense is attributable to any Hazardous Discharge resulting from actions on the part of Agent or any Lender.  Borrowers’ obligations under this Section 4.19 shall arise upon the discovery of the presence of any Hazardous Substances at the Real Property, whether or not any federal, state, or local environmental agency has taken or threatened any action in connection with the presence of any Hazardous Substances.  Borrowers’ obligation and the indemnifications hereunder shall survive the termination of this Agreement.                         (i)          For purposes of Section 4.19 and 5.7, all references to Real Property shall be deemed to include all of each Borrower’s right, title and interest in and to its owned and leased premises.           4.20.     Financing Statements.  Except as respects the financing statements filed by Agent and the financing statements described on Schedule 1.2, no financing statement covering any of the Collateral or any proceeds thereof is on file in any public office. V REPRESENTATIONS AND WARRANTIES.           Each Borrower represents and warrants as follows:           5.1.     Authority.  Each Borrower has full power, authority and legal right to enter into this Agreement and the Other Documents and to perform all its respective Obligations hereunder and thereunder.  This Agreement and the Other Documents have been duly executed and 46 delivered by each Borrower, and this Agreement and the Other Documents constitute the legal, valid and binding obligation of such Borrower enforceable in accordance with their terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, moratorium or similar laws affecting creditors’ rights generally.  The execution, delivery and performance of this Agreement and of the Other Documents (a) are within such Borrower’s corporate powers, have been duly authorized by all necessary corporate action, are not in contravention of law or the terms of such Borrower’s by-laws, certificate of incorporation or other applicable documents relating to such Borrower’s formation or to the conduct of such Borrower’s business or of any material agreement or undertaking to which such Borrower is a party or by which such Borrower is bound, (b) will not conflict with or violate any Applicable Law, (c) will not require the Consent of any Governmental Body or any other Person, except those Consents set forth on Schedule 5.1 hereto, all of which will have been duly obtained, made or compiled prior to the Closing Date and which are in full force and effect and (d) will not conflict with, nor result in any breach in any of the provisions of or constitute a default under or result in the creation of any Lien except Permitted Encumbrances upon any asset of such Borrower under the provisions of any agreement, charter document, instrument, by-law or other instrument to which such Borrower is a party or by which it or its property is a party or by which it may be bound, except where any such conflict or breach could not reasonably be expected to have a Material Adverse Effect.           5.2.     Formation and Qualification.                      (a)     Each Borrower is duly incorporated] and in good standing under the laws of the state listed on Schedule 5.2(a) and is qualified to do business and is in good standing in the states listed on Schedule 5.2(a) which constitute all states in which qualification and good standing are necessary for such Borrower to conduct its business and own its property and where the failure to so qualify could reasonably be expected to have a Material Adverse Effect on such Borrower.  Each Borrower has delivered to Agent true and complete copies of its certificate of incorporation and by-laws and will promptly notify Agent of any amendment or changes thereto.                      (b)     The only Subsidiaries of each Borrower are listed on Schedule 5.2(b).]           5.3.     Survival of Representations and Warranties.  All representations and warranties of such Borrower contained in this Agreement and the Other Documents shall be true at the time of such Borrower’s execution of this Agreement and the Other Documents, and shall survive the execution, delivery and acceptance thereof by the parties thereto and the closing of the transactions described therein or related thereto.            5.4.     Tax Returns.  Each Borrower’s federal tax identification number is set forth on Schedule 5.4.  Each Borrower has filed all federal, state and local tax returns and other reports each is required by law to file and has paid all taxes, assessments, fees and other governmental charges that are due and payable.  Federal, state and local income tax returns of each Borrower have been examined and reported upon by the appropriate taxing authority or closed by applicable statute and satisfied for all fiscal years prior to and including the fiscal year ending December 31, 2005.  The provision for taxes on the books of each Borrower is adequate for all years not closed by applicable statutes, and for its current fiscal year, and no Borrower has any actual knowledge of any deficiency or additional assessment in connection therewith not provided for on its books. 47           5.5.     Financial Statements.                      (a)     The twelve-month cash flow projections of Borrowers on a Consolidated Basis and their projected balance sheets as of the Closing Date, copies of which are annexed hereto as Exhibit 5.5(b) (the “Projections”) were prepared by the Chief Financial Officer of Intelligroup, are based on underlying assumptions which provide a reasonable basis for the projections contained therein and reflect Borrowers’ judgment based on present circumstances of the most likely set of conditions and course of action for the projected period.  The cash flow Projections.                      (b)     The consolidated and consolidating balance sheets of Borrowers, their Subsidiaries and such other Persons described therein (including the accounts of all Subsidiaries for the respective periods during which a subsidiary relationship existed) dated as of December 31, 2005, and the related statements of income, changes in stockholder’s equity, and changes in cash flow for the period ended on such date, all accompanied by reports thereon containing opinions without qualification by independent certified public accountants, copies of which have been delivered to Agent, have been prepared in accordance with GAAP, consistently applied (except for changes in application in which such accountants concur and present fairly the financial position of Borrowers and their Subsidiaries at such date and the results of their operations for such period.  Since December 31, 2005 there has been no change in the financial condition of Borrowers or their Subsidiaries (taken as a whole) as shown on the consolidated balance sheet as of such date and no change in the aggregate value of machinery and equipment owned by Borrowers and their respective Subsidiaries, except changes in the Ordinary Course of Business or changes which individually or in the aggregate have not been materially adverse to Borrowers and their Subsidiaries (taken as a whole).           5.6.     Entity Names.  No Borrower has been known by any other corporate name in the past five years and does not sell Inventory under any other name except as set forth on Schedule 5.6, nor has any Borrower been the surviving corporation of a merger or consolidation or acquired all or substantially all of the assets of any Person during the preceding five (5) years.           5.7.     O.S.H.A. and Environmental Compliance.                      (a)     Each Borrower has duly complied with, and its facilities, business, assets, property, leaseholds, Real Property and Equipment are in compliance in all material respects with, the provisions of the Federal Occupational Safety and Health Act, the Environmental Protection Act, RCRA and all other Environmental Laws; there have been no outstanding citations, notices or orders of non-compliance issued to any Borrower or relating to its business, assets, property, leaseholds or Equipment under any such laws, rules or regulations.                      (b)     Each Borrower has been issued all required federal, state and local licenses, certificates or permits relating to all applicable Environmental Laws. 48                      (c)     (i) There are no visible signs of releases, spills, discharges, leaks or disposal (collectively referred to as “Releases”) of Hazardous Substances at, upon, under or within any premises leased by any Borrower; (ii) there are no underground storage tanks or polychlorinated biphenyls on the Real Property; (iii) the Real Property has never been used as a treatment, storage or disposal facility of Hazardous Waste; and (iv) no Hazardous Substances are present on the Real Property or any premises leased by any Borrower, excepting such quantities as are handled in accordance with all applicable manufacturer’s instructions and governmental regulations and in proper storage containers and as are necessary for the operation of the commercial business of any Borrower or of its tenants.           5.8.     Solvency; No Litigation, Violation, Indebtedness or Default.                      (a)     Intelligroup is solvent, able to pay its debts as they mature, has capital sufficient to carry on its business and all businesses in which it is about to engage, and (i) as of the Closing Date, the fair present saleable value of its assets, calculated on a going concern basis, is in excess of the amount of its liabilities and (ii) subsequent to the Closing Date, the fair saleable value of its assets (calculated on a going concern basis) will be in excess of the amount of its liabilities.                      (b)     Except as disclosed in Schedule 5.8(b), no Borrower has (i) any pending or threatened litigation, arbitration, actions or proceedings which could reasonably be expected to have a Material Adverse Effect, and (ii) any liabilities or indebtedness for borrowed money other than the Obligations.                      (c)     No Borrower is in violation of any Applicable Laws in any respect which there could reasonably be expected to have a Material Adverse Effect.                      (d)     No Borrower nor any member of the Controlled Group maintains or contributes to any Plan other than those listed on Schedule 5.8(d) hereto.  (i) No Plan has incurred any “accumulated funding deficiency,” as defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether or not waived, and each Borrower and each member of the Controlled Group has met all applicable minimum funding requirements under Section 302 of ERISA in respect of each Plan; (ii) each Plan which is intended to be a qualified plan under Section 401(a) of the Code as currently in effect has been determined by the Internal Revenue Service to be qualified under Section 401(a) of the Code and the trust related thereto is exempt from federal income tax under Section 501(a) of the Code; (iii) neither any Borrower nor any member of the Controlled Group has incurred any liability to the PBGC other than for the payment of premiums, and there are no premium payments which have become due which are unpaid; (iv) no Plan has been terminated by the plan administrator thereof nor by the PBGC, and there is no occurrence which would cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Plan; (v) at this time, the current value of the assets of each Plan exceeds the present value of the accrued benefits and other liabilities of such Plan and neither any Borrower nor any member of the Controlled Group knows of any facts or circumstances which would materially change the value of such assets and accrued benefits and other liabilities; (vi) neither any Borrower nor any member of the Controlled Group has breached any of the responsibilities, obligations or duties imposed on it by ERISA with respect to any Plan; (vii) neither any Borrower nor any member of a Controlled Group has incurred any liability for any excise tax arising under Section 4972 or 4980B of the Code, and no fact exists which could give rise to any such liability; (viii) neither any Borrower nor any member of the Controlled Group 49 nor any fiduciary of, nor any trustee to, any Plan, has engaged in a “prohibited transaction” described in Section 406 of the ERISA or Section 4975 of the Code nor taken any action which would constitute or result in a Termination Event with respect to any such Plan which is subject to ERISA; (ix) each Borrower and each member of the Controlled Group has made all contributions due and payable with respect to each Plan; (x) there exists no event described in Section 4043(b) of ERISA, for which the thirty (30) day notice period has not been waived; (xi) neither any Borrower nor any member of the Controlled Group has any fiduciary responsibility for investments with respect to any plan existing for the benefit of persons other than employees or former employees of any Borrower and any member of the Controlled Group; (xii) neither any Borrower nor any member of the Controlled Group maintains or contributes to any Plan which provides health, accident or life insurance benefits to former employees, their spouses or dependents, other than in accordance with Section 4980B of the Code; (xiii) neither any Borrower nor any member of the Controlled Group has withdrawn, completely or partially, from any Multiemployer Plan so as to incur liability under the Multiemployer Pension Plan Amendments Act of 1980 and there exists no fact which would reasonably be expected to result in any such liability; and (xiv) no Plan fiduciary (as defined in Section 3(21) of ERISA) has any liability for breach of fiduciary duty or for any failure in connection with the administration or investment of the assets of a Plan.           5.9.     Patents, Trademarks, Copyrights and Licenses.    All material patents, patent applications, trademarks, trademark applications, service marks, service mark applications, copyrights, copyright applications, design rights, tradenames, assumed names, trade secrets and licenses owned or utilized by any Borrower are set forth on Schedule 5.9, are valid and have been duly registered or filed with all appropriate Governmental Bodies and constitute all of the intellectual property rights which are necessary for the operation of its business; there is no objection to or pending challenge to the validity of any such patent, trademark, copyright, design rights, tradename, trade secret or license and no Borrower is aware of any grounds for any challenge, except as set forth in Schedule 5.9 hereto.  Each material patent, patent application, patent license, trademark, trademark application, trademark license, service mark, service mark application, service mark license, design rights, copyright, copyright application and copyright license owned or held by any Borrower and all trade secrets used by any Borrower consist of original material or property developed by such Borrower or was lawfully acquired by such Borrower from the proper and lawful owner thereof.  Each of such items has been maintained so as to preserve the value thereof from the date of creation or acquisition thereof.  With respect to all software used by any Borrower, such Borrower is in possession of all source and object codes related to each piece of software or is the beneficiary of a source code escrow agreement, each such source code escrow agreement being listed on Schedule 5.9 hereto.           5.10.     Licenses and Permits.  Except as set forth in Schedule 5.10, each Borrower (a) is in compliance with and (b) has procured and is now in possession of, all material licenses or permits required by any applicable federal, state or local law, rule or regulation for the operation of its business in each jurisdiction wherein it is now conducting or proposes to conduct business, in each case, and where the failure to comply or to procure such licenses or permits could reasonably be expected to have a Material Adverse Effect. 50           5.11.     Default of Indebtedness.  No Borrower is in default in the payment of the principal of or interest on any Indebtedness in the aggregate in excess of Two Hundred Fifty Thousand Dollars ($250,000.00) or under any instrument or agreement under or subject to which any Indebtedness in the aggregate in excess of Two Hundred Fifty Thousand Dollars ($250,000.00) has been issued and no event has occurred under the provisions of any such instrument or agreement which with or without the lapse of time or the giving of notice, or both, constitutes or would constitute an event of default thereunder.           5.12.     No Default.  No Borrower is in default in the payment or performance of any of its contractual obligations which could reasonably be expected to have a Material Adverse Effect and no Default has occurred.           5.13.     No Burdensome Restrictions.  No Borrower is party to any contract or agreement the performance of which could reasonably be expected to have a Material Adverse Effect.  Each Borrower has heretofore delivered to Agent true and complete copies of all material contracts to which it is a party or to which it or any of its properties is subject.  No Borrower has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien which is not a Permitted Encumbrance.           5.14.     No Labor Disputes.  No Borrower is involved in any material labor dispute; there are no strikes or walkouts or union organization of any Borrower’s employees threatened or in existence and no labor contract is scheduled to expire during the Term other than as set forth on Schedule 5.14 hereto.           5.15.     Margin Regulations.   No Borrower is engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the purpose of “purchasing” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect.  No part of the proceeds of any Advance will be used for “purchasing” or “carrying” “margin stock” as defined in Regulation U of such Board of Governors.           5.16.     Investment Company Act.  No Borrower is an “investment company” registered or required to be registered under the Investment Company Act of 1940, as amended, nor is it controlled by such a company.           5.17.     Disclosure.  No representation or warranty made by any Borrower in this Agreement  or in any financial statement, report, certificate or any other document furnished in connection herewith contains any untrue statement of fact or omits to state any  fact necessary to make the statements herein or therein not misleading.  There is no fact actually known to any Borrower or which reasonably should be known to such Borrower which such Borrower has not disclosed to Agent in writing with respect to the transactions contemplated by this Agreement which could reasonably be expected to have a Material Adverse Effect.           5.18.     Swaps.  No Borrower is a party to, nor will it be a party to, any swap agreement whereby such Borrower has agreed or will agree to swap interest rates or currencies unless same provides that damages upon termination following an event of default thereunder are payable on an unlimited “two-way basis” without regard to fault on the part of either party. 51           5.19.     Conflicting Agreements.  No provision of any mortgage, indenture, contract, agreement, judgment, decree or order binding on any Borrower in excess of Two Hundred Fifty Thousand Dollars ($250,000.00) or affecting the Collateral conflicts with, or requires any Consent which has not already been obtained to, or would in any way prevent the execution, delivery or performance of, the terms of this Agreement or the Other Documents.           5.20.     Application of Certain Laws and Regulations.  Neither any Borrower nor any Affiliate of any Borrower is subject to any law, statute, rule or regulation which regulates the incurrence of any Indebtedness, including laws, statutes, rules or regulations relative to common or interstate carriers or to the sale of electricity, gas, steam, water, telephone, telegraph or other public utility services.           5.21.     Business and Property of Borrowers.  Upon and after the Closing Date, Borrowers do not propose to engage in any business other than providing information technology consulting system integration and implementation and outsourced application management services and activities necessary to conduct the foregoing.  On the Closing Date, each Borrower will own all the property and possess all of the rights and Consents necessary for the conduct of the business of such Borrower, except where the failure to own such property or possess such rights and Consents could not reasonably be expected to have a Material Adverse Effect.           5.22.     Section 20 Subsidiaries.   Borrowers do not intend to use and shall not use any portion of the proceeds of the Advances, directly or indirectly, to purchase during the underwriting period, or for 30 days thereafter, Ineligible Securities being underwritten by a Section 20 Subsidiary.           5.23.     Anti-Terrorism Laws.                                         (a)          General.  Neither any Borrower nor any Affiliate of any Borrower is in violation of any Anti-Terrorism Law or engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.                                         (b)          Executive Order No. 13224.  Neither any Borrower nor any Affiliate of any Borrower or their respective agents acting or benefiting in any capacity in connection with the Advances or other transactions hereunder, is any of the following (each a “Blocked Person”):                                         (i)           a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;                                         (ii)          a Person owned or  controlled  by, or acting for or on behalf  of,  any  Person  that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;                                         (iii)         a Person or entity with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; 52                                         (iv)          a Person or entity that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order No. 13224;                                         (v)           a Person or entity that is named as a “specially designated national” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list, or                                         (vi)          a Person or entity who is affiliated or associated with a Person or entity listed above.           Neither any Borrower nor to the knowledge of any Borrower, any of its agents acting in any capacity in connection with the Advances or other transactions hereunder (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property  blocked  pursuant to the Executive Order No. 13224.           5.24.     Trading with the Enemy.  No Borrower has engaged, nor does it intend to engage, in any business or activity prohibited by the Trading with the Enemy Act. VI AFFIRMATIVE COVENANTS.           Each Borrower shall, until payment in full of the Obligations and termination of this Agreement:           6.1.     Payment of Fees.   Pay to Agent on demand all usual and customary fees and expenses which Agent incurs in connection with (a) the forwarding of Advance proceeds and (b) the establishment and maintenance of any Blocked Accounts or Depository Accounts as provided for in Section 4.15(h).  Agent may, without making demand, charge Borrowers’ Account for all such fees and expenses.           6.2.     Conduct of Business and Maintenance of Existence and Assets.  (a) Conduct continuously and operate actively its business according to good business practices and maintain all of its properties useful or necessary in its business in good working order and condition (reasonable wear and tear excepted and except as may be disposed of in accordance with the terms of this Agreement), including all licenses, patents, copyrights, design rights, tradenames, trade secrets and trademarks and take all actions necessary to enforce and protect the validity of any intellectual property right or other right included in the Collateral; (b) keep in full force and effect its existence and comply in all material respects with the laws and regulations governing the conduct of its business where the failure to do so could reasonably be expected to have a Material Adverse Effect; and (c) make all such reports and pay all such franchise and other taxes and license fees and do all such other acts and things as may be lawfully required to maintain its rights, licenses, leases, powers and franchises under the laws of the United States or any political subdivision thereof. 53           6.3.     Violations.  Promptly notify Agent in writing of any violation of any Applicable Laws which could reasonably be expected to have a Material Adverse Effect.           6.4.     Government Receivables.  Take all steps reasonably necessary to protect Agent’s interest in the Collateral under the Federal Assignment of Claims Act, the Uniform Commercial Code and all other applicable state or local statutes or ordinances and deliver to Agent appropriately endorsed, any instrument or chattel paper connected with any Receivable arising out of contracts between any Borrower and the United States, any state or any department, agency or instrumentality of any of them.           6.5.     Financial Covenants.                                         (a)          Tangible Net Worth.  Maintain at the end of each fiscal year a Tangible Net Worth in an amount not less than Twenty Million Dollars ($20,000,000.00).  This covenant shall be tested only if average Undrawn Availability has been less than Five Million Dollars ($5,000,000.00) for a period of thirty (30) consecutive days during the fiscal year in question.                                         (b)          Fixed Charge Coverage Ratio.  Cause to be maintained as of the end of each fiscal quarter, calculated on a rolling four-quarter basis as of the end of any quarter in which Undrawn Availability is less than Five Million Dollars ($5,000,000.00) for a period of more than thirty (30) consecutive days, a Fixed Charge Coverage Ratio of not less than 1.1 to 1.0.           6.6.     Execution of Supplemental Instruments.  Execute and deliver to Agent from time to time, upon demand, such supplemental agreements, statements, assignments and transfers, or instructions or documents relating to the Collateral, and such other instruments as Agent may request, in order that the full intent of this Agreement may be carried into effect.           6.7.     Payment of Indebtedness.   Pay, discharge or otherwise satisfy at or before maturity (subject, where applicable, to specified grace periods and, in the case of the trade payables, to normal payment practices) all its obligations and liabilities of whatever nature, except when the failure to do so could not reasonably be expected to have a Material Adverse Effect or when the amount or validity thereof is currently being contested in good faith by appropriate proceedings and each Borrower shall have provided for such reserves as Agent may reasonably deem proper and necessary, subject at all times to any applicable subordination arrangement in favor of Lenders.           6.8.     Standards of Financial Statements.  Cause all financial statements referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, and 9.13 as to which GAAP is applicable to be complete and correct in all material respects (subject, in the case of interim financial statements, to normal year-end audit adjustments) and to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as concurred in by such reporting accountants or officer, as the case may be, and disclosed therein). 54 VII NEGATIVE COVENANTS.           No Borrower shall, until satisfaction in full of the Obligations and termination of this Agreement:           7.1.     Merger, Consolidation, Acquisition and Sale of Assets.                      (a)          Enter into any merger, consolidation or other reorganization with or into any other Person or acquire all or a substantial portion of the assets or Equity Interests of any Person or permit any other Person to consolidate with or merge with it.                      (b)          Sell, lease, transfer or otherwise dispose of any of its properties or assets, except (i) dispositions of Inventory and Equipment to the extent expressly permitted by Section 4.3 and (ii) any other sales or dispositions expressly permitted by this Agreement.           7.2.     Creation of Liens.  Create or suffer to exist any Lien or transfer upon or against any of its property or assets now owned or hereafter acquired, except Permitted Encumbrances.           7.3.      Guarantees.  Become liable upon the obligations or liabilities of any Person by assumption, endorsement or guaranty thereof or otherwise (other than to Lenders) except the endorsement of checks in the Ordinary Course of Business.           7.4.     Investments.  Purchase or acquire obligations or Equity Interests of, or any other interest in, any Person, except (a) obligations issued or guaranteed by the United States of America or any agency thereof, (b) commercial paper with maturities of not more than 180 days and a published rating of not less than A-1 or P-1 (or the equivalent rating), (c) certificates of time deposit and bankers’ acceptances having maturities of not more than 180 days and repurchase agreements backed by United States government securities of a commercial bank if (i) such bank has a combined capital and surplus of at least $500,000,000, or (ii) its debt obligations, or those of a holding company of which it is a Subsidiary, are rated not less than A (or the equivalent rating) by a nationally recognized investment rating agency, and (d) U.S. money market funds that invest solely in obligations issued or guaranteed by the United States of America or an agency thereof.           7.5.     Loans.   Make advances, loans or extensions of credit to any Person, including any Parent, Subsidiary or Affiliate except (a) to employees not to exceed the aggregate amount of Four Hundred Thousand Dollars ($400,000.00) at any time outstanding; and (b) to foreign Subsidiaries or divisions, not to exceed the aggregate amount of One Million Seven Hundred Thousand Dollars ($1,700,000.00) outstanding at any time. Notwithstanding anything contained herein to the contrary, Borrowers may make advances, loans or extensions of credit to their Subsidiaries which are organized under the laws of a United States jurisdiction without restriction as to dollar amount, provided Agent shall have received an executed Guarantee, Guarantor Security Agreements and such other documents as Agent may require all in form and substance satisfactory to Agent from each such Subsidiary, prior to the making of any such loan or extension of credit. 55           7.6.     Capital Expenditures.  Contract for, purchase or make any expenditure or commitments for Capital Expenditures in any fiscal year in an aggregate amount for all Borrowers in excess of Five Million Dollars ($5,000,000.00).           7.7.     Dividends.  Declare, pay or make any dividend or distribution on any shares of the common stock or preferred stock of any Borrower (other than dividends or distributions payable in its stock, or split-ups or reclassifications of its stock) or apply any of its funds, property or assets to the purchase, redemption or other retirement of any common or preferred stock, or of any options to purchase or acquire any such shares of common or preferred stock of any Borrower.           7.8.     Indebtedness.  Create, incur, assume or suffer to exist any Indebtedness (exclusive of trade debt) except in respect of (i) Indebtedness to Lenders; and (ii) Indebtedness incurred for Capital Expenditures permitted under Section 7.6 hereof.; and (iii) Indebtedness incurred in connection with a Permitted Acquisition, the terms and conditions of which must be reasonably acceptable to Agent and Lenders, provided, however, (a) the Indebtedness of a corporation which becomes a Subsidiary of a Borrower after the date hereof existed at the time such corporation became a Subsidiary and was not created in anticipation of the acquisition, and (b) immediately after giving effect to the acquisition of such corporation by a Borrower, no Default or Event of Default shall have occurred or be continuing.           7.9.     Nature of Business.  Substantially change the nature of the business in which it is presently engaged, nor except as specifically permitted hereby purchase or invest, directly or indirectly, in any assets or property other than in the Ordinary Course of Business for assets or property which are useful in, necessary for and are to be used in its business as presently conducted.           7.10.   Transactions with Affiliates.  Directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property to, or otherwise enter into any transaction or deal with, any Affiliate, except transactions disclosed to the Agent, which are in the Ordinary Course of Business, on an arm’s-length basis on terms and conditions no less favorable than terms and conditions which would have been obtainable from a Person other than an Affiliate.           7.11.   Leases.   Enter as lessee into any lease arrangement for real or personal property (unless capitalized and permitted under Section 7.6 hereof) if after giving effect thereto, aggregate annual rental payments for all leased property would exceed Five Hundred Thousand Dollars ($500,000.00) in any one fiscal year in the aggregate for all Borrowers or such other amount to which the Agent in its discretion may consent in writing.           7.12.   Subsidiaries.                      (a)     Form any Subsidiary unless (i) such Subsidiary expressly becomes a Guarantor hereunder and Agent receives a pledge of all the stock of each Subsidiary formed in a United States jurisdiction or not less than sixty five percent (65%) of the stock of each Subsidiary formed in a jurisdiction outside of the United States and (ii) Agent shall have received all documents, including legal opinions, it may reasonably require to establish compliance with each of the foregoing conditions. 56                        (b)     Enter into any partnership, joint venture or similar arrangement.           7.13.     Fiscal Year and Accounting Changes.  Change its fiscal year from December 31 or make any change (i) in accounting treatment and reporting practices except as required by GAAP or (ii) in tax reporting treatment except as required by law.           7.14.     Pledge of Credit.  Now or hereafter pledge Agent’s or any Lender’s credit on any purchases or for any purpose whatsoever or use any portion of any Advance in or for any business other than such Borrower’s business as conducted on the date of this Agreement.           7.15.     Amendment of Articles of Incorporation, By-Laws.  Amend, modify or waive any term or material provision of its Articles of Incorporation or By-Laws in a manner which is materially adverse to the Lenders taken as a whole, unless required by law.           7.16.     Compliance with ERISA.  (i) (x) Maintain, or permit any member of the Controlled Group to maintain, or (y) become obligated to contribute, or permit any member of the Controlled Group to become obligated to contribute, to any Plan, other than those Plans disclosed on Schedule 5.8(d), (ii) engage, or permit any member of the Controlled Group to engage, in any non-exempt “prohibited transaction”, as that term is defined in section 406 of ERISA and Section 4975 of the Code, (iii) incur, or permit any member of the Controlled Group to incur, any “accumulated funding deficiency”, as that term is defined in Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any member of the Controlled Group to terminate, any Plan where such event could result in any liability of any Borrower or any member of the Controlled Group or the imposition of a lien on the property of any Borrower or any member of the Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any member of the Controlled Group to assume, any obligation to contribute to any Multiemployer Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any member of the Controlled Group to incur, any withdrawal liability to any Multiemployer Plan; (vii) fail promptly to notify Agent of the occurrence of any Termination Event, (viii) fail to comply, or permit a member of the Controlled Group to fail to comply, with the requirements of ERISA or the Code or other Applicable Laws in respect of any Plan, (ix) fail to meet, or permit any member of the Controlled Group to fail to meet, all minimum funding requirements under ERISA or the Code or postpone or delay or allow any member of the Controlled Group to postpone or delay any funding requirement with respect of any Plan.           7.17.     Prepayment of Indebtedness.    At any time, directly or indirectly, prepay any Indebtedness (other than to Lenders), or repurchase, redeem, retire or otherwise acquire any Indebtedness of any Borrower.           7.18.     Anti-Terrorism Laws.  No Borrower shall, until satisfaction in full of the Obligations and termination of this Agreement, nor shall it permit any Affiliate or agent to:                        (a)     Conduct any business or engage in any transaction or dealing with any Blocked Person, including the making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person.                        (b)     Deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order No. 13224. 57                        (c)     Engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in the Executive Order No. 13224, the USA PATRIOT Act or any other Anti-Terrorism Law.  Borrower shall deliver to Lenders any certification or other evidence requested from time to time by any Lender in its sole discretion, confirming Borrower’s compliance with this Section.           7.19.     Membership/Partnership Interests.  Elect to treat or permit any of its Subsidiaries to (x) treat its limited liability company membership interests or partnership interests, as the case may be, as securities as contemplated by the definition of “security” in Section 8-102(15) and by Section 8-103 of Article 8 of Uniform Commercial Code or (y) certificate its limited liability company membership interests or partnership interests, as the case may be.           7.20.     Trading with the Enemy Act.  Engage in any business or activity in violation of the Trading with the Enemy Act. VIII CONDITIONS PRECEDENT.           8.1.     Conditions to First Advance Under This Agreement.  The agreement of Lenders to make any Advances requested to be made on the Closing Date or thereafter is subject to the satisfaction, or waiver by Agent, immediately prior to or concurrently with the making of such Advances, of the following conditions precedent:                                         (a)          Note.  Agent shall have received the Notes duly executed and delivered by an authorized officer of each Borrower;                                         (b)          Filings, Registrations and Recordings.  Each document (including any Uniform Commercial Code financing statement) required by this Agreement, any related agreement or under law or reasonably requested by the Agent to be filed, registered or recorded in order to create, in favor of Agent, a perfected security interest in or lien upon the Collateral shall have been properly filed, registered or recorded in each jurisdiction in which the filing, registration or recordation thereof is so required  or requested, and Agent shall have received an acknowledgment copy, or other evidence satisfactory to it, of each such filing, registration or recordation and satisfactory evidence of the payment of any necessary fee, tax or expense relating thereto;                                         (c)          Corporate Proceedings of Borrowers.  Agent shall have received a copy of the resolutions in form and substance reasonably satisfactory to Agent, of the Board of Directors of each Borrower authorizing (i) the execution, delivery and performance of this Agreement, the Notes, and the Other Agreements (collectively the “Documents”) and (ii) the granting by each Borrower of the security interests in and liens upon the Collateral in each case certified by the Secretary or an Assistant Secretary of each Borrower as of the Closing Date; and, such certificate shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded as of the date of such certificate;                                         (d)          Incumbency Certificates of Borrowers.  Agent shall have received a certificate of the Secretary or an Assistant Secretary of each Borrower, dated the Closing Date, as to the incumbency and signature of the officers of each Borrower executing this Agreement, the Other Documents, any certificate or other documents to be delivered by it pursuant hereto, together with evidence of the incumbency of such Secretary or Assistant Secretary; 58                                         (e)          Certificates.  Agent shall have received a copy of the Articles or Certificate of Incorporation of each Borrower, and all amendments thereto, certified by the Secretary of State or other appropriate official of its jurisdiction of incorporation together with copies of the By-Laws of each Borrower and all agreements of each Borrower’s shareholders certified as accurate and complete by the Secretary of  each Borrower;                                         (f)          Good Standing Certificates.  Agent shall have received good standing certificates (i) for each Borrower dated not more than thirty (30) days prior to the Closing Date, issued by the Secretary of State or other appropriate official of each Borrower’s jurisdiction of incorporation and (ii) dated not more than ninety (90) days after the Closing Date, issued by the Secretary of States of California and Illinois as to Intelligroup and the Secretary of State of Georgia as to Empower;                                         (g)          Legal Opinion.  Agent shall have received the executed legal opinion of Intelligroup’s legal department in form and substance satisfactory to Agent which shall cover such matters incident to the transactions contemplated by this Agreement, the Note, the Other Documents, and related agreements as Agent may reasonably require and each Borrower hereby authorizes and directs such counsel to deliver such opinions to Agent and Lenders;                                         (h)          No Litigation.  Except as set forth in Schedule 8.1(h), No litigation, investigation or proceeding before or by any arbitrator or Governmental Body shall be continuing or threatened against any Borrower or against the officers or directors of any Borrower (A) in connection with this Agreement, the Other Documents or any of the transactions contemplated thereby and which, in the reasonable opinion of Agent, is deemed material or (B) which could, in the reasonable opinion of Agent, have a Material Adverse Effect;                                         (i)          Financial Condition Certificates.  Agent shall have received an executed Financial Condition Certificate in the form of Exhibit 8.1(k).                                         (j)          Collateral Examination.    Agent shall have completed Collateral examinations, the results of which shall be satisfactory in form and substance to Lenders, of the Receivables of each Borrower and all books and records in connection therewith;                                         (k)          Fees.  Agent shall have received all fees payable to Agent and Lenders on or prior to the Closing Date hereunder, including pursuant to Article III hereof;                                         (l)          Projections.  Agent shall have received a copy of the Projections which shall be satisfactory in all respects to Lenders;                                         (m)         Insurance.  Agent shall have received in form and substance satisfactory to Agent, certified copies of Borrowers’ casualty insurance policies, together with loss payable endorsements on Agent’s standard form of loss payee endorsement naming Agent as loss payee, and certified copies of Borrowers’ liability insurance policies, together with endorsements naming Agent as a co-insured; 59                                         (n)          Blocked Accounts.  Agent shall have received duly executed agreements establishing the Blocked Accounts or Depository Accounts with financial institutions acceptable to Agent for the collection or servicing of the Receivables and proceeds of the Collateral;                                         (o)          Consents.  Agent shall have received any and all Consents necessary to permit the effectuation of the transactions contemplated by this Agreement and the Other Documents; and, Agent shall have received such Consents and waivers of such third parties as might assert claims with respect to the Collateral, as Agent and its counsel shall deem necessary;                                         (p)          No Adverse Material Change.  (i) since December 31, 2005, there shall not have occurred any event, condition or state of facts which could reasonably be expected to have a Material Adverse Effect and (ii) no representations made or information supplied to Agent or Lenders shall have been proven to be inaccurate or misleading in any material respect;                                         (q)          Leasehold Agreements.  Agent shall have received landlord, mortgagee or warehouseman agreements satisfactory to Agent with respect to all premises leased by Borrowers at which books and records are located;                                         (r)          Other Documents.  Agent shall have received the executed Other Documents, all in form and substance satisfactory to Agent;                                         (s)          Contract Review.  Agent shall have reviewed all material contracts of Borrowers including leases, union contracts, labor contracts, vendor supply contracts, license agreements and distributorship agreements and such contracts and agreements shall be satisfactory in all respects to Agent;                                         (t)          Closing Certificate.  Agent shall have received a closing certificate signed by the Chief Financial Officer of each Borrower dated as of the date hereof, stating that (i) all representations and warranties set forth in this Agreement and the Other Documents are true and correct on and as of such date, (ii) Borrowers are on such date in compliance with all the terms and provisions set forth in this Agreement and the Other Documents and (iii) on such date no Default or Event of Default has occurred or is continuing;                                         (u)          Borrowing Base.  Agent shall have received evidence from Borrowers that the aggregate amount of Eligible Receivables is sufficient in value and amount to support Advances in the amount requested by Borrowers on the Closing Date;                                         (v)          Undrawn Availability.  After giving effect to the Existing Loans and any additional Advances hereunder, on the Closing Date Borrowers shall have Undrawn Availability of at least Two Million Five Hundred Thousand Dollars ($2,500,000.00) and                                         (w)          Compliance with Laws.  Agent shall be reasonably satisfied that each Borrower is in compliance with all pertinent federal, state, local or territorial regulations, including those with respect to the Federal Occupational Safety and Health Act, the Environmental Protection Act, ERISA and the Trading with the Enemy Act. 60                                         (x)          Other.  All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the Transactions shall be satisfactory in form and substance to Agent and its counsel.           8.2.     Conditions to Each Advance.  The agreement of Lenders to make any Advance requested to be made on any date, is subject to the satisfaction of the following conditions precedent as of the date such Advance is made:                                         (a)          Representations and Warranties.  Each of the representations and warranties made by any Borrower in or pursuant to this Agreement, the Other Documents and any related agreements to which it is a party, and each of the representations and warranties contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement, the Other Documents or any related agreement shall be true and correct in all material respects on and as of such date as if made on and as of such date;                                         (b)          No Default.  No Event of Default or Default shall have occurred and be continuing on such date, or would exist after giving effect to the Advances requested to be made, on such date; provided, however that Agent, in its sole discretion, may continue to make Advances notwithstanding the existence of an Event of Default or Default and that any Advances so made shall not be deemed a waiver of any such Event of Default or Default; and           Each request for an Advance by any Borrower hereunder shall constitute a representation and warranty by each Borrower as of the date of such Advance that the conditions contained in this subsection shall have been satisfied. IX INFORMATION AS TO BORROWERS.           Each Borrower shall, or (except with respect to Section 9.11) shall cause Borrowing Agent on its behalf to, until satisfaction in full of the Obligations and the termination of this Agreement:           9.1.     Disclosure of Material Matters.  Immediately upon learning thereof, report to Agent all matters materially affecting the value, enforceability or collectibility of any portion of the Collateral, including any Borrower’s reclamation or repossession of, or the return to any Borrower of, a material amount of goods or claims or disputes asserted by any Customer or other obligor.            9.2.     Schedules.  Deliver to Agent on or before the fifteenth (15th) day of each month as and for the prior month (a) accounts receivable ageings inclusive of reconciliations to the general ledger, (b) accounts payable schedules inclusive of reconciliations to the general ledger, (c) Inventory reports and (d) a Borrowing Base Certificate in form and substance satisfactory to Agent (which shall be calculated as of the last day of the prior month and which shall not be binding upon Agent or restrictive of Agent’s rights under this Agreement).  In addition, each Borrower will deliver to Agent at such intervals as Agent may require:  (i) confirmatory assignment schedules, (ii) copies of Customer’s invoices, (iii) evidence of shipment or delivery, and (iv) such further schedules, documents and/or information regarding the Collateral as Agent may require including trial balances and test verifications.  Agent shall have the right to confirm and verify all Receivables by any manner and through any medium it considers advisable and do  61 whatever it may deem reasonably necessary to protect its interests hereunder. The items to be provided under this Section are to be in form satisfactory to Agent and executed by each Borrower and delivered to Agent from time to time solely for Agent’s convenience in maintaining records of the Collateral, and any Borrower’s failure to deliver any of such items to Agent shall not affect, terminate, modify or otherwise limit Agent’s Lien with respect to the Collateral.           9.3.     Environmental Certifications.  Include in each compliance certificate delivered with the financial statements referred to in Sections 9.7, 9.8 and 9.9, a representation that, to the best knowledge of the office executing such certificates, each Borrower is in compliance in all material respects with all federal, state and local Environmental Laws.  To the extent any Borrower is not in compliance with the foregoing laws, the certificate shall set forth with specificity all areas of non-compliance and the proposed action such Borrower will implement in order to achieve full compliance.           9.4.     Litigation.  Promptly notify Agent in writing of any claim, litigation, suit or administrative proceeding affecting any Borrower or any Guarantor, whether or not the claim is covered by insurance, and of any litigation, suit or administrative proceeding, which in any such case affects the Collateral or which could reasonably be expected to have a Material Adverse Effect.           9.5.     Material Occurrences.   Promptly notify Agent in writing upon the occurrence of (a) any Event of Default or Default; (b) any event, development or circumstance whereby any financial statements or other reports furnished to Agent fail in any material respect to present fairly, in accordance with GAAP consistently applied, the financial condition or operating results of any Borrower as of the date of such statements; (c) any accumulated retirement plan funding deficiency which, if such deficiency continued for two plan years and was not corrected as provided in Section 4971 of the Code, could subject any Borrower to a tax imposed by Section 4971 of the Code; (d) each and every default by any Borrower which might result in the acceleration of the maturity of any Indebtedness, including the names and addresses of the holders of such Indebtedness with respect to which there is a default existing or with respect to which the maturity has been or could be accelerated, and the amount of such Indebtedness; and (e) any other development in the business or affairs of any Borrower, which could reasonably be expected to have a Material Adverse Effect; in each case describing the nature thereof and the action Borrowers propose to take with respect thereto.           9.6.     Government Receivables.  Notify Agent, by disclosing same on each Borrowing Base Certificate, if any of its Receivables arise out of contracts between any Borrower and the United States, any state, or any department, agency or instrumentality of any of them.           9.7.     Annual Financial Statements.  Furnish Agent and Lenders within ninety-five  (95) days after the end of each fiscal year of Borrowers, financial statements of Borrowers on a consolidating and consolidated basis including, but not limited to, statements of income and stockholders’ equity and cash flow from the beginning of the current fiscal year to the end of such fiscal year and the balance sheet as at the end of such fiscal year, all prepared in accordance with GAAP applied on a basis consistent with prior practices, and in reasonable detail and reported upon without qualification by an independent certified public accounting firm selected 62 by Borrowers and satisfactory to Agent (the “Accountants”).  The report of the Accountants shall be accompanied by a statement of the Accountants certifying that (i) they have caused this Agreement to be reviewed, (ii) in making the examination upon which such report was based either no information came to their attention which to their knowledge constituted an Event of Default or a Default under this Agreement or any related agreement or, if such information came to their attention, specifying any such Default or Event of Default, its nature, when it occurred and whether it is continuing, and such report shall contain or have appended thereto calculations which set forth Borrowers’ compliance with the requirements or restrictions imposed by Sections 6.5, 7.4, 7.5,7.6, 7.7, 7.8 and 7.11 hereof.  In addition, the reports shall be accompanied by a Compliance Certificate.           9.8.     Quarterly Financial Statements.  Furnish Agent and Lenders within forty-seven (47) days after the end of each fiscal quarter, an unaudited balance sheet of Borrowers on a consolidated and consolidating basis and unaudited statements of income and stockholders’ equity and cash flow of Borrowers on a consolidated and consolidating basis reflecting results of operations from the beginning of the fiscal year to the end of such quarter and for such quarter, prepared on a basis consistent with prior practices and complete and correct in all material respects, subject to normal and recurring year end adjustments that individually and in the aggregate are not material to Borrowers’ business.  The reports shall be accompanied by a Compliance Certificate.           9.9.     Monthly Financial Statements.  Furnish Agent and Lenders within thirty (30) days after the end of each month, an unaudited balance sheet of Borrowers on a consolidated and consolidating basis and unaudited statements of income and stockholders’ equity and cash flow of Borrowers on a consolidated and consolidating basis reflecting results of operations from the beginning of the fiscal year to the end of such month and for such month, prepared on a basis consistent with prior practices and complete and correct in all material respects, subject to normal and recurring year end adjustments that individually and in the aggregate are not material to Borrowers’ business.  The reports shall be accompanied by a Compliance Certificate.           9.10.    Other Reports.  Furnish Agent as soon as available, but in any event within ten (10) days after the issuance thereof, with copies of such financial statements, reports and returns as each Borrower shall send to its stockholders and/or the Securities and Exchange Commission.           9.11.    Additional Information.  Furnish Agent with such additional information as Agent shall reasonably request in order to enable Agent to determine whether the terms, covenants, provisions and conditions of this Agreement and the Note have been complied with by Borrowers including, without the necessity of any request by Agent, (a) copies of all environmental audits and reviews, (b) at least thirty (30) days prior thereto, notice of any Borrower’s opening of any new office or place of business or any Borrower’s closing of any existing office or place of business, and (c) promptly upon any Borrower’s learning thereof, notice of any labor dispute to which any Borrower may become a party, any strikes or walkouts relating to any of its plants or other facilities, and the expiration of any labor contract to which any Borrower is a party or by which any Borrower is bound. 63           9.12.    Projected Operating Budget.  Furnish Agent and Lenders, no later than thirty (30) days subsequent to the beginning of each Borrower’s fiscal years a month by month projected operating budget and cash flow of Borrowers on a consolidated and consolidating basis for such fiscal year (including an income statement for each month and a balance sheet as at the end of the last month in each fiscal quarter), such projections to be accompanied by a certificate signed by the President or Chief Financial Officer of each Borrower to the effect that such projections have been prepared on the basis of sound financial planning practice consistent with past budgets and financial statements and that such officer has no reason to question the reasonableness of any material assumptions on which such projections were prepared.           9.13.    Variances From Operating Budget.   Furnish Agent, concurrently with the delivery of the financial statements referred to in Section 9.7 and each monthly report, a written report summarizing all material variances from budgets submitted by Borrowers pursuant to Section 9.12 whether under this Agreement or the Existing Loan Agreement and a discussion and analysis by management with respect to such variances.           9.14.     Notice of Suits, Adverse Events.  Furnish Agent with prompt written notice of (i) any lapse or other termination of any Consent issued to any Borrower by any Governmental Body or any other Person that is material to the operation of any Borrower’s business, (ii) any refusal by any Governmental Body or any other Person to renew or extend any such Consent; and (iii) copies of any periodic or special reports filed by any Borrower or any Guarantor with any Governmental Body or Person, if such reports indicate any material change in the business, operations, affairs or condition of any Borrower or any Guarantor, or if copies thereof are requested by Lender, and (iv) copies of any material notices and other communications from any Governmental Body or Person which specifically relate to any Borrower or any Guarantor.           9.15.     ERISA Notices and Requests.   Furnish Agent with immediate written notice in the event that (i) any Borrower or any member of the Controlled Group knows or has reason to know that a Termination Event has occurred, together with a written statement describing such Termination Event and the action, if any, which such Borrower or any member of the Controlled Group has taken, is taking, or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, Department of Labor or PBGC with respect thereto, (ii) any  Borrower or any member of the Controlled Group knows or has reason to know that a prohibited transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has occurred together with a written statement describing such transaction and the action which such Borrower or any member of the Controlled Group has taken, is taking or proposes to take with respect thereto, (iii) a funding waiver request has been filed with respect to any Plan together with all communications received by any Borrower or any member of the Controlled Group with respect to such request, (iv) any increase in the benefits of any existing Plan or the establishment of any new Plan or the commencement of contributions to any Plan to which any Borrower or any member of the Controlled Group was not previously contributing shall occur, (v) any Borrower or any member of the Controlled Group shall receive from the PBGC a notice of intention to terminate a Plan or to have a trustee appointed to administer a Plan, together with copies of each such notice, (vi) any Borrower or any member of the Controlled Group shall receive any favorable or unfavorable determination letter from the Internal Revenue Service regarding the qualification of a Plan under Section 401(a) of the Code, together with copies of each such letter; (vii) any Borrower or any member of the Controlled Group shall receive a notice regarding the imposition of withdrawal liability, together with copies of each such notice;  (viii) any Borrower or any member of the Controlled Group shall fail to make a required 64 installment or any other required payment under Section 412 of the Code on or before the due date for such installment or payment; (ix) any Borrower or any member of the Controlled Group knows that (a) a Multiemployer Plan has been terminated, (b) the administrator or plan sponsor of a Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan.           9.16     Customer Information.  On the first (1st) Business Day after January 1 and July 1 of each calendar year and at such other times as Agent may request, provide to Agent a list of all Customers to whom Borrowers have made a sale or rendered services with the past six (6) months, including for each Customer, the current address, the name of the current contact at each Customer and the current telephone number of each Customer.           9.17     Additional Documents.  Execute and deliver to Agent, upon request, such documents and agreements as Agent may, from time to time, reasonably request to carry out the purposes, terms or conditions of this Agreement. X EVENTS OF DEFAULT.           The occurrence of any one or more of the following events shall constitute an “Event of Default”:           10.1.     Nonpayment.  Failure by any Borrower to pay any principal or interest on the Obligations when due, whether at maturity or by reason of acceleration pursuant to the terms of this Agreement or by notice of intention to prepay, or by required prepayment or failure to pay any other liabilities or make any other payment, fee or charge provided for herein when due or in any Other Document;           10.2.     Breach of Representation.  Any representation or warranty made or deemed made by any Borrower or any Guarantor in this Agreement, any Other Document or any related agreement or in any certificate, document or financial or other statement furnished at any time in connection herewith or therewith shall prove to have been misleading in any material respect on the date when made or deemed to have been made;           10.3.     Financial Information.  Failure by any Borrower to (i) furnish financial information when due (in accordance with the terms of this Agreement) or when requested or (ii) permit the inspection of its books or records;           10.4.     Judicial Actions.  Issuance of a notice of Lien, levy, assessment, injunction or attachment against any Borrower’s Inventory or Receivables or against a material portion of any Borrower’s property which is not stayed or lifted within thirty (30) days;           10.5.     Noncompliance.  Except as otherwise provided for in Sections 10.1, 10.3 and 10.5(ii), (i) failure or neglect of any Borrower or any Guarantor to perform, keep or observe any term, provision, condition, covenant herein contained, or contained in any Other Document or any other agreement or arrangement, now or hereafter entered into between any Borrower or any Guarantor, and Agent or any Lender, or (ii) failure or neglect of any Borrower to perform, keep or observe any term, provision, condition or covenant, contained in Sections 4.6, 4.7, 4.9, 6.1, 6.3, 6.4, 9.4 or 9.6 hereof which is not cured within ten (10) days from the occurrence of such failure or neglect; 65           10.6.     Judgments.  Any judgment or judgments are rendered against Borrowers for an aggregate amount in excess of Two Hundred Fifty Thousand Dollars ($250,000.00) and (i) enforcement proceedings shall have been commenced by a creditor upon such judgment, (ii) there shall be any period of thirty (30) consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, shall not be in effect, or (iii) any such judgment results in the creation of a Lien upon any of the Collateral (other than a Permitted Encumbrance);           10.7.     Bankruptcy.  Any Borrower or any Guarantor shall (i) apply for, consent to or suffer the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or similar fiduciary of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of creditors, (iii) commence a voluntary case under any state or federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vi) acquiesce to, or fail to have dismissed, within thirty (30) days, any petition filed against it in any involuntary case under such bankruptcy laws, or (vii) take any action for the purpose of effecting any of the foregoing;           10.8.     Inability to Pay.  Any Borrower or any Guarantor shall admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business;           10.9.     Affiliate Bankruptcy.   Any Affiliate or any Subsidiary of any Borrower shall (i) apply for, consent to or suffer the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or similar fiduciary of itself or of all or a substantial part of its property, (ii) admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business, (iii) make a general assignment for the benefit of creditors, (iv) commence a voluntary case under any state or federal bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vii) acquiesce to, or fail to have dismissed, within thirty (30) days, any petition filed against it in any involuntary case under such bankruptcy laws, or (viii) take any action for the purpose of effecting any of the foregoing;           10.10.     Material Adverse Effect.  Any change in any Borrower’s or any Guarantor’s results of operations or condition (financial or otherwise) which in Agent’s opinion has a Material Adverse Effect;           10.11.     Lien Priority.  Any Lien created hereunder or provided for hereby or under any related agreement for any reason ceases to be or is not a valid and perfected Lien having a first priority interest;           10.12.     Cross Default.  A default of the obligations of any Borrower under any other agreement to which it is a party shall occur which adversely affects its condition, affairs or prospects (financial or otherwise) which default is not cured within any applicable grace period; 66           10.13.     Breach of Guaranty.  Termination or breach of any Guaranty or Guaranty Security Agreement or similar agreement executed and delivered to Agent in connection with the Obligations of any Borrower, or if any Guarantor attempts to terminate, challenges the validity of, or its liability under, any such Guaranty or Guaranty Security Agreement or similar agreement;           10.14.     Change of Management.  Any Change of Management shall occur;           10.15.     Invalidity.  Any material provision of this Agreement or any Other Document shall, for any reason, cease to be valid and binding on Borrower or any Guarantor, or any Borrower or any Guarantor shall so claim in writing to Agent or any Lender;           10.16.     Licenses.    (i) Any Governmental Body shall (A) revoke, terminate, suspend or adversely modify any license, permit, patent trademark or tradename of any Borrower or any Guarantor, the continuation of which is material to the continuation of any Borrower’s or Guarantor’s business, or (B) commence proceedings to suspend, revoke, terminate or adversely modify any such license, permit, trademark, tradename or patent and such proceedings shall not be dismissed or discharged within sixty (60) days, or (C) schedule or conduct a hearing on the renewal of any license, permit, trademark, trade name or patent necessary for the continuation of any Borrower’s or any Guarantor’s business and the staff of such Governmental Body issues a report recommending the termination, revocation, suspension or material, adverse modification of such license, permit, trademark, tradename or patent; (ii) any agreement which is necessary or material to the operation of any Borrower’s or any Guarantor’s business shall be revoked or terminated and not replaced by a substitute acceptable to Agent within thirty (30) days after the date of such revocation or termination, and such revocation or termination and non-replacement would reasonably be expected to have a Material Adverse Effect;           10.17.     Seizures.  Any portion of the Collateral shall be seized or taken by a Governmental Body, or any Borrower or any Guarantor or the title and rights of any Borrower, any Guarantor or any Original Owner which is the owner of any material portion of the Collateral shall have become the subject matter of claim, litigation, suit or other proceeding which might, in the opinion of Agent, upon final determination, result in impairment or loss of the security provided by this Agreement or the Other Documents; or           10.18.    Pension Plans.  An event or condition specified in Sections 7.16 or 9.15 hereof shall occur or exist with respect to any Plan and, as a result of such event or condition, together with all other such events or conditions, any Borrower or any member of the Controlled Group shall incur, or in the opinion of Agent be reasonably likely to incur, a liability to a Plan or the PBGC (or both) which could not reasonably be expected to have a Material Adverse Effect. XI LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT.           11.1.     Rights and Remedies.                         (a)                     Upon the occurrence of (i) an Event of Default pursuant to Section 10.7 all Obligations shall be immediately due and payable and this Agreement and the obligation of Lenders to make Advances shall be deemed terminated; and, (ii) any of the other Events of Default and at any time thereafter (such default not having previously been cured), at the option 67 of Required Lenders all Obligations shall be immediately due and payable and Lenders shall have the right to terminate this Agreement and to terminate the obligation of Lenders to make Advances.  Upon the occurrence of any Event of Default, Agent shall have the right to exercise any and all rights and remedies provided for herein, under the Other Documents, under the Uniform Commercial Code and at law or equity generally, including the right to foreclose the security interests granted herein and to realize upon any Collateral by any available judicial procedure and/or to take possession of and sell any or all of the Collateral with or without judicial process.  Agent may enter any of any Borrower’s premises or other premises without legal process and without incurring liability to any Borrower therefor, and Agent may thereupon, or at any time thereafter, in its discretion without notice or demand, take the Collateral and remove the same to such place as Agent may deem advisable and Agent may require Borrowers to make the Collateral available to Agent at a convenient place.  With or without having the Collateral at the time or place of sale, Agent may sell the Collateral, or any part thereof, at public or private sale, at any time or place, in one or more sales, at such price or prices, and upon such terms, either for cash, credit or future delivery, as Agent may elect.  Except as to that part of the Collateral which is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Agent shall give Borrowers reasonable notification of such sale or sales, it being agreed that in all events written notice mailed to Borrowing Agent at least ten (10) days prior to such sale or sales is reasonable notification.  At any public sale Agent or any Lender may bid for and become the purchaser, and Agent, any Lender or any other purchaser at any such sale thereafter shall hold the Collateral sold absolutely free from any claim or right of whatsoever kind, including any equity of redemption and all such claims, rights and equities are hereby expressly waived and released by each Borrower.  In connection with the exercise of the foregoing remedies, including the sale of Inventory, Agent is granted a perpetual nonrevocable, royalty free, nonexclusive license and Agent is granted permission to use all of each Borrower’s (a) trademarks, trade styles, trade names, patents, patent applications, copyrights, service marks, licenses, franchises and other proprietary rights which are used or useful in connection with Inventory for the purpose of marketing, advertising for sale and selling or otherwise disposing of such Inventory and (b) Equipment for the purpose of completing the manufacture of unfinished goods.  The cash proceeds realized from the sale of any Collateral shall be applied to the Obligations in the order set forth in Section 11.5 hereof.  Noncash proceeds will only be applied to the Obligations as they are converted into cash.  If any deficiency shall arise, Borrowers shall remain liable to Agent and Lenders therefor.                        (b)          To the extent that Applicable Law imposes duties on the Agent to exercise remedies in a commercially reasonable manner, each Borrower acknowledges and agrees that it is not commercially unreasonable for the Agent (i) to fail to incur expenses reasonably deemed significant by the Agent to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against Customers or other Persons obligated on Collateral or to remove Liens on or any adverse claims against Collateral, (iv) to exercise collection remedies against Customers and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other 68 Persons, whether or not in the same business as any Borrower, for expressions of interest in acquiring all or any portion of such Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (xi) to purchase insurance or credit enhancements to insure the Agent against risks of loss, collection or disposition of Collateral or to provide to the Agent a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by the Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist the Agent in the collection or disposition of any of the Collateral.  Each Borrower acknowledges that the purpose of this Section 11.1(b) is to provide non-exhaustive indications of what actions or omissions by the Agent would not be commercially unreasonable in the Agent’s exercise of remedies against the Collateral and that other actions or omissions by the Agent shall not be deemed commercially unreasonable solely on account of not being indicated in this Section 11.1(b).  Without limitation upon the foregoing, nothing contained in this Section 11.1(b) shall be construed to grant any rights to any Borrower or to impose any duties on Agent that would not have been granted or imposed by this Agreement or by Applicable Law in the absence of this Section 11.1(b).            11.2.     Agent’s Discretion.  Agent shall have the right in its sole discretion to determine which rights, Liens, security interests or remedies Agent may at any time pursue, relinquish, subordinate, or modify or to take any other action with respect thereto and such determination will not in any way modify or affect any of Agent’s or Lenders’ rights hereunder.           11.3.     Setoff.  Subject to Section 14.12, in addition to any other rights which Agent or any Lender may have under Applicable Law, upon the occurrence of an Event of Default hereunder, Agent and such Lender shall have a right, immediately and without notice of any kind, to apply any Borrower’s property held by Agent and such Lender to reduce the Obligations.           11.4.     Rights and Remedies not Exclusive.  The enumeration of the foregoing rights and remedies is not intended to be exhaustive and the exercise of any rights or remedy shall not preclude the exercise of any other right or remedies provided for herein or otherwise provided by law, all of which shall be cumulative and not alternative.           11.5.     Allocation of Payments After Event of Default.  Notwithstanding any other provisions of this Agreement to the contrary, after the occurrence and during the continuance of an Event of Default, all amounts collected or received by the Agent on account of the Obligations or any other amounts outstanding under any of the Other Documents or in respect of the Collateral may, at Agent’s discretion, be paid over or delivered as follows:           FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees) of the Agent in connection with enforcing its rights and the rights of the Lenders under this Agreement and the Other Documents and any protective advances made by the Agent with respect to the Collateral under or pursuant to the terms of this Document; 69           SECOND, to payment of any fees owed to the Agent;           THIRD, to the payment of all reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees) of each of the Lenders in connection with enforcing its rights under this Agreement and the Other Documents or otherwise with respect to the Obligations owing to such Lender;           FOURTH, to the payment of all of the Obligations consisting of accrued fees and interest;           FIFTH, to the payment of the outstanding principal amount of the Obligations (including the payment or cash collateralization of any outstanding Letters of Credit);           SIXTH, to all other Obligations and other obligations which shall have become due and payable under the Other Documents or otherwise and not repaid pursuant to clauses “FIRST” through “FIFTH” above; and           SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully entitled to receive such surplus.           In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; (ii) each of the Lenders shall receive (so long as it is not a Defaulting Lender) an amount equal to its pro rata share (based on the proportion that the then outstanding Advances held by such Lender bears to the aggregate then outstanding Advances) of amounts available to be applied pursuant to clauses “FOURTH”, “FIFTH” and “SIXTH” above; and (iii) to the extent that any amounts available for distribution pursuant to clause “FIFTH” above are attributable to the issued but undrawn amount of outstanding Letters of Credit, such amounts shall be held by the Agent in a cash collateral account and applied (A) first, to reimburse the Issuer from time to time for any drawings under such Letters of Credit and (B) then, following the expiration of all Letters of Credit, to all other obligations of the types described in clauses “FIFTH” and “SIXTH” above in the manner provided in this Section 11.5. XII WAIVERS AND JUDICIAL PROCEEDINGS.           12.1.     Waiver of Notice.  Each Borrower hereby waives notice of non-payment of any of the Receivables, demand, presentment, protest and notice thereof with respect to any and all instruments, notice of acceptance hereof, notice of loans or advances made, credit extended, Collateral received or delivered, or any other action taken in reliance hereon, and all other demands and notices of any description, except such as are expressly provided for herein.           12.2.     Delay.  No delay or omission on Agent’s or any Lender’s part in exercising any right, remedy or option shall operate as a waiver of such or any other right, remedy or option or of any Default or Event of Default.           12.3.     Jury Waiver.   EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER 70 INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. XIII EFFECTIVE DATE AND TERMINATION.           13.1.     Term.  This Agreement, which shall inure to the benefit of and shall be binding upon the respective successors and permitted assigns of each Borrower, Agent and each Lender, shall become effective on the date hereof and shall continue in full force and effect until May  22, 2008 (the “Term”) unless sooner terminated as herein provided.  Borrowers may terminate this Agreement at any time upon ninety (90) days’ prior written notice upon payment in full of the Obligations.  In the event the Obligations are paid in full prior to the last day of the Term or on any other date thereafter except an annual anniversary date of the Term (the date of such payment hereinafter referred to as an “Alternate Termination Date”), Borrowers shall pay to Agent for the benefit of Lenders a termination fee in an amount equal to (x) two and one-half percent (2.50%) of the Maximum Revolving Loan Amount if the Alternate Termination Date occurs on or after the Closing Date to and including the date immediately preceding the first anniversary of the Closing Date, (y) two percent (2.00%) of the Maximum Revolving Loan Amount if the Alternate Termination Date occurs on or after the first anniversary of the Closing Date and any date thereafter, except an annual anniversary of the Closing Date.           13.2.     Termination.  The termination of the Agreement shall not affect any Borrower’s, Agent’s or any Lender’s rights, or any of the Obligations having their inception prior to the effective date of such termination, and the provisions hereof shall continue to be fully operative until all transactions entered into, rights or interests created or Obligations have been fully and indefeasibly paid, disposed of, concluded or liquidated.  The security interests, Liens and rights granted to Agent and Lenders hereunder and the financing statements filed hereunder shall continue in full force and effect, notwithstanding the termination of this Agreement or the fact that Borrowers’ Account may from time to time be temporarily in a zero or credit position, until all of the Obligations of each Borrower have been indefeasibly paid and performed in full after the termination of this Agreement or each Borrower has furnished Agent and Lenders with an indemnification satisfactory to Agent and Lenders with respect thereto.  Accordingly, each Borrower waives any rights which it may have under the Uniform Commercial Code to demand the filing of termination statements with respect to the Collateral, and Agent shall not be required to send such termination statements to each Borrower, or to file them with any filing office, unless and until this Agreement shall have been terminated in accordance with its terms and all Obligations have been indefeasibly paid in full in immediately available funds.  All representations, warranties, covenants, waivers and agreements contained herein shall survive termination hereof until all Obligations are indefeasibly paid and performed in full. 71 XIV REGARDING AGENT.           14.1.     Appointment. Each Lender hereby designates PNC to act as Agent for such Lender under this Agreement and the Other Documents.  Each Lender hereby irrevocably authorizes Agent to take such action on its behalf under the provisions of this Agreement and the Other Documents and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto and Agent shall hold all Collateral, payments of principal and interest, fees (except the fees set forth in Sections 3.4(a) and (b), charges and collections (without giving effect to any collection days) received pursuant to this Agreement, for the ratable benefit of Lenders.  Agent may perform any of its duties hereunder by or through its agents or employees.  As to any matters not expressly provided for by this Agreement (including collection of the Note) Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding; provided, however, that Agent shall not be required to take any action which exposes Agent to liability or which is contrary to this Agreement or the Other Documents or Applicable Law unless Agent is furnished with an indemnification reasonably satisfactory to Agent with respect thereto.           14.2.     Nature of Duties.  Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the Other Documents.  Neither Agent nor any of its officers, directors, employees or agents shall be (i) liable for any action taken or omitted by them as such hereunder or in connection herewith, unless caused by their gross (not mere) negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment), or (ii) responsible in any manner for any recitals, statements, representations or warranties made by any Borrower or any officer thereof contained in this Agreement, or in any of the Other Documents or in any certificate, report, statement or other document referred to or provided for in, or received by Agent under or in connection with, this Agreement or any of the Other Documents or for the value, validity, effectiveness, genuineness, due execution, enforceability or sufficiency of this Agreement, or any of the Other Documents or for any failure of any Borrower to perform its obligations hereunder.  Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any of the Other Documents, or to inspect the properties, books or records of any Borrower.  The duties of Agent as respects the Advances to Borrowers shall be mechanical and administrative in nature; Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender; and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon Agent any obligations in respect of this Agreement except as expressly set forth herein.           14.3.     Lack of Reliance on Agent and Resignation.  Independently and without reliance upon Agent or any other Lender, each Lender has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of each Borrower and each 72 Guarantor in connection with the making and the continuance of the Advances hereunder and the taking or not taking of any action in connection herewith, and (ii) its own appraisal of the creditworthiness of each Borrower and each Guarantor.  Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before making of the Advances or at any time or times thereafter except as shall be provided by any Borrower pursuant to the terms hereof.  Agent shall not be responsible to any Lender for any recitals, statements, information, representations or warranties herein or in any agreement, document, certificate or a statement delivered in connection with or for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any Other Document, or of the financial condition of any Borrower or any Guarantor, or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement, the Note, the Other Documents or the financial condition of any Borrower, or the existence of any Event of Default or any Default.           Agent may resign on sixty (60) days’ written notice to each of Lenders and Borrowing Agent and upon such resignation, the Required Lenders will promptly designate a successor Agent reasonably satisfactory to Borrowers.           Any such successor Agent shall succeed to the rights, powers and duties of Agent, and the term “Agent” shall mean such successor agent effective upon its appointment, and the former Agent’s rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent.  After any Agent’s resignation as Agent, the provisions of this Article XIV shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement.           14.4.     Certain Rights of Agent.  If Agent shall request instructions from Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any Other Document, Agent shall be entitled to refrain from such act or taking such action unless and until Agent shall have received instructions from the Required Lenders; and Agent shall not incur liability to any Person by reason of so refraining.  Without limiting the foregoing, Lenders shall not have any right of action whatsoever against Agent as a result of its acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders.           14.5.     Reliance.  Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, order or other document or telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person or entity, and, with respect to all legal matters pertaining to this Agreement and the Other Documents and its duties hereunder, upon advice of counsel selected by it.  Agent may employ agents and attorneys-in-fact and shall not be liable for the default or misconduct of any such agents or attorneys-in-fact selected by Agent with reasonable care.           14.6.     Notice of Default.  Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder or under the Other Documents, unless Agent has received notice from a Lender or Borrowing Agent referring to this Agreement or the Other Documents, describing such Default or Event of Default and stating that such notice is a 73 “notice of default”.  In the event that Agent receives such a notice, Agent shall give notice thereof to Lenders.  Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided, that, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of Lenders.           14.7.     Indemnification.  To the extent Agent is not reimbursed and indemnified by Borrowers, each Lender will reimburse and indemnify Agent in proportion to its respective portion of the Advances (or, if no Advances are outstanding, according to its Commitment Percentage), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Agent in performing its duties hereunder, or in any way relating to or arising out of this Agreement or any Other Document; provided that, Lenders shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent’s gross (not mere) negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment).           14.8.     Agent in its Individual Capacity.  With respect to the obligation of Agent to lend under this Agreement, the Advances made by it shall have the same rights and powers hereunder as any other Lender and as if it were not performing the duties as Agent specified herein; and the term “Lender” or any similar term shall, unless the context clearly otherwise indicates, include Agent in its individual capacity as a Lender.  Agent may engage in business with any Borrower as if it were not performing the duties specified herein, and may accept fees and other consideration from any Borrower for services in connection with this Agreement or otherwise without having to account for the same to Lenders.           14.9.     Delivery of Documents.  To the extent Agent receives financial statements required under Sections 9.7, 9.8, 9.9, 9.12 and 9.13 or Borrowing Base Certificates from any Borrower pursuant to the terms of this Agreement which any Borrower is not obligated to deliver to each Lender, Agent will promptly furnish such documents and information to Lenders.           14.10.    Borrowers’ Undertaking to Agent.  Without prejudice to their respective obligations to Lenders under the other provisions of this Agreement, each Borrower hereby undertakes with Agent to pay to Agent from time to time on demand all amounts from time to time due and payable by it for the account of Agent or Lenders or any of them pursuant to this Agreement to the extent not already paid.  Any payment made pursuant to any such demand shall pro tanto satisfy the relevant Borrower’s obligations to make payments for the account of Lenders or the relevant one or more of them pursuant to this Agreement.           14.11.     No Reliance on Agent’s Customer Identification Program.  Each Lender acknowledges and agrees that neither such Lender, nor any of its Affiliates, participants or assignees, may rely on the Agent to carry out such Lender’s, Affiliate’s, participant’s or assignee’s customer identification program, or other obligations required or imposed under or pursuant to the USA PATRIOT Act or the regulations thereunder, including the regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the “CIP Regulations”), or any 74 other Anti-Terrorism Law, including any programs involving any of the following items relating to or in connection with any Borrower, its Affiliates or its agents, this Agreement, the Other Documents or the transactions hereunder or contemplated hereby: (1) any identity verification procedures, (2) any record-keeping, (3) comparisons with government lists, (4) customer notices or (5) other procedures required under the CIP Regulations or such other laws.           14.12.     Other Agreements.  Each of the Lenders agrees that it shall not, without the express consent of Agent, and that it shall, to the extent it is lawfully entitled to do so, upon the request of Agent, set off against the Obligations, any amounts owing by such Lender to any Borrower or any deposit accounts of any Borrower now or hereafter maintained with such Lender.  Anything in this Agreement to the contrary notwithstanding, each of the Lenders further agrees that it shall not, unless specifically requested to do so by Agent, take any action to protect or enforce its rights arising out of this Agreement or the Other Documents, it being the intent of Lenders that any such action to protect or enforce rights under this Agreement and the Other Documents shall be taken in concert and at the direction or with the consent of Agent or Required Lenders.  XV BORROWING AGENCY.           15.1.     Borrowing Agency Provisions.                          (a)     Each Borrower hereby irrevocably designates Borrowing Agent to be its attorney and agent and in such capacity to borrow, sign and endorse notes, and execute and deliver all instruments, documents, writings and further assurances now or hereafter required hereunder, on behalf of such Borrower or Borrowers, and hereby authorizes Agent to pay over or credit all loan proceeds hereunder in accordance with the request of Borrowing Agent.                          (b)     The handling of this credit facility as a co-borrowing facility with a borrowing agent in the manner set forth in this Agreement is solely as an accommodation to Borrowers and at their request.  Neither Agent nor any Lender shall incur liability to Borrowers as a result thereof.  To induce Agent and Lenders to do so and in consideration thereof, each Borrower hereby indemnifies Agent and each Lender and holds Agent and each Lender harmless from and against any and all liabilities, expenses, losses, damages and claims of damage or injury asserted against Agent or any Lender by any Person arising from or incurred by reason of the handling of the financing arrangements of Borrowers as provided herein, reliance by Agent or any Lender on any request or instruction from Borrowing Agent or any other action taken by Agent or any Lender with respect to this Section 15.1 except due to willful misconduct or gross (not mere) negligence by the indemnified party (as determined by a court of competent jurisdiction in a final and non-appealable judgment).                          (c)     All Obligations shall be joint and several, and each Borrower shall make payment upon the maturity of the Obligations by acceleration or otherwise, and such obligation and liability on the part of each Borrower shall in no way be affected by any extensions, renewals and forbearance granted to Agent or any Lender to any Borrower, failure of Agent or any Lender to give any Borrower notice of borrowing or any other notice, any failure of Agent or any Lender to pursue or preserve its rights against any Borrower, the release by Agent or any Lender of any Collateral now or thereafter acquired from any Borrower, and such agreement by 75 each Borrower to pay upon any notice issued pursuant thereto is unconditional and unaffected by prior recourse by Agent or any Lender to the other Borrowers or any Collateral for such Borrower’s Obligations or the lack thereof.  Each Borrower waives all suretyship defenses.           15.2.     Waiver of Subrogation.  Each Borrower expressly waives any and all rights of subrogation, reimbursement, indemnity, exoneration, contribution of any other claim which such Borrower may now or hereafter have against the other Borrowers or other Person directly or contingently liable for the Obligations hereunder, or against or with respect to the other Borrowers’ property (including, without limitation, any property which is Collateral for the Obligations), arising from the existence or performance of this Agreement, until termination of this Agreement and repayment in full of the Obligations. XVI MISCELLANEOUS.           16.1.     Governing Law.   This Agreement shall be governed by and construed in accordance with the laws of the State of New York applied to contracts to be performed wholly within the State of New York.  Any judicial proceeding brought by or against any Borrower with respect to any of the Obligations, this Agreement, the Other Documents or any related agreement may be brought in any court of competent jurisdiction in the State of New York, United States of America, and, by execution and delivery of this Agreement, each Borrower accepts for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement.  Each Borrower hereby waives personal service of any and all process upon it and consents that all such service of process may be made by registered mail (return receipt requested) directed to Borrowing Agent at its address set forth in Section 16.6 and service so made shall be deemed completed five (5) days after the same shall have been so deposited in the mails of the United States of America, or, at the Agent’s option, by service upon Borrowing Agent which each Borrower irrevocably appoints as such Borrower’s Agent for the purpose of accepting service.  Nothing herein shall affect the right to serve process in any manner permitted by law or shall limit the right of Agent or any Lender to bring proceedings against any Borrower in the courts of any other jurisdiction.  Each Borrower waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.  Each Borrower waives the right to remove any judicial proceeding brought against such Borrower in any state court to any federal court.  Any judicial proceeding by any Borrower against Agent or any Lender involving, directly or indirectly, any matter or claim in any way arising out of, related to or connected with this Agreement or any related agreement, shall be brought only in a federal or state court located in the County of New York, State of New York or the Southern District of New York.           16.2.     Entire Understanding.                          (a)     This Agreement and the documents executed concurrently herewith contain the entire understanding between each Borrower, Agent and each Lender and supersedes all prior agreements and understandings, if any, relating to the subject matter hereof.  Any promises, representations, warranties or guarantees not herein contained and hereinafter made shall have no force and effect unless in writing, signed by each Borrower’s, Agent’s and each 76 Lender’s respective officers.  Neither this Agreement nor any portion or provisions hereof may be changed, modified, amended, waived, supplemented, discharged, cancelled or terminated orally or by any course of dealing, or in any manner other than by an agreement in writing, signed by the party to be charged.  Each Borrower acknowledges that it has been advised by counsel in connection with the execution of this Agreement and Other Documents and is not relying upon oral representations or statements inconsistent with the terms and provisions of this Agreement.                          (b)     The Required Lenders or Agent with the consent in writing of the Required Lenders, and Borrowers may, subject to the provisions of this Section 16.2 (b), from time to time enter into written supplemental agreements to this Agreement or the Other Documents executed by Borrowers, for the purpose of adding or deleting any provisions or otherwise changing, varying or waiving in any manner the rights of Lenders, Agent or Borrowers thereunder or the conditions, provisions or terms thereof of waiving any Event of Default thereunder, but only to the extent specified in such written agreements; provided, however, that no such supplemental agreement shall, without the consent of all Lenders:                                     (i)      increase the Commitment Percentage, the maximum dollar commitment of any Lender or the Maximum Revolving Advance Amount.                                     (ii)     extend the maturity of any Note or the due date for any amount payable hereunder, or decrease the rate of interest or reduce any fee payable by Borrowers to Lenders pursuant to this Agreement.                                     (iii)    alter the definition of the term Required Lenders or alter, amend or modify this Section 16.2(b).                                     (iv)    release any Collateral during any calendar year (other than in accordance with the provisions of this Agreement) having an aggregate value in excess of Five Million Dollars ($5,000,000.00).                                     (v)     change the rights and duties of Agent.                                     (vi)    permit any Revolving Advance to be made if after giving effect thereto the total of Revolving Advances outstanding hereunder would exceed the Formula Amount for more than sixty (30) consecutive Business Days or exceed one hundred and five percent (105%) of the Formula Amount.                                     (vii)   increase the Advance Rates above the Advance Rates in effect on the Closing Date.                                     (viii)  release any Guarantor.           Any such supplemental agreement shall apply equally to each Lender and shall be binding upon Borrowers, Lenders and Agent and all future holders of the Obligations.  In the case of any waiver, Borrowers, Agent and Lenders shall be restored to their former positions and rights, and any Event of Default waived shall be deemed to be cured and not continuing, but no waiver of a specific Event of Default shall extend to any subsequent Event of Default (whether or not the subsequent Event of Default is the same as the Event of Default which was waived), or impair any right consequent thereon. 77           In the event that Agent requests the consent of a Lender pursuant to this Section 16.2 and such Lender shall not respond or reply to Agent in writing within five (5) days of delivery of such request, such Lender shall be deemed to have consented to the matter that was the subject of the request.  In the event that Agent requests the consent of a Lender pursuant to this Section 16.2 and such consent is denied, then PNC may, at its option, require such Lender to assign its interest in the Advances to PNC or to another Lender or to any other Person designated by the Agent (the “Designated Lender”), for a price equal to (i) the then outstanding principal amount thereof plus (ii) accrued and unpaid interest and fees due such Lender, which interest and fees shall be paid when collected from Borrowers.  In the event PNC elects to require any Lender to assign its interest to PNC or to the Designated Lender, PNC will so notify such Lender in writing within forty five (45) days following such Lender’s denial, and such Lender will assign its interest to PNC or the Designated Lender no later than five (5) days following receipt of such notice pursuant to a Commitment Transfer Supplement executed by such Lender, PNC or the Designated Lender, as appropriate, and Agent.           Notwithstanding (a) the existence of a Default or an Event of Default, (b) that any of the other applicable conditions precedent set forth in Section 8.2 hereof have not been satisfied or (c) any other provision of this Agreement, Agent may at its discretion and without the consent of the Required Lenders, voluntarily permit the outstanding Revolving Advances at any time to exceed  the Formula Amount by up to ten percent (10%) of the Formula Amount for up to thirty (30) consecutive Business Days (the “Out-of-Formula Loans”).  If Agent is willing in its sole and absolute discretion to make such Out-of-Formula Loans, such Out-of-Formula Loans shall be payable on demand and shall bear interest at the Default Rate; provided that, if Lenders do make Out-of-Formula Loans, neither Agent nor Lenders shall be deemed thereby to have changed the limits of Section 2.1(a).  For purposes of this paragraph, the discretion granted to Agent hereunder shall not preclude involuntary overadvances that may result from time to time due to the fact that the Formula Amount was unintentionally exceeded for any reason, including, but not limited to, Collateral previously deemed to be either “Eligible Receivables” or “Eligible Inventory”, as applicable, becomes ineligible, collections of Receivables applied to reduce outstanding Revolving Advances are thereafter returned for insufficient funds or overadvances are made to protect or preserve the Collateral.  In the event Agent involuntarily permits the outstanding Revolving Advances to exceed the Formula Amount by more than ten percent (10%), Agent shall use its efforts to have Borrowers decrease such excess in as expeditious a manner as is practicable under the circumstances and consistent with its business judgment.  Revolving Advances made after Agent has determined the existence of involuntary overadvances shall be deemed to be involuntary overadvances and shall be decreased in accordance with the preceding sentence.           In addition to (and not in substitution of) the discretionary Revolving Advances permitted above in this Section 16.2, the Agent is hereby authorized by Borrowers and the Lenders, from time to time in the Agent’s sole discretion, (A) after the occurrence and during the continuation of a Default or an Event of Default, or (B) at any time that any of the other applicable conditions precedent set forth in Section 8.2 hereof have not been satisfied, to make Revolving Advances to Borrowers on behalf of the Lenders which the Agent, in its reasonable business judgment, deems 78 necessary or desirable (a) to preserve or protect the Collateral, or any portion thereof, (b) to enhance the likelihood of, or maximize the amount of, repayment of the Advances and other Obligations, or (c) to pay any other amount chargeable to Borrowers pursuant to the terms of this Agreement; provided, that at any time after giving effect to any such Revolving Advances the outstanding Revolving Advances do not exceed one hundred and ten percent (110%) of the Formula Amount.           16.3.     Successors and Assigns; Participations; New Lenders.                         (a)     This Agreement shall be binding upon and inure to the benefit of Borrowers, Agent, each Lender, all future holders of the Obligations and their respective successors and assigns, except that no Borrower may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of Agent and each Lender.                         (b)     Each Borrower acknowledges that in the regular course of commercial banking business one or more Lenders may at any time and from time to time sell participating interests in the Advances to other financial institutions (each such transferee or purchaser of a participating interest, a “Participant”).  Each Participant may exercise all rights of payment (including rights of set-off) with respect to the portion of such Advances held by it or other Obligations payable hereunder as fully as if such Participant were the direct holder thereof provided that Borrowers shall not be required to pay to any Participant more than the amount which it would have been required to pay to Lender which granted an interest in its Advances or other Obligations payable hereunder to such Participant had such Lender retained such interest in the Advances hereunder or other Obligations payable hereunder and in no event shall Borrowers be required to pay any such amount arising from the same circumstances and with respect to the same Advances or other Obligations payable hereunder to both such Lender and such Participant.  Each Borrower hereby grants to any Participant a continuing security interest in any deposits, moneys or other property actually or constructively held by such Participant as security for the Participant’s interest in the Advances.                         (c)     Any Lender may with the consent of Agent which shall not be unreasonably withheld or delayed sell, assign or transfer all or any part of its rights under this Agreement and the Other Documents to one or more additional banks or financial institutions and one or more additional banks or financial institutions may commit to make Advances hereunder (each a “Purchasing Lender”, and together with each Participant, each a “Transferee” and collectively the “Transferees”), in minimum amounts of not less than Five Million Dollars ($5,000,000.00), pursuant to a Commitment Transfer Supplement, executed by a Purchasing Lender, the transferor Lender, and Agent and delivered to Agent for recording.  Upon such execution, delivery, acceptance and recording, from and after the transfer effective date determined pursuant to such Commitment Transfer Supplement, (i) Purchasing Lender thereunder shall be a party hereto and, to the extent provided in such Commitment Transfer Supplement, have the rights and obligations of a Lender thereunder with a Commitment Percentage as set forth therein, and (ii) the transferor Lender thereunder shall, to the extent provided in such Commitment Transfer Supplement, be released from its obligations under this Agreement, the Commitment Transfer Supplement creating a novation for that purpose.  Such Commitment Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender and the resulting 79 adjustment of the Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Agreement and the Other Documents.  Each Borrower hereby consents to the addition of such Purchasing Lender and the resulting adjustment of the Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Agreement and the Other Documents.  Borrowers shall execute and deliver such further documents and do such further acts and things in order to effectuate the foregoing.                         (d)     Agent shall maintain at its address a copy of each Commitment Transfer Supplement delivered to it and a register (the “Register”) for the recordation of the names and addresses of each Lender and the outstanding principal, accrued and unpaid interest and other fees due hereunder.  The entries in the Register shall be conclusive, in the absence of manifest error, and Borrowers, Agent and Lenders may treat each Person whose name is recorded in the Register as the owner of the Advance recorded therein for the purposes of this Agreement.  The Register shall be available for inspection by Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice.  Agent shall receive a fee in the amount of $3,500 payable by the applicable Purchasing Lender upon the effective date of each transfer or assignment to such Purchasing Lender.                         (e)     Each Borrower authorizes each Lender to disclose to any Transferee and any prospective Transferee any and all financial information in such Lender’s possession concerning such Borrower which has been delivered to such Lender by or on behalf of such Borrower pursuant to this Agreement or in connection with such Lender’s credit evaluation of such Borrower.           16.4.     Application of Payments.  Agent shall have the continuing and exclusive right to apply or reverse and re-apply any payment and any and all proceeds of Collateral to any portion of the Obligations.  To the extent that any Borrower makes a payment or Agent or any Lender receives any payment or proceeds of the Collateral for any Borrower’s benefit, which are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other party under any bankruptcy law, common law or equitable cause, then, to such extent, the Obligations or part thereof intended to be satisfied shall be revived and continue as if such payment or proceeds had not been received by Agent or such Lender.           16.5.     Indemnity.  Each Borrower shall indemnify Agent, each Lender and each of their respective officers, directors, Affiliates, attorneys, employees and agents from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including reasonable fees and disbursements of counsel) which may be imposed on, incurred by, or asserted against Agent or any Lender in any claim, litigation, proceeding or investigation instituted or conducted by any Governmental Body or instrumentality or any other Person with respect to any aspect of, or any transaction contemplated by, or referred to in, or any matter related to, this Agreement or the Other Documents, whether or not Agent or any Lender is a party thereto, except to the extent that any of the foregoing arises out of the willful misconduct of the party being indemnified (as determined by a court of competent jurisdiction in a final and non-appealable judgment).  80 Without limiting the generality of the foregoing, this indemnity shall extend to any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including fees and disbursements of counsel) asserted against or incurred by any of the indemnitees described above in this Section 16.5 by any Person under any Environmental Laws or similar laws by reason of any Borrower’s or any other Person’s failure to comply with laws applicable to solid or hazardous waste materials, including Hazardous Substances and Hazardous Waste, or other Toxic Substances.  Additionally, if any taxes (excluding taxes imposed upon or measured solely by the net income of Agent and Lenders, but including any intangibles taxes, stamp tax, recording tax or franchise tax) shall be payable by Agent, Lenders or Borrowers on account of the execution or delivery of this Agreement, or the execution, delivery, issuance or recording of any of the Other Documents, or the creation or repayment of any of the Obligations hereunder, by reason of any Applicable Law now or hereafter in effect, Borrowers will pay (or will promptly reimburse Agent and Lenders for payment of) all such taxes, including interest and penalties thereon, and will indemnify and hold the indemnitees described above in this Section 16.5 harmless from and against all liability in connection therewith.           16.6.     Notice.   Any notice or request hereunder may be given to Borrowing Agent or any Borrower or to Agent or any Lender at their respective addresses set forth below or at such other address as may hereafter be specified in a notice designated as a notice of change of address under this Section.  Any notice, request, demand, direction or other communication (for purposes of this Section 16.6 only, a “Notice”) to be given to or made upon any party hereto under any provision of this Loan Agreement shall be given or made by telephone or in writing (which includes by means of electronic transmission (i.e., “e-mail”) or facsimile transmission or by setting forth such Notice on a site on the World Wide Web (a “Website Posting”) if Notice of such Website Posting (including the information necessary to access such site) has previously been delivered to the applicable parties hereto by another means set forth in this Section 16.6) in accordance with this Section 16.6.  Any such Notice must be delivered to the applicable parties hereto at the addresses and numbers set forth under their respective names on Section 16.6 hereof or in accordance with any subsequent unrevoked Notice from any such party that is given in accordance with this Section 16.6.  Any Notice shall be effective:                         (a)     In the case of hand-delivery, when delivered;                         (b)     If given by mail, four days after such Notice is deposited with the United States Postal Service, with first-class postage prepaid, return receipt requested;                         (c)     In the case of a telephonic Notice, when a party is contacted by telephone, if delivery of such telephonic Notice is confirmed no later than the next Business Day by hand delivery, a facsimile or electronic transmission, a Website Posting or an overnight courier delivery of a confirmatory Notice (received at or before noon on such next Business Day);                         (d)     In the case of a facsimile transmission, when sent to the applicable party’s facsimile machine’s telephone number, if the party sending such Notice receives confirmation of the delivery thereof from its own facsimile machine;                         (e)     In the case of electronic transmission, when actually received; 81                         (f)     In the case of a Website Posting, upon delivery of a Notice of such posting (including the information necessary to access such site) by another means set forth in this Section 16.6; and                         (g)     If given by any other means (including by overnight courier), when actually received.            Any Lender giving a Notice to Borrowing Agent or any Borrower shall concurrently send a copy thereof to the Agent, and the Agent shall promptly notify the other Lenders of its receipt of such Notice.   (A) If to Agent or PNC at:           Steel City Capital Funding     c/o PNC Bank, National Association     70 East 55th Street     New York, NY  10022     Attention:  Kevin M. Madigan,                       Managing Director     Telephone:  (212) 303-0054     Facsimile:  (212) 303-0067           if there is more than one Lender hereunder, with a copy to:           PNC Bank, National Association     PNC Agency Services     PNC Firstside Center     500 First Avenue, 4th Floor     Pittsburgh, Pennsylvania 15219     Attention:          Lisa Pierce     Telephone:        (412) 762-6442     Facsimile:          (412) 762-8672           with an additional copy to:           Pitney Hardin LLP     U.S.Mail  PO Box 1945     Morristown, NJ 07962-1945     Courier:  200 Campus Drive     Florham Park, NJ 07932     Attention:  Linda K. Smith     Telephone:  (973) 966-8420     Facsimile:  (973) 966-1015         (B) If to a Lender other than Agent, as specified on the signature pages hereof 82   (C) If to Borrowing Agent or any Borrower:           Intelligroup, Inc.     499 Thornall Street     Edison, New Jersey 08837     Attention:  Madhu Poomalil     Telephone:  (732) 362-2134     Telecopier:  (732) 362-2106           with a copy to:           Intelligroup, Inc.     499 Thornall Street, 11th Floor     Edison, New Jersey 08837     Attention:       Legal Dept.     Telephone:     (732) 362-2136     Facsimile:      (732) 626-6010           16.7.     Survival.  The obligations of Borrowers under Sections 3.7, 3.8, 3.9, 4.19(h), and 16.5 and the obligations of Lenders under Section 14.7, shall survive termination of this Agreement and the Other Documents and payment in full of the Obligations.           16.8.     Severability.  If any part of this Agreement is contrary to, prohibited by, or deemed invalid under Applicable Laws or regulations, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given effect so far as possible.           16.9.     Expenses.  All costs and expenses including reasonable attorneys’ fees (including the allocated costs of in house counsel) and disbursements incurred by Agent on its behalf or on behalf of Lenders and Lenders (a) in all efforts made to enforce payment of any Obligation or effect collection of any Collateral, or (b) in connection with the entering into, modification, amendment, administration and enforcement of this Agreement or any consents or waivers hereunder and all related agreements, documents and instruments, or (c) in instituting, maintaining, preserving, enforcing and foreclosing on Agent’s security interest in or Lien on any of the Collateral, or maintaining, preserving or enforcing any of Agent’s or any Lender’s rights hereunder and under all related agreements, documents and instruments, whether through judicial proceedings or otherwise, or (d) in defending or prosecuting any actions or proceedings arising out of or relating to Agent’s or any Lender’s transactions with any Borrower or any Guarantor or (e) in connection with any advice given to Agent or any Lender with respect to its rights and obligations under this Agreement and all related agreements, documents and instruments, may be charged to Borrowers’ Account and shall be part of the Obligations.           16.10.     Injunctive Relief.  Each Borrower recognizes that, in the event any Borrower fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, or threatens to fail to perform, observe or discharge such obligations or liabilities, any remedy at law may prove to be inadequate relief to Lenders; therefore, Agent, if Agent so requests, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving that actual damages are not an adequate remedy. 83           16.11.     Consequential Damages.  Neither Agent nor any Lender, nor any agent or attorney for any of them, shall be liable to any Borrower or any Guarantor (or any Affiliate of any such Person) for indirect, punitive, exemplary or consequential damages arising from any breach of contract, tort or other wrong relating to the establishment, administration or collection of the Obligations or as a result of any transaction contemplated under this Agreement or any Other Document.           16.12.     Captions.  The captions at various places in this Agreement are intended for convenience only and do not constitute and shall not be interpreted as part of this Agreement.           16.13.     Counterparts; Facsimile Signatures.  This Agreement may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement.  Any signature delivered by a party by facsimile transmission shall be deemed to be an original signature hereto.           16.14.     Construction.  The parties acknowledge that each party and its counsel have reviewed 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 or any amendments, schedules or exhibits thereto.           16.15.     Confidentiality; Sharing Information.            Agent, each Lender and each Transferee shall hold all non-public information obtained by Agent, such Lender or such Transferee pursuant to the requirements of this Agreement in accordance with Agent’s, such Lender’s and such Transferee’s customary procedures for handling confidential information of this nature; provided, however, Agent, each Lender and each Transferee may disclose such confidential information (a) to its examiners, Affiliates, outside auditors, counsel and other professional advisors, (b) to Agent, any Lender or to any prospective Transferees, and (c) as required or requested by any Governmental Body or representative thereof or pursuant to legal process; provided, further that (i) unless specifically prohibited by Applicable Law or court order, Agent, each Lender and each Transferee shall use its reasonable best efforts prior to disclosure thereof, to notify the applicable Borrower of the applicable request for disclosure of such non-public information (A) by a Governmental Body or representative thereof (other than any such request in connection with an examination of the financial condition of a Lender or a Transferee by such Governmental Body) or (B) pursuant to legal process and (ii) in no event shall Agent, any Lender or any Transferee be obligated to return any materials furnished by any Borrower other than those documents and instruments in possession of Agent or any Lender in order to perfect its Lien on the Collateral once the Obligations have been paid in full and this Agreement has been terminated.  Each Borrower acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to such Borrower or one or more of its Affiliates (in connection with this Agreement or otherwise) by any Lender or by one or more Subsidiaries or Affiliates of such Lender and each Borrower hereby authorizes each Lender to share any information delivered to 84 such Lender by such Borrower and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of such Lender, it being understood that any such Subsidiary or Affiliate of any Lender receiving such information shall be bound by the provisions of this Section 16.15 as if it were a Lender hereunder.  Such authorization shall survive the repayment of the other Obligations and the termination of this Agreement.           16.16.     Publicity.  Each Borrower and each Lender hereby authorizes Agent to make appropriate announcements of the financial arrangement entered into among Borrowers, Agent and Lenders, including announcements which are commonly known as tombstones, in such publications and to such selected parties as Agent shall in its sole and absolute discretion deem appropriate.           16.17.     Certifications From Banks and Participants; US PATRIOT Act.  Each Lender or assignee or participant of a Lender that is not incorporated under the Laws of the United States of America or a state thereof (and is not excepted from the certification requirement contained in Section 313 of the USA PATRIOT Act and the applicable regulations because it is both (i) an affiliate of a depository institution or foreign bank that maintains a physical presence in the United States or foreign country, and (ii) subject to supervision by a banking authority regulating such affiliated depository institution or foreign bank) shall deliver to the Agent the certification, or, if applicable, recertification, certifying that such Lender is not a “shell” and certifying to other matters as required by Section 313 of the USA PATRIOT Act and the applicable regulations: (1) within 10 days after the Closing Date, and (2) as such other times as are required under the USA PATRIOT Act. XVII CONTINUING NATURE OF OBLIGATIONS AND SECURITY INTEREST.           17.1.     Amendment and Restatement.  This Agreement is an amendment and restatement of the Existing Loan Agreement in its entirety.           17.2.     Continuing Obligations.                         (a)     This Agreement is an amendment and restatement of and a substitution for the Existing Loan Agreement; it is not intended nor shall it be deemed to constitute a novation of the Obligations which are outstanding under the Existing Loan Agreement.                          (b)     All of the Obligations are continuing in nature and, as of the Closing Date, are due in accordance with the terms of this Agreement without any defense, offset, counterclaim or recoupment.                          (c)     The outstanding principal balance with respect to the Existing Revolving Loan set forth in the definition of such term is correct as of the date specified.           17.3.     Continuing Security Interests.  The liens and security interests in and to the Collateral in favor of PNC which were created under the Existing Loan Agreement and which are reaffirmed hereunder, are continuing and uninterrupted liens and security interests. 85           Each of the parties has signed this Second Amended and Restated Revolving Credit Loan and Security Agreement as of the day and year first above written. ATTEST:   INTELLIGROUP, INC.         --------------------------------------------------------------------------------   By: /s/ Madhu Poomalil       --------------------------------------------------------------------------------     Name: Madhi Poomalil     Title: Chief Financial Officer                 ATTEST:   EMPOWER, INC.             By: /s/ Madhu Poomalil --------------------------------------------------------------------------------     --------------------------------------------------------------------------------     Name: Madhu Poomalil     Title: Treasurer                     STEEL CITY CAPITAL FUNDING, a division of     PNC BANK, NATIONAL ASSOCIATION,     as Lender and as Agent             By: /s/ Kevin M. Madigan       --------------------------------------------------------------------------------     Name: Kevin M. Madigan     Title: Managing Director             Commitment Percentage:  100% STATE OF NEW YORK      )                                                ) ss. COUNTY OF NEW YORK  )           On this _____ day of ______________, 200_, before me personally came ____________________________, to me known, who, being by me duly sworn, did depose and say that s/he is the __________________ of _______________________, the [corporation] [limited liability company] described in and which executed the foregoing instrument; and that s/he signed her/his name thereto by order of the [board of directors] [management committee] of said [corporation] [limited liability company].         --------------------------------------------------------------------------------     Notary Public   STATE OF NEW YORK     )                                               ) ss. COUNTY OF NEW YORK )           On this _____ day of ______________, 200_, before me personally came ______________________________, to me known, who, being by me duly sworn, did depose and say that s/he is the __________________ of PNC BANK, NATIONAL ASSOCIATION, and that s/he was authorized to sign her/his name thereto.         --------------------------------------------------------------------------------     Notary Public   STATE OF NEW YORK     )                                               ) ss. COUNTY OF NEW YORK )           On this _____ day of ______________, 200_, before me personally came ______________________________, to me known, who, being by me duly sworn, did depose and say that s/he is the __________________ of _______________________, the[corporation] [limited liability company] described in and which executed the foregoing instrument and that s/he signed her/his name thereto by order of the [board of directors] [management committee] of said [corporation] [limited liability company].         --------------------------------------------------------------------------------     Notary Public   LIST OF EXHIBITS AND SCHEDULES Exhibits       Exhibit 1.2 Borrowing Base Certificate Exhibit 2.1(a) Revolving Credit Note Exhibit 5.5(b) Financial Projections Exhibit 8.1(k) Financial Condition Certificate Exhibit 16.3 Commitment Transfer Supplement     Schedules       Schedule 1-L/C Existing Letters of Credit Schedule 1.2 Permitted Encumbrances Schedule 4.5 Equipment and Inventory Locations, Real Property Schedule 4.15(c) Chief Executive office locations and other office locations Schedule 4.15(h) Deposit and Investment Accounts Schedule 5.1 Consents Schedule 5.2(a) States of Qualification and Good Standing Schedule 5.2(b) Subsidiaries Schedule 5.4 Federal Tax Identification Number Schedule 5.6 Prior Names Schedule 5.7 Environmental Schedule 5.8(b) Litigation Schedule 5.8(d) Plans Schedule 5.9 Intellectual Property, Source Code Escrow Agreements Schedule 5.10 Licenses and Permits Schedule 5.14 Labor Disputes  

SECURITIES PURCHASE AGREEMENT THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of April 1, 2006, by and among PACER HEALTH CORPORATION, a Florida corporation (the “Company”), and the Buyers listed on Schedule I attached hereto (individually, a “Buyer” or collectively “Buyers”). RECITALS: WHEREAS, the Company and the Buyer(s) are executing and delivering this Agreement in reliance upon an exemption from securities registration pursuant to Section 4(2) and/or Rule 506 of Regulation D (“Regulation D”) as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”); WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Buyer(s), as provided herein, and the Buyer(s) shall purchase up to Two Million Dollars ($2,000,000) of secured convertible debentures (the “Convertible Debentures”), which shall be convertible into shares of the Company’s common stock, par value $0.001 (the “Common Stock”) (as converted, the “Conversion Shares”) of which One Million Dollars ($1,000,000) shall be funded on the fifth (5th) business day following the date hereof (the “First Closing”) and One Million Dollars ($1,000,000) shall be funded two (2) business days prior to the date the registration statement (the “Registration Statement”) is filed, pursuant to the Investor Registration Rights Agreement dated the date hereof, with the United States Securities and Exchange Commission (the “SEC”) (the “Second Closing”) (individually referred to as a “Closing” collectively referred to as the “Closings”), for a total purchase price of up to Two Million Dollars ($2,000,000), (the “Purchase Price”) in the respective amounts set forth opposite each Buyer(s) name on Schedule I (the “Subscription Amount”); WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement (the “Investor Registration Rights Agreement”) pursuant to which the Company has agreed to provide certain registration rights under the Securities Act and the rules and regulations promulgated there under, and applicable state securities laws; WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Company and the Buyers are executing and delivering an Amended and Restated Security Agreement; (1) Pacer Health Services, Inc., a Florida corporation, (2) Pacer Holdings of Arkansas, Inc., a Florida corporation, (3) Pacer Holdings of Georgia, Inc., a Florida corporation, (4) Pacer Holdings of Louisiana, Inc., a Florida corporation, (5) Pacer Health Management of Florida, LLC, a Florida corporation, (6) Pacer Holdings of Lafayette, Inc., a Louisiana corporation, (7) Pacer Health Management Corporation of Georgia, a Georgia corporation, (8) Pacer Health Management Corporation, a Louisiana corporation, and (9) Pacer Health Psychiatric, Inc., a Louisiana corporation, each a wholly owned subsidiary of the Company, and the Buyers are executing and delivering a Security Agreement (all such security agreements between the Buyers and the subsidiaries of the Company and the Amended and Restated Security Agreement between the Company and the Buyers shall collectively be referred to as the “Security Agreement”) pursuant to which the Company and its wholly owned subsidiaries agreed to provide the Buyers a security interest in Pledged Collateral (as this term is defined in the each Security Agreement) to secure the Company’s obligations under this Agreement, the Transaction Documents, or any other obligations of the Company to the Buyer;     --------------------------------------------------------------------------------     WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Pledge and Escrow Agreement (the “Pledge and Escrow Agreement”) pursuant to which the Pledgor has agreed to provide the Buyer a security interest in the Pledged Shares (as this term is defined in the Pledge and Escrow Agreement) to secure the Company’s obligations under this Agreement, the Transaction Documents, or any other obligations of the Company to the Buyer; WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering Irrevocable Transfer Agent Instructions (the “Irrevocable Transfer Agent Instructions”); and WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Deed to Secure Debt and Security Agreement (the “Security Deed”) between Pacer Health Management Corporation of Georgia, Inc. and the Buyer, giving the Buyer a security interest in real property in the Minnie G. Boswell Memorial Hospital, located in Greene County Georgia. NOW, THEREFORE, for and in consideration of the mutual covenants and other agreements contained in this Agreement, and for other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, the Company and the Buyer(s) hereby agree as follows: 1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES. (a) Purchase of Convertible Debentures. Subject to the satisfaction (or waiver) of the terms and conditions of this Agreement, each Buyer agrees, severally and not jointly, to purchase at each Closing and the Company agrees to sell and issue to each Buyer, severally and not jointly, at each Closing, Convertible Debentures in amounts corresponding with the Subscription Amount set forth opposite each Buyer’s name on Schedule I hereto. (b) Closing Date. The First Closing of the purchase and sale of the Convertible Debentures shall take place at 10:00 a.m. Eastern Standard Time on the fifth (5th) business day following the date hereof, subject to notification of satisfaction of the conditions to the First Closing set forth herein and in Sections 6 and 7 below (or such later date as is mutually agreed to by the Company and the Buyer(s)) (the “First Closing Date”) and the Second Closing of the purchase and sale of the Convertible Debentures shall take place at 10:00 a.m. Eastern Standard Time two (2) business days prior to the date the Registration Statement is filed with the SEC, subject to notification of satisfaction of the conditions to the Second Closing set forth herein and in Sections 6 and 7 below (or such later date as is mutually agreed to by the Company and the Buyer(s)) (the “Second Closing Date”) (collectively referred to a the “Closing Dates”). The Closing shall occur on the respective Closing Dates at the offices of Yorkville Advisors, LLC, 101 Hudson Street, Suite 3700, Jersey City, New Jersey 07302 (or such other place as is mutually agreed to by the Company and the Buyer(s)).   2 --------------------------------------------------------------------------------     (c) Form of Payment. Subject to the satisfaction of the terms and conditions of this Agreement, on the Closing Dates, (i) the Buyers shall deliver to the Company such aggregate proceeds for the Convertible Debentures to be issued and sold to such Buyer(s), minus the fees to be paid directly from the proceeds the Closings as set forth herein, and (ii) the Company shall deliver to each Buyer, Convertible Debentures which such Buyer(s) is purchasing in amounts indicated opposite such Buyer’s name on Schedule I, duly executed on behalf of the Company. 2. BUYER’S REPRESENTATIONS AND WARRANTIES. Each Buyer represents and warrants, severally and not jointly, that: (a) Investment Purpose. Each Buyer is acquiring the Convertible Debentures and, upon conversion of Convertible Debentures, the Buyer will acquire the Conversion Shares then issuable, for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act; provided, however, that by making the representations herein, such Buyer reserves the right to dispose of the Conversion Shares at any time in accordance with or pursuant to an effective registration statement covering such Conversion Shares or an available exemption under the Securities Act. (b) Accredited Investor Status. Each Buyer is an “Accredited Investor” as that term is defined in Rule 501(a)(3) of Regulation D. (c) Reliance on Exemptions. Each Buyer understands that the Convertible Debentures are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire such securities. (d) Information. Each Buyer and its advisors (and his or, its counsel), if any, have been furnished with all materials relating to the business, finances and operations of the Company and information he deemed material to making an informed investment decision regarding his purchase of the Convertible Debentures and the Conversion Shares, which have been requested by such Buyer. Each Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company and its management. Neither such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives shall modify, amend or affect such Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. Each Buyer understands that its investment in the Convertible Debentures and the Conversion Shares involves a high degree of risk. Each Buyer is in a position regarding the Company, which, based upon employment, family relationship or economic bargaining power, enabled and enables such Buyer to obtain information from the Company in order to evaluate the merits and risks of this investment. Each Buyer has sought such accounting, legal and tax advice, as it has considered necessary to make an informed investment decision with respect to its acquisition of the Convertible Debentures and the Conversion Shares.   3 --------------------------------------------------------------------------------     (e) No Governmental Review. Each Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Convertible Debentures or the Conversion Shares, or the fairness or suitability of the investment in the Convertible Debentures or the Conversion Shares, nor have such authorities passed upon or endorsed the merits of the offering of the Convertible Debentures or the Conversion Shares. (f) Transfer or Resale. Each Buyer understands that except as provided in the Investor Registration Rights Agreement: (i) the Convertible Debentures have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, or (B) such Buyer shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration requirements; (ii) any sale of such securities made in reliance on Rule 144 under the Securities Act (or a successor rule thereto) (“Rule 144”) may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of such securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. The Company reserves the right to place stop transfer instructions against the shares and certificates for the Conversion Shares. (g) Legends. Each Buyer understands that the certificates or other instruments representing the Convertible Debentures and or the Conversion Shares shall bear a restrictive legend in substantially the following form (and a stop -transfer order may be placed against transfer of such stock certificates): THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.   4 --------------------------------------------------------------------------------     The legend set forth above shall be removed and the Company within two (2) business days shall issue a certificate without such legend to the holder of the Conversion Shares upon which it is stamped, if, unless otherwise required by state securities laws, (i) in connection with a sale transaction, provided the Conversion Shares are registered under the Securities Act or (ii) in connection with a sale transaction, after such holder provides the Company with an opinion of counsel, which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale, assignment or transfer of the Conversion Shares may be made without registration under the Securities Act. (h) Authorization, Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of such Buyer and is a valid and binding agreement of such Buyer enforceable in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies. (i) Receipt of Documents. Each Buyer and his or its counsel has received and read in their entirety: (i) this Agreement and each representation, warranty and covenant set forth herein and the Transaction Documents (as defined herein); (ii) all due diligence and other information necessary to verify the accuracy and completeness of such representations, warranties and covenants; (iii) the Company’s Form 10-KSB for the fiscal year ended December 31, 2004; (iv) the Company’s Form 10-QSB for the fiscal quarter ended September 30, 2005 and (v) answers to all questions each Buyer submitted to the Company regarding an investment in the Company; and each Buyer has relied on the information contained therein and has not been furnished any other documents, literature, memorandum or prospectus. (j) Due Formation of Corporate and Other Buyers. If the Buyer(s) is a corporation, trust, partnership or other entity that is not an individual person, it has been formed and validly exists and has not been organized for the specific purpose of purchasing the Convertible Debentures and is not prohibited from doing so. (k) No Legal Advice From the Company. Each Buyer acknowledges, that it had the opportunity to review this Agreement and the transactions contemplated by this Agreement with his or its own legal counsel and investment and tax advisors. Each Buyer is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of its representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants as of the date hereof to each of the Buyers that, except as set forth in the SEC Documents (as defined herein) or in the Disclosure Schedule attached hereto (the “Disclosure Schedule”):   5 --------------------------------------------------------------------------------     (a) Organization and Qualification. The Company and its subsidiaries are corporations duly organized and validly existing in good standing under the laws of the jurisdiction in which they are incorporated, and have the requisite corporate power to own their properties and to carry on their business as now being conducted. Each of the Company and its subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole. (b) Authorization, Enforcement, Compliance with Other Instruments. (i) The Company has the requisite corporate power and authority to enter into and perform this Agreement, the Security Agreement, the Investor Registration Rights Agreement, the Irrevocable Transfer Agent Agreement, the Pledge and Escrow Agreement, the Security Deed, and any related agreements (collectively the “Transaction Documents”) and to issue the Convertible Debentures and the Conversion Shares in accordance with the terms hereof and thereof, (ii) the execution and delivery of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Convertible Debentures the Conversion Shares and the reservation for issuance and the issuance of the Conversion Shares issuable upon conversion or exercise thereof, have been duly authorized by the Company’s Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its stockholders, (iii) the Transaction Documents have been duly executed and delivered by the Company, (iv) the Transaction Documents constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies. The authorized officer of the Company executing the Transaction Documents knows of no reason why the Company cannot file the registration statement as required under the Investor Registration Rights Agreement or perform any of the Company’s other obligations under such documents. (c) Capitalization. The authorized capital stock of the Company consists of 930,000,000 shares of Common Stock, par value $0.001, and 20,000,000 shares of Preferred Stock, par value $0.0001 (“Preferred Stock”) of which 573,126,246 shares of Common Stock and zero shares of Preferred Stock are issued and outstanding. All of such outstanding shares have been validly issued and are fully paid and nonassessable. No shares of Common Stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company. As of the date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, (ii) there are no outstanding debt securities and (iii) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of their securities under the Securities Act (except pursuant to the Registration Rights Agreement) and (iv) there are no outstanding registration statements and there are no outstanding comment letters from the SEC or any other regulatory agency. There are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Convertible Debentures as described in this Agreement. The Company has furnished to the Buyer true and correct copies of the Company’s Articles of Incorporation, as amended and as in effect on the date hereof (the “Articles of Incorporation”), and the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock and the material rights of the holders thereof in respect thereto other than stock options issued to employees and consultants.   6 --------------------------------------------------------------------------------     (d) Issuance of Securities. The Convertible Debentures are duly authorized and, upon issuance in accordance with the terms hereof, shall be duly issued, fully paid and nonassessable, are free from all taxes, liens and charges with respect to the issue thereof. The Conversion Shares issuable upon conversion of the Convertible Debentures have been duly authorized and reserved for issuance. Upon conversion or exercise in accordance with the Convertible Debentures the Conversion Shares will be duly issued, fully paid and nonassessable. (e) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby will not (i) result in a violation of the Articles of Incorporation, any certificate of designations of any outstanding series of preferred stock of the Company or the By-laws or (ii) conflict with or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of The National Association of Securities Dealers Inc.’s OTC Bulletin Board on which the Common Stock is quoted) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries is bound or affected. Neither the Company nor its subsidiaries is in violation of any term of or in default under its Articles of Incorporation or By-laws or their organizational charter or by-laws, respectively, or any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its subsidiaries. The business of the Company and its subsidiaries is not being conducted, and shall not be conducted in violation of any material law, ordinance, or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the Securities Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under or contemplated by this Agreement or the Registration Rights Agreement in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company and its subsidiaries are unaware of any facts or circumstance, which might give rise to any of the foregoing.   7 --------------------------------------------------------------------------------     (f) SEC Documents: Financial Statements. Since January 1, 2003, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (all of the foregoing filed prior to the date hereof or amended after the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to as the “SEC Documents”). The Company has delivered to the Buyers or their representatives, or made available through the SEC’s website at http://www.sec.gov., true and complete copies of the SEC Documents. As of their respective dates, the financial statements of the Company disclosed in the SEC Documents (the “Financial Statements”) complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such Financial Statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and, fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of the Company to the Buyer which is not included in the SEC Documents, including, without limitation, information referred to in this Agreement, contains any untrue statement of a material fact or omits 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. (g) 10(b)-5. The SEC Documents do not include any untrue statements of material fact, nor do they omit to state any material fact required to be stated therein necessary to make the statements made, in light of the circumstances under which they were made, not misleading. (h) Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending against or affecting the Company, the Common Stock or any of the Company’s subsidiaries, wherein an unfavorable decision, ruling or finding would (i) have a material adverse effect on the transactions contemplated hereby (ii) adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, this Agreement or any of the documents contemplated herein, or (iii) have a material adverse effect on the business, operations, properties, financial condition or results of operations of the Company and its subsidiaries taken as a whole. (i) Acknowledgment Regarding Buyer’s Purchase of the Convertible Debentures. The Company acknowledges and agrees that the Buyer(s) 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 the Buyer(s) is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by the Buyer(s) or any of their respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to such Buyer’s purchase of the Convertible Debentures or the Conversion Shares. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation by the Company and its representatives.   8 --------------------------------------------------------------------------------     (j) No General Solicitation. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Convertible Debentures or the Conversion Shares. (k) No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the Convertible Debentures or the Conversion Shares under the Securities Act or cause this offering of the Convertible Debentures or the Conversion Shares to be integrated with prior offerings by the Company for purposes of the Securities Act. (l) Employee Relations. Neither the Company nor any of its subsidiaries is involved in any labor dispute nor, to the knowledge of the Company or any of its subsidiaries, is any such dispute threatened. None of the Company’s or its subsidiaries’ employees is a member of a union and the Company and its subsidiaries believe that their relations with their employees are good. (m) Intellectual Property Rights. The Company and its subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. The Company and its subsidiaries do not have any knowledge of any infringement by the Company or its subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, and, to the knowledge of the Company there is no claim, action or proceeding being made or brought against, or to the Company’s knowledge, being threatened against, the Company or its subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement; and the Company and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. (n) Environmental Laws. The Company and its subsidiaries are (i) in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval. (o) Title. Any real property and facilities held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries.   9 --------------------------------------------------------------------------------     (p) Insurance. The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its subsidiaries are engaged. Neither the Company nor any such subsidiary has been refused any insurance coverage sought or applied for and neither the Company nor any such 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 at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company and its subsidiaries, taken as a whole. (q) Regulatory Permits. The Company and its subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. (r) Internal Accounting Controls. The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, and (iii) the recorded amounts for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (s) No Material Adverse Breaches, etc. Neither the Company nor any of its subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a material adverse effect on the business, properties, operations, financial condition, results of operations or prospects of the Company or its subsidiaries. Neither the Company nor any of its subsidiaries is in breach of any contract or agreement which breach, in the judgment of the Company’s officers, has or is expected to have a material adverse effect on the business, properties, operations, financial condition, results of operations or prospects of the Company or its subsidiaries. (t) Tax Status. The Company and each of its subsidiaries has made and filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject and (unless and only to the extent that the Company and each of its subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.   10 --------------------------------------------------------------------------------     (u) Certain Transactions. Except for arm’s length transactions pursuant to which the Company makes payments in the ordinary course of business upon terms no less favorable than the Company could obtain from third parties and other than the grant of stock options disclosed in the SEC Documents, none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. (v) Fees and Rights of First Refusal. The Company is not obligated to offer the securities offered hereunder on a right of first refusal basis or otherwise to any third parties including, but not limited to, current or former shareholders of the Company, underwriters, brokers, agents or other third parties. 4. COVENANTS. (a) Best Efforts. Each party shall use its best efforts to timely satisfy each of the conditions to be satisfied by it as provided in Sections 6 and 7 of this Agreement. (b) Form D. The Company agrees to file a Form D with respect to the Conversion Shares as required under Regulation D and to provide a copy thereof to each Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Conversion Shares, or obtain an exemption for the Conversion Shares for sale to the Buyers at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of any such action so taken to the Buyers on or prior to the Closing Date. (c) Reporting Status. Until the earlier of (i) the date as of which the Buyer(s) may sell all of the Conversion Shares without restriction pursuant to Rule 144(k) promulgated under the Securities Act (or successor thereto), or (ii) the date on which (A) the Buyer(s) shall have sold all the Conversion Shares and (B) none of the Convertible Debentures are outstanding (the “Registration Period”), the Company shall file in a timely manner all reports required to be filed with the SEC pursuant to the Exchange Act and the regulations of the SEC thereunder, and the Company shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would otherwise permit such termination. (d) Use of Proceeds. The Company will use the proceeds from the sale of the Convertible Debentures for general corporate and working capital purposes.   11 --------------------------------------------------------------------------------     (e) Reservation of Shares. The Company shall take all action reasonably necessary to at all times have authorized, and reserved for the purpose of issuance, such number of shares of Common Stock as shall be necessary to effect the issuance of the Conversion Shares. If at any time the Company does not have available such shares of Common Stock as shall from time to time be sufficient to effect the conversion of all of the Conversion Shares, the Company shall call and hold a special meeting of the shareholders within thirty (30) days of such occurrence, for the sole purpose of increasing the number of shares authorized. The Company’s management shall recommend to the shareholders to vote in favor of increasing the number of shares of Common Stock authorized. Management shall also vote all of its shares in favor of increasing the number of authorized shares of Common Stock. (f) Listings or Quotation. The Company shall promptly secure the listing or quotation of the Conversion Shares upon each national securities exchange, automated quotation system or The National Association of Securities Dealers Inc.’s Over-The-Counter Bulletin Board (“OTCBB”) or other market, if any, upon which shares of Common Stock are then listed or quoted (subject to official notice of issuance) and shall use its best efforts to maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable under the terms of this Agreement. The Company shall maintain the Common Stock’s authorization for quotation on the OTCBB. (g) Fees and Expenses. (i) Each of the Company and the Buyer(s) shall pay all costs and expenses incurred by such party in connection with the negotiation, investigation, preparation, execution and delivery of the Transaction Documents. The Company shall pay Yorkville Advisors LLC a fee equal to ten percent (10%) of the Purchase Price. (ii) The Company shall pay a structuring fee to Yorkville Advisors LLC of Fifteen Thousand Dollars ($15,000), which shall be paid directly from the proceeds of the First Closing. (iii) The Company shall pay Yorkville Advisors, LLC a non-refundable due diligence fee of Five Thousand Dollars ($5,000) which shall be paid directly from the proceeds of the First Closing. (iv) The Company shall issue to the Buyer a warrant to purchase Thirty Five Million (35,000,000) shares of the Company’s Common Stock for a period of five (5) years at an exercise price of $0.02 per share (the “Warrant”). The shares of Common Stock issuable under the Warrant shall collectively be referred to as the “Warrant Shares.” (v) The Warrant Shares shall have “piggy-back” and demand registration rights. (h) Corporate Existence. So long as any of the Convertible Debentures remain outstanding, the Company shall not directly or indirectly consummate any merger, reorganization, restructuring, reverse stock split consolidation, sale of all or substantially all of the Company’s assets or any similar transaction or related transactions (each such transaction, an “Organizational Change”) unless, prior to the consummation an Organizational Change, the Company obtains the written consent of each Buyer. In any such case, the Company will make appropriate provision with respect to such holders’ rights and interests to insure that the provisions of this Section 4(h) will thereafter be applicable to the Convertible Debentures.   12 --------------------------------------------------------------------------------     (i) Transactions With Affiliates. So long as any Convertible Debentures are outstanding, the Company shall not, and shall cause each of its subsidiaries not to, enter into, amend, modify or supplement, or permit any subsidiary to enter into, amend, modify or supplement any agreement, transaction, commitment, or arrangement with any of its or any subsidiary’s officers, directors, person who were officers or directors at any time during the previous two (2) years, stockholders who beneficially own five percent (5%) or more of the Common Stock, or Affiliates (as defined below) or with any individual related by blood, marriage, or adoption to any such individual or with any entity in which any such entity or individual owns a five percent (5%) or more beneficial interest (each a “Related Party”), except for (a) customary employment arrangements and benefit programs on reasonable terms, (b) any investment in an Affiliate of the Company, (c) any agreement, transaction, commitment, or arrangement on an arms-length basis on terms no less favorable than terms which would have been obtainable from a person other than such Related Party, (d) any agreement, transaction, commitment, or arrangement which is approved by a majority of the disinterested directors of the Company; for purposes hereof, any director who is also an officer of the Company or any subsidiary of the Company shall not be a disinterested director with respect to any such agreement, transaction, commitment, or arrangement. “Affiliate” for purposes hereof means, with respect to any person or entity, another person or entity that, directly or indirectly, (i) has a ten percent (10%) or more equity interest in that person or entity, (ii) has ten percent (10%) or more common ownership with that person or entity, (iii) controls that person or entity, or (iv) shares common control with that person or entity. “Control” or “controls” for purposes hereof means that a person or entity has the power, direct or indirect, to conduct or govern the policies of another person or entity. (j) Transfer Agent. The Company covenants and agrees that, in the event that the Company’s agency relationship with the transfer agent should be terminated for any reason prior to a date which is two (2) years after the Closing Date, the Company shall immediately appoint a new transfer agent and shall require that the new transfer agent execute and agree to be bound by the terms of the Irrevocable Transfer Agent Instructions (as defined herein). (k) Restriction on Issuance of the Capital Stock. So long as any Convertible Debentures are outstanding, the Company shall not, without the prior written consent of the Buyer(s), (i) issue or sell shares of Common Stock or Preferred Stock without consideration or for a consideration per share less than the bid price of the Common Stock determined immediately prior to its issuance, (ii) issue any preferred stock, warrant, option, right, contract, call, or other security or instrument granting the holder thereof the right to acquire Common Stock without consideration or for a consideration less than such Common Stock’s Bid Price determined immediately prior to it’s issuance, (iii) enter into any security instrument granting the holder a security interest in any and all assets of the Company, or (iv) file any registration statement on Form S-8.   13 --------------------------------------------------------------------------------     (l) Neither the Buyer(s) nor any of its affiliates have an open short position in the Common Stock of the Company, and the Buyer(s) agrees that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the Common Stock as long as any Convertible Debentures shall remain outstanding. (m) Rights of First Refusal. So long as any portion of Convertible Debentures are outstanding, if the Company intends to raise additional capital by the issuance or sale of capital stock of the Company, including without limitation shares of any class of common stock, any class of preferred stock, options, warrants or any other securities convertible or exercisable into shares of common stock (whether the offering is conducted by the Company, underwriter, placement agent or any third party) the Company shall be obligated to offer to the Buyers such issuance or sale of capital stock, by providing in writing the principal amount of capital it intends to raise and outline of the material terms of such capital raise, prior to the offering such issuance or sale of capital stock  to any third parties including, but not limited to, current or former officers or directors, current or former shareholders and/or investors of the obligor, underwriters, brokers, agents or other third parties.  The Buyers shall have ten (10) business days from receipt of such notice of the sale or issuance of capital stock to accept or reject all or a portion of such capital raising offer. (n) The Company shall be solely responsible for any and all taxes, filing costs and other costs in connection with the Security Deed, including but not limited to the attorneys costs and the intangible filing tax. In addition, the Company shall be solely responsible for any and all associated future cost in connection with Security Deed, including but not limited to any future costs of the title policy. 5. TRANSFER AGENT INSTRUCTIONS. (a) The Company shall issue the Irrevocable Transfer Agent Instructions to its transfer agent irrevocably appointing David Gonzalez, Esq. as the Company’s agent for purpose of having certificates issued, registered in the name of the Buyer(s) or its respective nominee(s), for the Conversion Shares representing such amounts of Convertible Debentures as specified from time to time by the Buyer(s) to the Company upon conversion of the Convertible Debentures, for interest owed pursuant to the Convertible Debenture, and for any and all Liquidated Damages (as this term is defined in the Investor Registration Rights Agreement). David Gonzalez, Esq. shall be paid a cash fee of Fifty Dollars ($50) for every occasion they act pursuant to the Irrevocable Transfer Agent Instructions. The Company shall not change its transfer agent without the express written consent of the Buyer(s), which may be withheld by the Buyer(s) in its sole discretion. Prior to registration of the Conversion Shares under the Securities Act, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section 2(g) hereof (in the case of the Conversion Shares prior to registration of such shares under the Securities Act) will be given by the Company to its transfer agent and that the Conversion Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Investor Registration Rights Agreement. Nothing in this Section 5 shall affect in any way the Buyer’s obligations and agreement to comply with all applicable securities laws upon resale of Conversion Shares. If the Buyer(s) provides the Company with an opinion of counsel, in form, scope and substance customary for opinions of counsel in comparable transactions to the effect that registration of a resale by the Buyer(s) of any of the Conversion Shares is not required under the Securities Act, the Company shall within two (2) business days instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by the Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 5, that the Buyer(s) shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required.   14 --------------------------------------------------------------------------------     6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL. The obligation of the Company hereunder to issue and sell the Convertible Debentures to the Buyer(s) at the Closings is subject to the satisfaction, at or before the Closing Dates, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion: (a) Each Buyer shall have executed the Transaction Documents and delivered them to the Company. (b) The Buyer(s) shall have delivered to the Company the Purchase Price for Convertible Debentures in respective amounts as set forth next to each Buyer as outlined on Schedule I attached hereto, minus any fees to be paid directly from the proceeds of the Closings as set forth herein, by wire transfer of immediately available U.S. funds pursuant to the wire instructions provided by the Company. (c) The representations and warranties of the Buyer(s) shall be true and correct in all material respects as of the date when made and as of the Closing Dates as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer(s) shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer(s) at or prior to the Closing Dates. 7. CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE. (a) The obligation of the Buyer(s) hereunder to purchase the Convertible Debentures at the First Closing is subject to the satisfaction, at or before the First Closing Date, of each of the following conditions: (i) The Company shall have executed the Transaction Documents and delivered the same to the Buyer(s). (ii) The Common Stock shall be authorized for quotation on the OTCBB, trading in the Common Stock shall not have been suspended for any reason, and all the Conversion Shares issuable upon the conversion of the Convertible Debentures shall be approved by the OTCBB.   15 --------------------------------------------------------------------------------     (iii) The representations and warranties of the Company shall be true and correct in all material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 3 above, in which case, such representations and warranties shall be true and correct without further qualification) as of the date when made and as of the First Closing Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the First Closing Date. If requested by the Buyer, the Buyer shall have received a certificate, executed by the President of the Company, dated as of the First Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, without limitation an update as of the First Closing Date regarding the representation contained in Section 3(c) above. (iv) The Company shall have executed and delivered to the Buyer(s) the Convertible Debentures in the respective amounts set forth opposite each Buyer(s) name on Schedule I attached hereto. (v) The Buyer(s) shall have received an opinion of counsel from the Company’s counsel in a form satisfactory to the Buyer(s). (vi) The Company shall have provided to the Buyer(s) a certificate of good standing from the secretary of state from the state in which the company is incorporated. (vii) The Company shall have filed a form UCC-1 or such other forms as may be required to perfect the Buyer’s interest in the Pledged Property as detailed in the Security Agreement dated the date hereof and provided proof of such filing to the Buyer(s). (viii) The Company shall have delivered the Pledged Shares as well as executed and medallion guaranteed stock powers as required pursuant to the Pledge and Escrow Agreement. (ix) The Company shall have provided to the Buyer an acknowledgement, to the satisfaction of the Buyer, from the Company’s independent certified public accountants as to its ability to provide all consents required in order to file a registration statement in connection with this transaction. (x) The Company shall have reserved out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Convertible Debentures, shares of Common Stock to effect the conversion of all of the Conversion Shares then outstanding.   16 --------------------------------------------------------------------------------     (xi) The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to the Buyer, shall have been delivered to and acknowledged in writing by the Company’s transfer agent. (xii) The Company shall have delivered the Security Deed and paid any and all costs in connection with the same. (b) The obligation of the Buyer(s) hereunder to accept the Convertible Debentures at the Second Closing is subject to the satisfaction, at or before the Second Closing Date, of each of the following conditions: (i) The Common Stock shall be authorized for quotation on the OTCBB, trading in the Common Stock shall not have been suspended for any reason, and all the Conversion Shares issuable upon the conversion of the Convertible Debentures shall be approved by the OTCBB. (ii) The representations and warranties of the Company shall be true and correct in all material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 3 above, in which case, such representations and warranties shall be true and correct without further qualification) as of the date when made and as of the Second Closing Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Second Closing Date. If requested by the Buyer, the Buyer shall have received a certificate, executed by two officers of the Company, dated as of the Second Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, without limitation an update as of the Second Closing Date regarding the representation contained in Section 3(c) above. (iii) The Company shall have executed and delivered to the Buyer(s) the Convertible Debentures in the respective amounts set forth opposite each Buyer(s) name on Schedule I attached hereto. (iv) The Company shall have certified that all conditions to the Second Closing have been satisfied and that the Company will file the Registration Statement with the SEC in compliance with the rules and regulations promulgated by the SEC for filing thereof two (2) business days after the Second Closing. If requested by the Buyer, the Buyer shall have received a certificate, executed by the two officers of the Company, dated as of the Second Closing Date, to the foregoing effect. (v) The Company shall have paid any and all additional costs in connection with the Security Deed. (vi) No Events of Default shall have occurred under the Transaction Documents.   17 --------------------------------------------------------------------------------     8. INDEMNIFICATION. (a) In consideration of the Buyer’s execution and delivery of this Agreement and acquiring the Convertible Debentures and the Conversion Shares hereunder, and in addition to all of the Company’s other obligations under this Agreement, the Company shall defend, protect, indemnify and hold harmless the Buyer(s) and each other holder of the Convertible Debentures and the Conversion Shares, and all of their officers, directors, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Buyer Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Buyer Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by the Buyer Indemnitees or any of them as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement, the Convertible Debentures or the Investor Registration Rights Agreement or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement, or the Investor Registration Rights Agreement or any other certificate, instrument or document contemplated hereby or thereby, or (c) any cause of action, suit or claim brought or made against such Indemnitee and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement or any other instrument, document or agreement executed pursuant hereto by any of the parties hereto, any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Convertible Debentures or the status of the Buyer or holder of the Convertible Debentures the Conversion Shares, as a Buyer of Convertible Debentures in the Company. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law. (b) In consideration of the Company’s execution and delivery of this Agreement, and in addition to all of the Buyer’s other obligations under this Agreement, the Buyer shall defend, protect, indemnify and hold harmless the Company and all of its officers, directors, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Company Indemnitees”) from and against any and all Indemnified Liabilities incurred by the Indemnitees or any of them as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Buyer(s) in this Agreement, instrument or document contemplated hereby or thereby executed by the Buyer, (b) any breach of any covenant, agreement or obligation of the Buyer(s) contained in this Agreement, the Investor Registration Rights Agreement or any other certificate, instrument or document contemplated hereby or thereby executed by the Buyer, or (c) any cause of action, suit or claim brought or made against such Company Indemnitee based on material misrepresentations or due to a material breach and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement, the Investor Registration Rights Agreement or any other instrument, document or agreement executed pursuant hereto by any of the parties hereto. To the extent that the foregoing undertaking by each Buyer may be unenforceable for any reason, each Buyer shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law.   18 --------------------------------------------------------------------------------     9. GOVERNING LAW: MISCELLANEOUS. (a) Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New Jersey without regard to the principles of conflict of laws. The parties further agree that any action between them shall be heard in Hudson County, New Jersey, and expressly consent to the jurisdiction and venue of the Superior Court of New Jersey, sitting in Hudson County and the United States District Court for the District of New Jersey sitting in Newark, New Jersey for the adjudication of any civil action asserted pursuant to this Paragraph. (b) Counterparts. This Agreement may be executed in two or more identical counterparts, all of which 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. In the event any signature page is delivered by facsimile transmission, the party using such means of delivery shall cause four (4) additional original executed signature pages to be physically delivered to the other party within five (5) days of the execution and delivery hereof. (c) Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. (d) Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. (e) Entire Agreement, Amendments. This Agreement supersedes all other prior oral or written agreements between the Buyer(s), the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement. (f) Notices. Any notices, consents, waivers, or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon confirmation of receipt, when sent by facsimile; (iii) three (3) days after being sent by U.S. certified mail, return receipt requested, or (iv) one (1) day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:     19 --------------------------------------------------------------------------------     If to the Company, to: Pacer Health Corporation   7759 N.W. 146th Street   Miami Lakes, Florida 33016   Attention: Rainier Gonzalez   Telephone: (305) 828-7660   Facsimile: (305) 282-2551     With a copy to: Kirkpatrick & Lockhart Nicholson Graham, LLP   201 South Biscayne Boulevard, Suite 2000   Miami, Florida 33131   Attention: Clayton E. Parker, Esquire   Telephone: (305) 539-3306   Facsimile: (305) 358-7095           If to the Buyer(s), to its address and facsimile number on Schedule I, with copies to the Buyer’s counsel as set forth on Schedule I. Each party shall provide five (5) days’ prior written notice to the other party of any change in address or facsimile number. (g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Neither the Company nor any Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party hereto. (h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. (i) Survival. Unless this Agreement is terminated under Section 9(l), the representations and warranties of the Company and the Buyer(s) contained in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8, shall survive the Closing for a period of two (2) years following the date on which the Convertible Debentures are converted in full. The Buyer(s) shall be responsible only for its own representations, warranties, agreements and covenants hereunder. (j) Publicity. The Company and the Buyer(s) shall have the right to approve, before issuance any press release or any other public statement with respect to the transactions contemplated hereby made by any party; provided, however, that the Company shall be entitled, without the prior approval of the Buyer(s), to issue any press release or other public disclosure with respect to such transactions required under applicable securities or other laws or regulations (the Company shall use its best efforts to consult the Buyer(s) in connection with any such press release or other public disclosure prior to its release and Buyer(s) shall be provided with a copy thereof upon release thereof). (k) Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.   20 --------------------------------------------------------------------------------     (l) Termination. In the event that the Closing shall not have occurred with respect to the Buyers on or before five (5) business days from the date hereof due to the Company’s or the Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7 above (and the non-breaching party’s failure to waive such unsatisfied condition(s)), the non-breaching party shall have the option to terminate this Agreement with respect to such breaching party at the close of business on such date without liability of any party to any other party; provided, however, that if this Agreement is terminated by the Company pursuant to this Section 9(l), the Company shall remain obligated to reimburse the Buyer(s) for the fees and expenses of Yorkville Advisors LLC described in Section 4(g) above. (m) No Strict Construction. 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. [REMAINDER PAGE INTENTIONALLY LEFT BLANK]     21 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities Purchase Agreement to be duly executed as of the date first written above.   COMPANY:   PACER HEALTH CORPORATION       By:                                                                  Name: Rainier Gonzalez   Title: CEO       22 --------------------------------------------------------------------------------   SCHEDULE I   SCHEDULE OF BUYERS Name   Signature   Address/Facsimile Number of Buyer   Amount of Subscription                             Cornell Capital Partners, LP   By: Yorkville Advisors, LLC   101 Hudson Street - Suite 3700   $2,000,000     Its: General Partner   Jersey City, NJ 07303             Facsimile: (201) 985-8266                       By:                 Name: Mark Angelo             Its: Portfolio Manager                       With a copy to:   David Gonzalez, Esq.   101 Hudson Street - Suite 3700             Jersey City, NJ 07302             Facsimile: (201) 985-8266         --------------------------------------------------------------------------------   DISCLOSURE SCHEDULE NONE   2 --------------------------------------------------------------------------------  

EXHIBIT 10(bl)   AMENDMENT NO. 16 TO LOAN AGREEMENT                This Amendment No. 16 to Loan Agreement (the "Amendment No. 16") is made and entered into effective as of, but not necessarily on, July 31, 2006, and amends that certain Loan and Pledge Agreement (the "Loan Agreement") dated effective as of December 6, 1991, by and between National Western Life Insurance Company, a Colorado insurance corporation (the "Borrower") and JPMorgan Chase Bank, N.A. (successor by merger to Bank One, NA (Main Office Chicago)) (the "Bank") amended by (i) Amendment No. 1 to Loan Agreement dated as of January 15, 1992, (ii) Amendment No. 2 to Loan Agreement dated as of May 31, 1992, (iii) Amendment No. 3 to Loan Agreement dated as of May 31, 1993, (iv) Amendment No. 4 to Loan Agreement dated as of May 31, 1994, (v) Amendment No. 5 to Loan Agreement dated as of May 31, 1995; (vi) Amendment No. 6 to Loan Agreement dated as of May 31, 1996; (vii) Amendment No. 7 to Loan Agreement dated as of May 31, 1997; (viii) Amendment No. 8 to Loan Agreement dated as of May 31, 1998; (ix) Amendment No. 9 to Loan Agreement dated as of May 31, 1999; (x) Amendment No. 10 to Loan Agreement dated May 31, 2000, (xi) Amendment No. 11 to Loan Agreement dated May 31, 2001, (xii) Amendment No. 12 to Loan Agreement dated May 31, 2002, (xiii) Amendment No. 13 to Loan Agreement dated May 31, 2003, (xiv) Amendment No. 14 to Loan Agreement dated May 21, 2004, and (xv) Amendment No. 15 to Loan Agreement dated July 31, 2005 (collectively, the "Amendments").   Recitals :              The Borrower and the Bank entered into the Loan Agreement for the purpose of setting forth the terms and conditions pursuant to which the Bank granted to the Borrower a revolving line of credit up to the original principal amount of $75,000,000.00 and later reduced to $40,000,000.00. The Borrower and the Bank wish to amend the Loan Agreement in accordance the terms and conditions and in reliance on the representations and warranties contained in this Amendment No. 16.   Agreements :              In consideration of the mutual covenants contained in this Amendment No. 16 and in the Loan Agreement and for other good and valuable consideration, the Borrower and the Bank agree as follows:     1.     Defined Terms. Unless otherwise specifically defined herein, the terms used in this Amendment No. 16 have the same meanings as those terms used in the Loan Agreement. Section 1.1 of the Loan Agreement is hereby amended by adding or restating, as the case may be, the following defined terms:              Base Borrowing Rate" means a per annum rate of interest equal to the Base Rate, minus one and one-half percent (1.50%) per annum.                "CD Borrowing Rate" means a per annum rate of interest equal to the CD Rate, plus one and one-fourth percent (1.25%) per annum.                "Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the applicable British Bankers' Association LIBOR rate for deposits in U.S. dollars as reported by any generally recognized financial information service as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, provided that, if no such British Bankers' Association LIBOR rate is available to the Bank, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the rate determined by the Bank to be the rate at which the Bank or one of its affiliate banks offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, in the approximate amount of the relevant Eurodollar Advance and having a maturity equal to such Interest Period.                "Eurodollar Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the sum of (i) one and one-fourth percent ( 1.25%) per annum, plus (ii) the quotient of (a) the Eurodollar Base Rate applicable to such Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period.                "Maturity Date" shall mean July 31, 2009.       2.          Representations and Warranties. In order to induce the Bank to enter into this Amendment No. 16, the Borrower hereby represents, and warrants and commits to the Bank as follows:         (a) The Borrower has the corporate power and authority to enter into and perform this Amendment No. 16 and all documents and actions required or contemplated hereunder and thereunder; all corporate actions necessary or appropriate for the execution and performance of this Amendment No. 16 and all documents and actions required or contemplated hereby or thereby have been taken; and the Loan Agreement, as amended hereby, and the other Loan Documents constitute the legal, valid, and binding obligations of the Borrower, enforceable in accordance with their respective terms.         (b) The Borrower is not in default under or violating any provisions of its Articles of Incorporation or Bylaws, and (after giving effect to the terms hereof) is not in default under or violating any material provisions of any indenture, mortgage, lien, agreement, contract, deed, lease, loan agreement, note, order, judgment, decree, or other instrument or restriction of any kind or character to which it is a party or by which it is bound, or to which its assets are subject, which default would have a material adverse effect on the ability of the Borrower to perform its obligations hereunder, thereunder, or under the other Loan Documents; and neither the execution and delivery of this Amendment No. 16 nor compliance with the terms, conditions, and provisions hereof will conflict with or result in the breach of, or constitute a default under, any of the foregoing.         (c) Neither any Event of Default nor any Potential Default has occurred or now exists.         (d) Every representation and warranty contained in the Loan Agreement and this Amendment No. 16 (and each thereof) is true and correct as of the date of this Amendment No. 16, except as previously disclosed to the Bank in writing.         (e) Neither the Borrower's Articles of Incorporation nor by-laws have been modified, rescinded or revoked since December 6, 1991 and the same are currently in full force and effect, except as previously disclosed to the Bank in writing.       3.          Further Assurances. The Borrower will execute and deliver such writings and take such other actions as the Bank may reasonably request from time to time to carry out the intent of the Loan Agreement, this Amendment No. 16 and the other Loan Documents and to perfect or give further assurances of any right granted or provided for therein or herein. In addition, the Borrower shall pay the costs and expenses of the Bank, including reasonable attorney's fees incurred by the Bank in connection with the preparation and closing of this Amendment No. 16.       4.          Conditions Precedent. As a condition precedent to the obligations of the Bank hereunder, the Borrower shall furnish or cause to be furnished to the Bank (a) a satisfactory certificate of corporate resolutions and incumbency for the Borrower, (b) the Control Agreement properly executed by the Borrower, the Custodian and the Bank, and (c) the Revolving Note properly executed by the Borrower.       5.          Ratification. Except as expressly modified hereby, the Loan Agreement (as amended by the Amendments and as amended hereby) and all other Loan Documents are hereby ratified and confirmed as being in full force and effect and continuing in all respects to govern the Obligations.       6.          USA Patriot Act Notification. The following notification is provided to the Borrowers pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:              IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit or other financial services product. What this means for the Borrower: When the Borrower opens an account, if a Borrower is an individual, the Bank will ask for the Borrower's name, taxpayer identification number, residential address, date of birth, and other information that will allow the Bank to identify the Borrower, and, if the Borrower is not an individual, the Bank will ask for the Borrower's name, taxpayer identification number, business address, and other information that will allow the Bank to identify the Borrower. The Bank may also ask, if the Borrower is an individual, to see the Borrower's driver's license or other identifying documents, and, if the Borrower is not an individual, to see the Borrower's legal organizational documents or other identifying documents.           THE LOAN AGREEMENT, AS AMENDED HEREBY, THE REVOLVING NOTE AND CONTROL AGREEMENT OF EVEN DATE HEREWITH AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPO-RANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.           IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 16 to be effective as of, but not necessarily on, the first day and date above written.         National Western Life Insurance   Company , a Colorado insurance corporation         By: /S/Brian M. Pribyl   Brian M. Pribyl   Senior Vice President           JPMorgan Chase Bank, N.A.   (successor by merger to Bank One, NA   (Main Office Chicago))         By: /S/ Todd Jordan   Name: Todd Jordan   Title: Vice President      

  Exhibit 10.2 JOHNSON CONTROLS, INC. RESTRICTED STOCK PLAN Amended March 21, 2006 ARTICLE 1. PURPOSE AND DURATION           Section 1.1 Purpose. The Johnson Controls, Inc. Restricted Stock Plan has two complementary purposes: (a) to promote the success of the Company by providing incentives to the Company’s and subsidiary’s officers and other key employees that will link their personal interests to the long-term financial success of the Company and to growth in value; and (b) to permit the Company and its subsidiaries to attract, motivate and retain experienced and knowledgeable employees upon whose judgment, interest, and special efforts the successful conduct of the Company’s operations is largely dependent.           Section 1.2 Duration. The Plan will become effective on October 1, 2001. The Plan shall remain in effect, subject to the right of the Board to terminate the Plan at any time pursuant to Article 11 herein, until all Shares reserved for issuance under the Plan have been issued. ARTICLE 2. DEFINITIONS AND CONSTRUCTION           Section 2.1 Definitions. Wherever used in the Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized:           (a) “Act” means the Securities Act of 1933, as interpreted by rules and regulations issued pursuant thereto, all as amended and in effect from time to time. Any reference to a specific provision of the Act shall be deemed to include reference to any successor provision thereto.           (b) “Award” means a grant of Restricted Shares or Restricted Share Units.           (c) “Beneficial Owner” (or derivatives thereof) shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.           (d) “Board” means the Board of Directors of the Company.           (e) “Cause” means: (1) if the Participant is subject to an employment agreement that contains a definition of “cause”, such definition, or (2) otherwise, any of the following as determined by the Committee: (a) violation of the provisions of any employment agreement, non-competition agreement, confidentiality agreement, or similar agreement with the Company or subsidiary, or the Company’s or subsidiary’s code of ethics, as then in effect, (b) conduct rising to the level of gross negligence or willful misconduct in the course of employment with the Company or subsidiary, (c) commission of an act of dishonesty or disloyalty involving the Company or subsidiary, (d) violation of any federal, state or local law in connection with the Participant’s employment, or (e) breach of any fiduciary duty to the Company or a subsidiary.           (f) “Change of Control” means the occurrence of any one of the following:   (i)   The acquisition, other than from the Company, by any Person of Beneficial Ownership of 20% or more of either (A) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Company   --------------------------------------------------------------------------------         Voting Securities”); provided, however, that any acquisition by (x) the Company or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or (y) any corporation with respect to which, following such acquisition, more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then Beneficially Owned, directly or indirectly, by all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Outstanding Company Common Stock and Company Voting Securities immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Company Common Stock and Company Voting Securities, as the case may be, shall not constitute a Change in Control of the Company.     (ii)   Individuals who, as of May 24, 1989, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to May 24, 1989, whose election or nomination for election by the Company’s shareholders 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 were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act).     (iii)   Consummation of a reorganization, merger or consolidation (a “Business Combination”), in each case, with respect to which all or substantially all of the individuals and entities who were the respective Beneficial Owners of the Outstanding Company Common Stock and Company Voting Securities immediately prior to such Business Combination do not, following such Business Combination, Beneficially Own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination in substantially the same proportion as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Company Voting Securities, as the case may be.     (iv)   A complete liquidation or dissolution of the Company or sale or other disposition of all or substantially all of the assets of the Company other than to a corporation with respect to which, following such sale or disposition, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors is then Beneficially Owned, directly or indirectly, by all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Outstanding Company Common Stock and Company Voting Securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the Outstanding Company Common Stock and Company Voting Securities, as the case may be, immediately prior to such sale or disposition.   --------------------------------------------------------------------------------             (g) “Code” means the Internal Revenue Code of 1986, as interpreted by rules and regulations issued pursuant thereto, all as amended and in effect from time to time. Any reference to a specific provision of the Code shall be deemed to include reference to any successor provision thereto.           (h) “Committee” means the Compensation Committee of the Board, or such other committee appointed by the Board to administer the Plan pursuant to Article 3 herein.           (i) “Company” means Johnson Controls, Inc., a Wisconsin corporation, and any successor as provided in Article 13.           (j) “Deferred Compensation Plan” means the Johnson Controls, Inc. Executive Deferred Compensation Plan, as from time to time amended and in effect.           (k) “Eligible Employee” means a current management or highly compensated employee of the Company or subsidiary.           (l) “Exchange Act” means the Securities Exchange Act of 1934, as interpreted by rules and regulations issued pursuant thereto, all as amended and in effect from time to time. Any reference to a specific provision of the Exchange Act shall be deemed to include reference to any successor provision thereto.           (m) “Fair Market Value” means with respect to a Share, the closing sales price on the New York Stock Exchange on the date in question (or the immediately preceding trading day if the date in question is not a trading day), and with respect to any other property, such value as is determined by the Committee.           (n) “Inimical Conduct” means any act or omission that is inimical to the best interests of the Company or any subsidiary, as determined by the Committee in its sole discretion, including but not limited to: (1) violation of any employment, noncompete, confidentiality or other agreement in effect with the Company or any subsidiary, (2) taking any steps or doing anything which would damage or negatively reflect on the reputation of the Company or a subsidiary, or (3) failure to comply with applicable laws relating to trade secrets, confidential information or unfair competition.           (o) “Participant” means an Eligible Employee who has been granted an Award.           (p) “Period of Restriction” means the period during which Shares or Share Units may not be transferred and are subject to a substantial risk of forfeiture.           (q) “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.           (r) “Plan” means this Johnson Controls, Inc. Restricted Stock Plan, as from time to time amended and in effect.           (s) “Restricted Shares” means Shares that are subject to a Period of Restriction.           (t) “Restricted Share Units” means Share Units that are subject to a Period of Restriction.           (u) “Retirement” means a voluntary termination of employment from the Company and its subsidiaries (for other than Cause) on or after age 55 and completion of at least ten years of vesting service, or age 65 and completion of at least five years of vesting service (such vesting service to be determined within the meaning of the Johnson Controls Pension Plan or such other plan or methodology specified by the Committee).           (v) “Rule 16b-3” means Rule 16b-3 under the Exchange Act.   --------------------------------------------------------------------------------             (w) “Share” means the common stock of the Company, or such other securities specified in Section 4.3.           (x) “Share Unit” means a measure of compensation having a value equal to the Fair Market Value of a single Share.           (y) “Total and Permanent Disability” means the Participant’s inability to perform the material duties of his occupation as a result of a medically-determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a period of at least 12 months, as determined by the Committee. The Participant will be required to submit such medical evidence or to undergo a medical examination by a doctor selected by the Committee as the Committee determines is necessary in order to make a determination hereunder.           Section 2.2 Construction. Wherever any words are used in the masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and wherever any words are use in the singular or the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. Titles of articles and sections are for general information only, and the Plan is not to be construed by reference to such items.           Section 2.3 Severability. In the event any provision of the Plan is 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 said illegal or invalid provision had not been included. ARTICLE 3. ADMINISTRATION           Section 3.1 The Committee. The Plan shall be administered by the Committee. If at any time the Committee shall not be in existence, the Plan shall be administered by the Board and each reference to the Committee herein shall be deemed to include the Board.           Section 3.2 Authority of the Committee. In addition to the authority specifically granted to the Committee in the Plan, and subject to the provisions of the Plan, the Committee shall have full power and discretionary authority to: (a) select Participants, grant Awards, and determine the terms and conditions of each such Award, including but not limited to the Period of Restriction and the number of Shares to which the Award will relate; (b) administer the Plan, including but not limited to the power and authority to construe and interpret the Plan and any award agreement; (c) correct errors, supply omissions or reconcile inconsistencies in the terms of the Plan and any award agreement; (d) establish, amend or waive rules and regulations, and appoint such agents, as it deems appropriate for the Plan’s administration; and (e) make any other determinations, including factual determinations, and take any other action as it determines is necessary or desirable for the Plan’s administration.           Notwithstanding the foregoing, the Committee shall have no authority to act to adversely affect the rights or benefits granted under any outstanding Award without the consent of the person holding such Award (other than as specifically provided herein).           Section 3.3 Decision Binding. The Committee’s determination and decisions made pursuant to the provisions of the Plan and all related orders or resolutions of the Board shall be final, conclusive and binding on all persons who have an interest in the Plan or an Award, and such determinations and decisions shall not be reviewable.           Section 3.4 Procedures of the Committee. The Committee’s determinations must be made by not less than a majority of its members present at the meeting (in person or otherwise) at which a quorum is present, or by written majority consent, which sets forth the action, is signed by each member of the Committee and filed with the minutes for proceedings of the Committee. A majority of the entire Committee shall constitute a quorum for the transaction of business. Service on the Committee shall constitute service as a director of the Company so that the   --------------------------------------------------------------------------------   Committee members shall be entitled to indemnification, limitation of liability and reimbursement of expenses with respect to their Committee services to the same extent that they are entitled under the Company’s By-laws and Wisconsin law for their services as directors of the Company.           Section 3.5 Award Agreements. The Committee shall evidence the grant of each Award by an award agreement which shall be signed by an authorized officer of the Company and by the Participant, and shall contain such terms and conditions as may be approved by the Committee, subject to the terms of the Plan. Terms and conditions of such Awards need not be the same in all cases. ARTICLE 4. SHARES SUBJECT TO THE PLAN           Section 4.1 Number of Shares. Subject to adjustment as provided in Section 4.3, the aggregate number of Shares that may be issued under the Plan or to which an Award may relate shall not exceed 250,000 Shares. Shares delivered under the Plan shall consist solely of treasury Shares.           Section 4.2 Lapsed Awards. If any Award is forfeited or terminated for any reason, the Restricted Shares or Restricted Share Units subject to such Award that are forfeited shall be available for the grant of a new Award under the Plan.           Section 4.3 Adjustments in Authorized Shares. In the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, split-up, share combination, or other change in the corporate structure of the Company affecting the Shares, the Committee shall adjust: (a) the number and class of Shares which may be delivered under the Plan; and (b) the number and class of Shares or Share Units subject to outstanding Awards, as it determines to be appropriate and equitable to prevent dilution or enlargement of the rights intended to be granted hereunder and under any Award; provided that the number of Shares subject to any Award shall always be a whole number. ARTICLE 5. PARTICIPATION           Subject to the provisions of the Plan, the Committee shall have the authority to select the Employees to receive an Award. No Employee shall have any right to be granted an Award even if previously granted an Award. ARTICLE 6. TERMS AND CONDITIONS OF AWARDS           Section 6.1 Grant of Award. Subject to the terms and provisions of the Plan, the Committee shall have the authority to determine the number of Shares or Share Units to which an Award shall relate, the term of the Restriction Period and conditions for lapse thereof, and any other terms and conditions of an Award. Notwithstanding the foregoing, and subject to such rules as are established by the Committee, a Participant who has been selected to receive an Award from the Committee may elect, prior to or within thirty (30) days after the grant date, to receive the Award either in the form of Restricted Shares or Restricted Share Units; provided that if the Participant fails to make a valid election, the Award shall be made in the form of Restricted Shares.           Section 6.2 Terms and Conditions of Restricted Share Awards.           (a) Period of Restriction. Restricted Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, and shall be subject to a substantial risk of forfeiture, until the termination of the applicable Period of Restriction as set forth in the Participant’s award agreement or provided herein. During the Period of Restriction, the Company shall have the right to hold the Restricted Shares in escrow.   --------------------------------------------------------------------------------             (b) Certificate Legend. Each certificate representing Restricted Shares shall bear the following legend:     “The sale or other transfer of the shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer set forth in the Johnson Controls, Inc. Restricted Stock Plan, in the rules and administrative procedures adopted pursuant to such Plan, and in a Restricted Stock Agreement dated ___. A copy of the Plan, such rules and procedures, and such Restricted Stock Agreement may be obtained from the Secretary of Johnson Controls, Inc.”           (c) Removal of Restrictions. Except as otherwise provided in this Article, Restricted Shares shall become vested in, and freely transferable by, the Participant after the last day of the Period of Restriction. Once the Shares are released from the restrictions, the Participant shall be entitled to have the legend required by subsection (b) removed from his stock certificate.           (d) Voting Rights. Unless determined otherwise by the Committee, during the Period of Restriction, Participants holding Restricted Shares may exercise full voting rights with respect to those Shares.           (e) Dividends and Other Distributions. Any dividends or other distributions paid or delivered with respect to Restricted Shares will be subject to the same terms and conditions (including risk of forfeiture) as the Restricted Shares to which they relate and payment or delivery thereof will be deferred accordingly. Unless otherwise determined by the Committee, all dividends or other distributions paid or delivered with respect to Restricted Shares shall be allocated to a Share Unit account or other investment account under the Deferred Compensation Plan.           Section 6.3 Terms and Conditions of Restricted Share Units.           (a) Establishment of Account. Upon the grant of Restricted Share Units to a Participant, the Company shall establish a bookkeeping account under the Deferred Compensation Plan to which shall be credited the number of Share Units granted.           (b) Alienation of Account. A Participant (or beneficiary) shall not have any right to assign, hypothecate, pledge, encumber or otherwise alienate his Share Unit account.           (c) Dividends and Other Distributions. Each Participant with a Share Unit account shall be entitled to receive a credit to such account for any dividends or other distributions delivered on Shares, whether in the form of cash or in property, in accordance with the terms of the Deferred Compensation Plan; provided that such credit shall be subject to the same terms and conditions (including risk of forfeiture) as the Restricted Share Units to which they relate.           (d) Payment of Account. The value of the Participant’s Share Unit account as to which the Restriction Period has lapsed shall be paid to the Participant (or his beneficiary) in accordance with the terms of the Deferred Compensation Plan.           Section 6.4 Termination of Employment. Upon a Participant’s termination of employment from the Company and its subsidiaries, the following rules shall apply:           (a) Retirement. If the Participant terminates employment due to Retirement on or after the last day of the calendar year following the calendar year in which the Award of Restricted Shares or Restricted Share Units is made, any remaining Period of Restriction shall continue as if the Participant continued in active employment; provided, however, that for awards granted on January 3, 2006, if the Participant terminates employment due to retirement on or after December 31, 2006, any remaining Period of Restriction shall continue as   --------------------------------------------------------------------------------   of the Participant continued in active employment. Notwithstanding the foregoing, if the Participant engages in Inimical Conduct after his Retirement, any Restricted Shares and/or Restricted Share Units still subject to a Period of Restriction shall automatically be forfeited as of the date of the Committee’s determination.           (b) Death or Disability. If the Participant’s employment terminates because of death or Total and Permanent Disability at a time when the Participant could not have been terminated for Cause, or if the Participant dies after Retirement while holding an Award that is subject to a Period of Restriction, any remaining Period of Restriction shall automatically lapse as of the date of such termination of employment or death, as applicable.           (c) Termination for Other Reasons. If the Participant’s employment terminates for any reason not described above, then any Restricted Shares and/or Restricted Share Units still subject to a Period of Restriction as of the date of such termination shall automatically be forfeited and returned to the Company; provided, however, that in the event of an involuntary termination of the employment of an Employee by the Company or a subsidiary for other than Cause, the Committee may waive the automatic forfeiture of any or all such Shares or Share Units and may add such new restrictions to such Restricted Shares or Restricted Share Units as it deems appropriate.           (d) Suspension. The Committee may suspend payment or delivery of Shares (without liability for interest thereon) pending its determination of whether the Participant was or should have been terminated for Cause or whether the Participant has engaged in Inimical Conduct.           Section 6.5 Other Restrictions. The Committee may impose such other restrictions on any Awards granted pursuant to the Plan (including after the Period of Restriction lapses) as it may deem advisable including, without limitation, restrictions under applicable Federal or state securities laws, and the Committee may legend certificates to give appropriate notice of such restrictions. ARTICLE 7. RIGHTS OF ELIGIBLE INDIVIDUALS           Section 7.1 Employment. Nothing in the Plan shall interfere with or limit in any way the right of the Company or subsidiary to terminate any Participant’s employment at any time, nor confer upon any Participant any right to continue in the employ of the Company or subsidiary.           Section 7.2 No Implied Rights; Rights on Termination of Service. Neither the establishment of the Plan nor any amendment thereof shall be construed as giving any Participant or any other person any legal or equitable right unless such right shall be specifically provided for in the Plan or conferred by specific action of the Committee in accordance with the terms and provisions of the Plan.           Section 7.3 No Funding. Neither the Participant nor any other person shall acquire, by reason of the Plan or any Award, any right in or title to any assets, funds or property of the Company and its subsidiaries whatsoever including, without limiting the generality of the foregoing, any specific funds, assets, or other property which the Company or its subsidiaries may, in their sole discretion, set aside in anticipation of a liability hereunder. Any benefits which become payable hereunder shall be paid from the general assets of the Company and its subsidiaries, as applicable. The Participant shall have only a contractual right to the amounts, if any, payable hereunder unsecured by any asset of the Company or its subsidiaries. Nothing contained in the Plan constitutes a guarantee by the Company or its subsidiaries that the assets of the Company or its subsidiaries shall be sufficient to pay any benefit to any person.           Section 7.4 Other Restrictions. As a condition to the issuance of any Shares, the Committee may require the Participant to enter into a restrictive stock transfer or other shareholder’s agreement with the Company.   --------------------------------------------------------------------------------   ARTICLE 8. CHANGE OF CONTROL           If a Change of Control occurs, any Period of Restriction of any outstanding Award shall lapse upon the date of the Change of Control. ARTICLE 9. AMENDMENT, MODIFICATION, AND TERMINATION           Section 9.1 Amendment, Modification, and Termination of the Plan. At any time and from time to time, the Board may terminate, amend, or modify the Plan. However, the approval of any such amendment by the shareholders of the Company shall be obtained if required by the Code, by the insider trading rules of Section 16 of the Exchange Act, by any national securities exchange or system on which the Shares are then listed or reported, or by any regulatory body having jurisdiction with respect hereto. Further, no termination, amendment or modification of the Plan shall in any manner adversely affect any Award theretofore granted under the Plan, without the written consent of the Participant, except as specifically provided herein.           Section 9.2 Amendment of Award Agreements. The Committee may at any time amend any outstanding award agreement; provided, however, that any amendment that decreases or impairs the rights of a Participant under such agreement shall not be effective unless consented to by the Participant in writing, except that Participant consent shall not be required in the event an Award is amended, adjusted or cancelled under Section 4.3 or paid as provided in Article 8, and Participant consent shall not be required with respect to any amendment of the Deferred Compensation Plan that affects a Participant’s Share Unit account to the extent such plan does not require Participant consent.           Section 9.3 Survival Following Termination. Notwithstanding the foregoing, to the extent provided in the Plan, the authority of (a) the Committee to amend, alter, adjust, suspend, discontinue or terminate any Award, waive any conditions or restrictions with respect to any Award, and otherwise administer the Plan and any Award and (b) the Board to amend the Plan, shall extend beyond the date of the Plan’s termination. Termination of the Plan shall not affect the rights of Participants with respect to Awards previously granted to them, and all unexpired Awards shall continue in force and effect after termination of the Plan except as they may lapse or be terminated by their own terms and conditions, subject to the terms of the Deferred Compensation Plan. ARTICLE 10. WITHHOLDING           Section 10.1 Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an applicable amount sufficient to satisfy foreign, Federal, state and local taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to the issuance of Shares, the lapse of the Period of Restriction, or the distribution of the Participant’s Share Unit account. The Company shall also have the right to withhold Shares as to which the Period of Restriction has lapsed and which have a Fair Market Value equal to the Participants’ minimum tax withholding liability, to satisfy any withholding obligations.           Section 10.2 Stock Delivery or Withholding. Participants may elect, subject to the approval of the Committee and such rules as it shall prescribe, to satisfy the withholding requirement, in whole or in part, by tendering to the Company previously acquired Shares in an amount having a Fair Market Value equal to the amount required to be withheld to satisfy the minimum tax withholding obligations described in Section 10.1. The value of the Shares to be tendered is to be based on the Fair Market Value of the Shares on the date that the amount of tax to be withheld is determined. ARTICLE 11. LEGENDS; PAYMENT OF EXPENSES           Section 11.1 Legends. The Company may endorse such legend or legends upon the certificates for Shares issued under the Plan and may issue such “stop transfer” instructions to its transfer agent in respect of such Shares as it determines to be necessary or appropriate to (a) prevent a violation of, or to perfect an exemption from, the registration requirements of the Securities Act, applicable state securities laws or other legal requirements,   --------------------------------------------------------------------------------   or (b) implement the provisions of the Plan or any agreement between the Company and the Participant with respect to such Shares.           Section 11.2 Payment of Expenses. The Company shall pay for all issuance taxes with respect to the issuance of Shares under the Plan, as well as all fees and expenses incurred by the Company in connection with such issuance. ARTICLE 12. 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 and/or assets of the Company. The Plan shall be binding upon and inure to the benefit of the Participants and their heirs, executors, administrators or legal representatives. ARTICLE 13. REQUIREMENTS OF LAW           Section 13.1 Requirements of Law. The granting of Awards and the issuance of Shares under this 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.           Section 13.2 Governing Law. This Plan and the rights and obligations hereunder shall be governed by and construed in accordance with the internal laws of the State of Wisconsin (excluding any choice of law rules that may direct the application of the laws of another jurisdiction), except as provided in Section 13.3 hereof.           Section 13.3 Arbitration.           (a) Application. Notwithstanding any employee agreement in effect between a Participant and the Company or any subsidiary employer, if a Participant brings a claim that relates to benefits under this Plan, regardless of the basis of the claim (including but not limited to, actions under Title VII, wrongful discharge, breach of employment agreement, etc.), such claim shall be settled by final binding arbitration in accordance with the rules of the American Arbitration Association (“AAA”) and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.           (b) Initiation of Action. Arbitration must be initiated by serving or mailing a written notice of the complaint to the other party. Normally, such written notice should be provided the other party within one year (365 days) after the day the complaining party first knew or should have known of the events giving rise to the complaint. However, this time frame may be extended if the applicable statute of limitation provides for a longer period of time. If the complaint is not properly submitted within the appropriate time frame, all rights and claims that the complaining party has or may have against the other party shall be waived and void. Any notice sent to the Company shall be delivered to: Office of General Counsel Johnson Controls, Inc. 5757 North Green Bay Avenue P.O. Box 591 Milwaukee, WI 53201-0591           The notice must identify and describe the nature of all complaints asserted and the facts upon which such complaints are based. Notice will be deemed given according to the date of any postmark or the date of time of any personal delivery.   --------------------------------------------------------------------------------             (c) Compliance with Personnel Policies. Before proceeding to arbitration on a complaint, the Participant or Beneficiary must initiate and participate in any complaint resolution procedure identified in the Company’s or subsidiary’s personnel policies. If the claimant has not initiated the complaint resolution procedure before initiating arbitration on a complaint, the initiation of the arbitration shall be deemed to begin the complaint resolution procedure. No arbitration hearing shall be held on a complaint until any applicable Company or subsidiary complaint resolution procedure has been completed.           (d) Rules of Arbitration. All arbitration will be conducted by a single arbitrator according to the Employment Dispute Arbitration Rules of the AAA. The arbitrator will have authority to award any remedy or relief that a court of competent jurisdiction could order or grant including, without limitation, specific performance of any obligation created under policy, the awarding of punitive damages, the issuance of any injunction, costs and attorney’s fees to the extent permitted by law, or the imposition of sanctions for abuse of the arbitration process. The arbitrator’s award must be rendered in a writing that sets forth the essential findings and conclusions on which the arbitrator’s award is based.           (e) Representation and Costs. Each party may be represented in the arbitration by an attorney or other representative selected by the party. The Company or subsidiary shall be responsible for its own costs, the AAA filing fee and all other fees, costs and expenses of the arbitrator and AAA for administering the arbitration. The claimant shall be responsible for his attorney’s or representative’s fees, if any. However, if any party prevails on a statutory claim which allows the prevailing party costs and/or attorneys’ fees, the arbitrator may award costs and reasonable attorneys’ fees as provided by such statute.           (f) Discovery; Location; Rules of Evidence. Discovery will be allowed to the same extent afforded under the Federal Rules of Civil Procedure. Arbitration will be held at a location selected by the Company. AAA rules notwithstanding, the admissibility of evidence offered at the arbitration shall be determined by the arbitrator who shall be the judge of its materiality and relevance. Legal rules of evidence will not be controlling, and the standard for admissibility of evidence will generally be whether it is the type of information that responsible people rely upon in making important decisions.           (g) Confidentiality. The existence, content or results of any arbitration may not be disclosed by a party or arbitrator without the prior written consent of both parties. Witnesses who are not a party to the arbitration shall be excluded from the hearing except to testify.  

  MTN GLOBAL FUNDING AGREEMENT Principal Life Insurance Company 711 High Street Des Moines, Iowa 50392-0001 (515) 247-5111 In consideration of the payment made by, or at the direction of, Principal Life Income Fundings Trust 2006-49 (the “Agreement Holder”) of the Net Deposit, as described below, Principal Life Insurance Company (“Principal Life”) agrees to make payments to the person or persons entitled to them, subject to the provisions of this funding agreement (this “Agreement”). This Agreement is delivered in and subject to the laws of the State of Iowa. This Agreement is issued and accepted subject to all the terms set out in it. This Agreement is executed by Principal Life at its Corporate Center to take effect as of the 9th day of August, 2006, which is referred to as the Effective Date, subject to the receipt by Principal Life or its designee of the Net Deposit (as set forth in Section 1).       /s/ Joyce N. Hoffman   /s/ J. Barry Griswell Senior Vice President and   Chairman, President and Corporate Secretary   Chief Executive Officer       /s/ Jim Madden   Registrar   August 9, 2006   Date GLOBAL FUNDING AGREEMENT NO. 7-07833 RESTRICTIONS REGARDING THE TRANSFER OR SALE OF THIS FUNDING AGREEMENT OR ANY INTEREST HEREIN ARE SET FORTH HEREIN   --------------------------------------------------------------------------------         FUNDING AGREEMENT   No. 7-07833      This Agreement is issued in connection with the issuance by the Trust (specified in the Annex) of Secured Notes (the “Notes”) which are identified in the annex hereto (the “Annex”) and which are being issued by the Trust pursuant to the Prospectus dated February 16, 2006, the Prospectus Supplement dated February 16, 2006, as from time to time amended or supplemented, and the Pricing Supplement applicable to the Notes (the “Pricing Supplement”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Notes. Where used in this Agreement, the term “Notes” shall mean the Notes secured by this Agreement as the same exist on the Effective Date, without giving effect to any amendments or modifications to said Notes effected or made after any such Effective Date unless such amendments or modifications to said Notes have been consented to in writing by Principal Life. 1.   Deposit       Principal Life agrees to accept, and the Agreement Holder agrees to pay or cause to be paid to Principal Life, for value on the Effective Date, the Net Deposit (as specified in the Annex). All funds received by Principal Life under this Agreement shall become the exclusive property of Principal Life and remain a part of Principal Life’s general account without any duty or requirement of segregation or separate investment.       This Agreement shall become effective only upon the receipt by Principal Life or its designee of the Net Deposit.   2.   Fund       Upon receipt of the Net Deposit, Principal Life will establish, under this Agreement, a bookkeeping account in the name of the Agreement Holder, which will evidence Principal Life’s obligations under this Agreement.       The Deposit deemed received (as specified in the Annex), (i) less any withdrawals to make payments hereunder and (ii) plus any interest accrued and premium, if any, pursuant to Section 7, will be referred to as the “Fund”.       Principal Life is neither a trustee nor a fiduciary with respect to the Fund.   3.   Purchase of Notes By Principal Life.       Principal Life may purchase some or all of the Notes in the open market or otherwise at any time, and from time to time. Simultaneously, upon such purchase, (1) the purchased Notes shall, by their terms become mandatorily redeemable by the Trust as specified in the related Pricing Supplement, Prospectus Supplement and/or Prospectus and (2) the Fund under this Agreement shall be permanently reduced by the same percentage as the principal amount of the Notes so redeemed bears to the sum of (i) the aggregate principal amount of all Notes issued and outstanding immediately prior to such redemption and (ii) the principal amount of the Trust Beneficial Interest related to such Notes. If Principal Life, in its sole discretion, engages in such open market or other purchases, then the Trust, the Indenture Trustee in respect of such Notes, and Principal Life shall take 2 --------------------------------------------------------------------------------       actions (including, in the case of Principal Life, making the payment(s) necessary to effect the Trust’s redemption of such Notes) as may be necessary or desirable to effect the cancellation of such Notes by the Trust.   4.   Entire Agreement       This Agreement and the Annex attached hereto constitute the entire Agreement.   5.   Representations   (a)   Each party hereto represents and warrants to the other that as of the date hereof:   (i)   it has the power to enter into this Agreement and to consummate the transactions contemplated hereby;     (ii)   this Agreement has been duly authorized, executed and delivered, this Agreement constitutes a legal, valid and binding obligation of each party hereto, and this Agreement is enforceable in accordance with the terms hereof, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights, and subject as to enforceability to general principles of equity, regardless of whether enforcement is sought in a proceeding in equity or at law; and     (iii)   the execution and delivery of this Agreement and the performance of obligations hereunder do not and will not constitute or result in a default, breach or violation of the terms or provisions of its certificate, articles or charter of incorporation, declaration of trust, by-laws or any agreement, instrument, mortgage, judgment, injunction or order applicable to it or any of its property.   (b)   The Trust further represents and warrants to Principal Life that:   (i)   it is a person other than a natural person and is purchasing this Agreement for the purpose of providing collateral security for securities registered with the United States Securities and Exchange Commission;     (ii)   it has been informed and understands that transfer is restricted by the terms of this Agreement; and     (iii)   it (a) is solely responsible for determining whether this Agreement is suitable for the purpose intended; (b) has carefully read this Agreement (including the Annex) before signing this Agreement; (c) has had a reasonable opportunity to make such inquiries as it deemed necessary prior to signing this Agreement; and (d) has received or had access to such additional information as it deemed necessary in connection with its decision to sign this Agreement. 3 --------------------------------------------------------------------------------       In performing its obligations hereunder Principal Life is not acting as a fiduciary, agent or other representative for the Agreement Holder or anyone else. All representations and warranties made by the Agreement Holder and Principal Life in this Agreement shall be considered to have been relied upon by the other in connection with the execution hereof.   6.   Assignment of Agreement       The following conditions must be satisfied in order to effectuate any assignment of this Agreement:   (i)   This Agreement may only be transferred through a book entry system maintained by Principal Life, or an agent designated by it, within the meaning of Temporary Treasury Regulations Section 5f.103-1(c) and Treasury Regulations Section 1.871-14(c)(1)(i).     (ii)   The Agreement Holder, and any assignee, must comply with applicable securities laws.     (iii)   Principal Life has consented in writing to the proposed assignment, such consent not to be unreasonably withheld.     (iv)   Principal Life shall have received from the proposed assignee a duly executed certificate containing, in substance, the information, representations, warranties, acknowledgments and agreements set forth in this Agreement.     Any attempted sale, transfer, anticipation, assignment, hypothecation, or alienation not in accordance with this Section 6 shall be void and of no effect. Until such time, if any, as Principal Life has consented in writing to a proposed assignment, Principal Life shall not be obligated to make any payments to or at the direction of anyone other than the person shown on Principal Life’s books and records as the Agreement Holder. Once the foregoing conditions have been satisfied with respect to an assignment, the assignee or its successor shall be deemed to be the sole Agreement Holder for all purposes of this Agreement and Principal Life shall promptly amend its records to reflect the assignee’s status as Agreement Holder.   7.   Payments to the Agreement Holder       Principal Life shall pay to, or at the direction of, the Agreement Holder by the date (the “Due Date”) on which any payment becomes due in respect of the Notes secured by this Agreement (and in any event such period of time prior to the Due Date as shall be necessary to ensure that the Trust can fulfill its obligation to make payment in full of all amounts due and payable under the Notes on the Due Date), an amount in the currency or currencies in which the Notes are denominated as specified in the Notes equal to the sum of (i) the amount of principal and/or (as the case may be) interest and/or (as the case may be) premium falling due in respect of the Notes on such Due Date (the “Notes Component”) and (ii) the amount of any payments owed by the Trust in respect of the Trust Beneficial Interest falling due on such date (the “Beneficial Interest Component”). In the event that Principal Life fails to make payment of any such amount on or prior to 4 --------------------------------------------------------------------------------       the Due Date, Principal Life shall pay to or at the direction of the Agreement Holder, on demand by the Agreement Holder, (i) if the failure relates to the Notes Component, an amount in the currency specified in the Notes equal to the amount of default interest (or other amount) which becomes due and payable by the Trust in accordance with the Notes as a consequence of any delay in the Trust making the relevant payment of principal, interest or premium (as the case may be) to the holders of the of Notes and (ii) if the failure relates to the Beneficial Interest Component, such amount or default interest, if any, determined in the same manner as default interest on the Notes Component.       Interest shall accrue on the Fund in the same amount and pursuant to the same terms as interest accrues on the Notes secured by this Agreement and on the Trust Beneficial Interest related to the Notes.       If any amount is withdrawn from the Fund in order to make a payment under this Section 7, interest will cease to be credited with regard to such amount as of the end of the day immediately preceding the date on which such withdrawal is made.       All payments made by Principal Life to the Agreement Holder hereunder shall be paid in same-day, freely transferable funds to such account as has been specified for such purpose by the Agreement Holder.       Notwithstanding anything to the contrary in this Section 7, if Principal Life shall, with respect to any scheduled amount due and payable under any of the Notes, comply in all respects with the requirements of this Section 7, but an event of default has occurred with respect to the Notes and as a result payments with respect to the Notes have been accelerated, otherwise than by reason of any default under this Agreement by Principal Life, no Event of Default (as defined below) under this Funding Agreement shall be deemed to have occurred, no payments with respect to this Agreement shall be accelerated and Principal Life will remain obligated to make payments under this Agreement as if no event of default had occurred with respect to the Notes.   8.   Termination of Agreement       Subject to the provisions of the following paragraph and the Annex, this Agreement shall terminate and cease to be of any further force or effect on the day and at the time upon which all amounts have been withdrawn from the Fund pursuant to this Agreement.       Upon the occurrence of any of the following events (each, an “Event of Default”) and following a written demand by the Agreement Holder, Principal Life shall pay to, or at the direction of, the Agreement Holder all amounts that the Trust is required to pay in such event under the Notes and the Trust Beneficial Interest:   (i)   Principal Life’s failure to make any payment of interest, premium (if applicable) or installment payments (if applicable) in accordance with this Agreement, if such failure to pay is not corrected within seven (7) Business Days after such payment becomes due and payable; or 5 --------------------------------------------------------------------------------     (ii)   Principal Life’s failure to make any payment of principal (other than any installment payment) in accordance with this Agreement, if such failure to pay is not corrected within one (1) Business Day after such payment becomes due and payable; or     (iii)   if Principal Life (a) is dissolved (other than pursuant to a consolidation, amalgamation or merger in which the resulting entity assumes its obligations); (b) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (c) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (d) institutes or has instituted against it an administrative or legal proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any supervision, rehabilitation, liquidation, bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (1) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its rehabilitation, winding-up or liquidation or (2) is not dismissed, discharged, stayed or restrained in each case within 60 days of the institution or presentation thereof; (e) has a resolution passed for its rehabilitation, winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger in which the resulting entity assumes the obligations of Principal Life); (f) seeks or becomes subject to the appointment of an administrator, supervisor, rehabilitator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (g) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 60 days thereafter; (h) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (a) to (g) (inclusive); or (i) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts.     Notwithstanding anything to the contrary in this Section 8, if an event described in clause (iii) above occurs, this Agreement will automatically terminate and the amount of the Fund will be immediately due and payable by Principal Life to the Agreement Holder, or the account specified by the Agreement Holder.       Principal Life will promptly notify the Agreement Holder and the Rating Agencies in writing of the occurrence of any of (i) through (iii) above.   9.   Withholding; Additional Amounts       All amounts due in respect of this Agreement will be made without withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or 6 --------------------------------------------------------------------------------       other governmental charges of whatever nature imposed or levied by or on behalf of any governmental authority in the United States unless the withholding or deduction is required by law, regulation or official interpretation thereof. Unless otherwise specified in the Annex, Principal Life will not pay any additional amounts to the Agreement Holder in the event that any withholding or deduction is so required by law, regulation or official interpretation thereof, and the imposition of a requirement to make any such withholding or deduction will not give rise to an Event of Default or any independent right or obligation to redeem this Agreement.   10.   Currency       Except as may be specifically noted in the Annex, the Net Deposit and all payments under Section 7 of this Agreement shall be made using the currency or currencies as specified in the Notes.   11.   Tax Treatment       Principal Life and the Agreement Holder agree that this Agreement shall be disregarded for U.S. Federal income tax purposes. Principal Life and the Agreement Holder further agree that if this Agreement is not so disregarded, it will and is intended to be treated as a debt obligation of Principal Life issued in registered form within the meaning of Treasury Regulations Section 1.871-14(c)(1)(i), except to the extent provided in Treasury Regulations Section 1.163-5T (or any subsequent similar regulation).   12.   Amendment and Modification       This Agreement may be amended or modified in whole or in part, at any time and from time to time, for any period or periods (a) by mutual written agreement by such officers of Principal Life, the Agreement Holder and, where such Agreement Holder is the Indenture Trustee upon an assignment by way of security of this Agreement by the Trust, the Trust and (b) without the consent of any other person affected thereby.   13.   Notice       Except as otherwise provided herein, all notices given pursuant to this Agreement shall be in writing, and shall either be delivered, mailed or telecopied to the locations listed below or at such other address or to the attention of such other persons as such party shall have designated for such purpose in a written notice complying as to delivery with the terms of this Section 13. Each such notice shall be effective (i) if given by telecopy, when transmitted to the applicable number so specified in this Section 13 (if required herein, such notice shall also be sent by mail, with first class postage prepaid), (ii) if given by mail, three days after deposit in the mails with first class postage prepaid, or (iii) if given by any other means, when actually delivered at such address. 7 --------------------------------------------------------------------------------   If to Principal Life:       Principal Life Insurance Company 711 High Street Des Moines, Iowa 50392-0001 Attention:   General Counsel Telephone:   (515) 247-5111 Telecopy:   (515) 248-3011       Principal Life Insurance Company 711 High Street Des Moines, Iowa 50392-0001 Attention:   Jim Fifield, Counsel Telephone:   (515) 248-9196 Telecopy:   (515) 235-9353 If to the Agreement Holder:       Principal Life Income Fundings Trust 2006-49 c/o U.S. Bank Trust National Association 100 Wall Street, 16th Floor New York, NY 10005 Attention:   Thomas E. Tabor Telephone:   (212) 361-6184 Facsimile:   (212) 809-5459 with a copy to:       Citibank, N.A. Citibank Agency and Trust 388 Greenwich Street, 14th Floor New York, NY 10013       Attention:   Nancy Forte Telephone:   (212) 816-5685 Telecopy:   (212) 816-5527 14.   Business Day       For purposes of this Agreement, “Business Day” means any day that is a Business Day as specified in the Notes or the Indenture.   15.   Business Day Convention       If the date on which any payment is due to be made under this Agreement shall occur on a day on which is not a Business Day, such payment shall be made in accordance with the Business Day Convention as specified in the Notes or the Indenture. 8 --------------------------------------------------------------------------------   16.   Jurisdiction       The parties to this Agreement hereby consent to the non-exclusive jurisdiction of any State or Federal Court of competent jurisdiction located within the State of New York, in the Borough of Manhattan, in connection with any actions or proceedings arising directly or indirectly from this Agreement.   17.   Waiver       The obligations of Principal Life or the Agreement Holder under this Agreement may be waived only in writing by the party to this Agreement whose interests are adversely affected by such waiver. No failure or delay, on the part of the party adversely affected, in exercising any right or remedy hereunder shall operate as a waiver thereof.   18.   Tax Redemption.       If a Tax Event (defined below) occurs, Principal Life will have the right to redeem this Agreement by giving not less than 30 and no more than 60 days prior written notice to the Agreement Holder and by paying to the Agreement Holder an amount equal to the Fund. The term “Tax Event” means that Principal Life shall have received an opinion of independent legal counsel stating in effect that as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or (b) any amendment to, or change in, an interpretation or application of any such laws or regulations by any governmental authority in the United States, which amendment or change is enacted, promulgated, issued or announced on or after the Effective Date of this Agreement, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date thereof, subject to U.S. federal income tax with respect to interest accrued or received on this Agreement or (ii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of taxes, duties or other governmental charges. 9 --------------------------------------------------------------------------------   ANNEX This Annex will become effective as of the Effective Date, subject to the requirements of Section 1.           Trust:   Principal Life Income Fundings Trust 2006-49           Net Deposit:   The Net Deposit is $8,620,720.00.           Deposit:   Regardless of the amount of the Net Deposit, the Deposit is deemed to be $8,752,015.00.           Bank and Account:   Wells Fargo Bank Iowa, N.A. ABA No.: XXXXXXXX For credit to Principal Life Insurance Company Account #XXXXXXXX           Title of Notes:   Principal Life Income Fundings Trust 2006-49 6.05% Principal® Life CoreNotes® Due 2016           Survivor’s Option:   Unless this Agreement has been declared due and payable prior to the Maturity Date of the related Notes by reason of any Event of Default, or has been previously redeemed or otherwise repaid, the Agreement Holder may request repayment of this Agreement upon the valid exercise of the Survivor’s Option in the Notes by the Representative of the deceased Beneficial Owner of such Notes (a “Survivor’s Option”).               Except as provided below, upon the tender to and acceptance by Principal Life of this Agreement (or portion thereof) securing the Notes as to which the Survivor’s Option has been exercised, Principal Life shall repay to the Agreement Holder the amount of the Fund equal to (i) 100% of the principal amount of the Notes as to which the Survivor’s Option has been validly exercised and accepted, plus accrued and unpaid interest on such amount to the date of repayment, or (ii) in the case of Discount Notes, the Issue Price of the Notes as to which the Survivor’s Option has been validly exercised and accepted, plus accrued discount and any accrued and unpaid interest on such amount to the date of repayment. However, Principal Life shall not be obligated to repay:               •   more than the greater of $2,000,000 or 2% of the aggregate deposit for all funding agreement contracts securing all outstanding notes issued under the Principal® Life CoreNotesSM program as of the end of the most recent calendar year; A-1 --------------------------------------------------------------------------------     •   more than $250,000 in aggregate deposit of funding agreement contracts securing outstanding notes issued under the Principal® Life CoreNotesSM program as to which the Survivor’s Option has been exercised on behalf of any single beneficial owner in any calendar year; or     •   more than 2% of the Deposit under this Agreement which secures the related Notes, as of the end of the most recent calendar year.           Principal Life shall not make repayments pursuant to the Agreement Holder’s request for repayment upon exercise of the Survivor’s Option in amounts that are less than $1,000, and, in the event that the limitations described in the preceding sentence would result in the partial repayment of this Agreement, the principal amount of this Agreement remaining outstanding after repayment must be at least $1,000 (the minimum authorized denomination of this Agreement). A request for repayment by the Agreement Holder upon an otherwise valid election to exercise the Survivor’s Option may not be withdrawn.           This Agreement (or portion thereof) accepted for repayment shall be repaid on the first Interest Payment Date for the related Notes that occurs 20 or more calendar days after the date of such acceptance.           In order to obtain repayment of this Agreement (or portion thereof) upon exercise of the Survivor’s Option, the Agreement Holder must provide to Principal Life (i) a written request for repayment signed by the Agreement Holder, and (ii) any additional information Principal Life requires to evidence satisfaction of any conditions to the repayment of this Agreement (or portion thereof). A-2 --------------------------------------------------------------------------------         PRINCIPAL LIFE INSURANCE COMPANY       By:   /s/ Christopher P. Freese             Name:   Christopher P. Freese             Title:   Officer                   PRINCIPAL LIFE INCOME FUNDINGS TRUST 2006-49       By:   U.S. Bank Trust National Association, not in its individual capacity, but solely in its capacity as trustee       By:   Bankers Trust Company, N.A., under Limited Power of Attorney, dated February 16, 2006.             By:   /s/ Debra Williams             Name:   Debra Williams             Title:   Vice President       A-3

EXHIBIT 10.6 SECOND AMENDMENT TO EMPLOYMENT AGREEMENT This Second Amendment (this “Second Amendment”), being made and effective as of August 9, 2006, is to the Employment Agreement dated December 30, 2005, by and between Luca C. Naccarato (the “Executive”) and SGS International, Inc., a Delaware corporation (the “Company”), as amended by an Amendment dated as of January 15, 2006 (as heretofore amended, the “Agreement”). All capitalized terms which are used in this Second Amendment and are not defined herein shall have the meaning ascribed to them in the Agreement. 1. Section 3 of the Agreement is hereby amended by deleting clause (b) therein in its entirety and replacing it with the following: Bonus Plans. The Executive shall be eligible to participate in the Company’s bonus plans for senior management with an annual incentive target of fifty percent (50%) of Base Salary (“Incentive Payment”), subject to achievement of such program’s objectives and final approval of the Board. 2. All other provisions of the Agreement remain in full force and effect. 3. This Second Amendment may be executed in counterparts each of which shall be deemed an original, and all of which together shall constitute a single instrument. -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first above written.   SGS International, Inc. By:   /s/ Benjamin F. Harmon, IV   Benjamin F. Harmon, IV   Vice President, General Counsel and Secretary Executive /s/ Luca C. Naccarato Luca C. Naccarato

EXHIBIT 10.1 EXECUTIVE SEVERANCE AND NONCOMPETITION AGREEMENT Kelly Lang 28445 SW Highland Circle Wilsonville, OR 97070 July 31, 2006 Merix Corporation an Oregon corporation PO Box 3000 Forest Grove, Oregon 97116 Merix Corporation (“Merix”) considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of Merix and its shareholders. In this connection, Merix recognizes that, as is the case with many publicly held corporations, the possibility of a change of control may exist and that such possibility, and the uncertainty and questions that it may raise among management, may result in the departure or distraction of management personnel to the detriment of Merix and its shareholders. In order to induce Kelly Lang (“Executive”) to remain employed by Merix in the face of uncertainties about the long-term strategies of Merix and possible change of control of Merix and their potential impact on Executive’s position with Merix, this Agreement, which has been approved by the Board of Directors of Merix, sets forth the severance benefits that Merix will provide to Executive in the event Executive’s employment by Merix is terminated under the circumstances described in this Agreement. To induce Merix to enter into this Agreement, Executive agrees to the covenants set forth in Section 6 of this Agreement.   1. Employment Relationship. Executive is currently employed by Merix as Chief Financial Officer. Executive and Merix acknowledge that either party may terminate this employment relationship at any time and for any or no reason, subject to the obligation of Merix to provide the severance benefits specified in this Agreement in accordance with the terms hereof. -------------------------------------------------------------------------------- 2. Release of Claims. In consideration for and as a condition precedent to receiving the severance benefits outlined in this Agreement, Executive agrees to execute and deliver to Merix a Release of Claims in the form attached as Exhibit A (“Release of Claims”) that will be delivered to Executive on the date of Termination of Executive’s Employment (as defined in Section 9.1).   3. Additional Compensation Upon Termination. In addition to unpaid salary and other wages, if any, payable to Executive through the date of Termination of Executive’s Employment, in the event of a Termination of Executive’s Employment at any time other than for Cause (as defined in Section 9.2 of this Agreement), death or Disability (as defined in Section 9.4 of this Agreement), and contingent upon Executive’s execution of the Release of Claims and compliance with Section 11 of this Agreement, Executive shall be entitled to the following benefits: 3.1 As severance pay and in lieu of any other compensation for periods subsequent to the date of Termination of Executive’s Employment, Merix shall pay Executive, in a single payment after employment has ended and eight days have passed following execution of the Release of Claims without revocation, an amount in cash equal to one year of Executive’s annual base pay at the rate in effect immediately prior to the date of Termination of Executive’s Employment. 3.2 Executive is entitled to extend coverage under any group health plan in which Executive and Executive’s dependents are enrolled at the time of Termination of Executive’s Employment under the COBRA continuation laws for the 18-month statutory period, or for as long as Executive remains eligible under COBRA. Merix will pay Executive a lump sum payment in an amount equivalent to the reasonably estimated cost Executive may incur to extend for a period of 18 months under the COBRA continuation laws Executive’s group health and dental plan coverage in effect at the time of Termination of Executive’s Employment. Executive may use this payment, as well as any payment made under Section 3.1, for such COBRA continuation coverage or for any other purpose. 3.3 Executive shall be entitled to a portion of the benefits under any annual cash incentive plans in effect at the time of Termination of Executive’s Employment equal to the greater of (a) 50 percent of Executive’s target benefit under such plan for the year or (b) a prorated amount representing the portion of the plan year during which Executive was a participant. For purposes of this Agreement, Executive’s participation in any such plan will be considered to have ended on Executive’s last day -------------------------------------------------------------------------------- of active employment. In making the proration calculation, the amount of Executive’s award if Executive had been a participant for the full incentive period shall be divided by the total number of days in the incentive period, and the result multiplied by the actual number of days Executive participated in the plan. The payment amount shall be calculated at the end of the incentive period and the amount shall not be due and payable by Merix to Executive until the date that all awards are payable to other eligible employees after the close of the incentive period, except that Executive may elect at any time after Termination of Executive’s Employment, by written notice to Merix, to receive 50 percent of Executive’s target benefit instead of the prorated amount, in which case the payment shall be made within 20 days of such election. If the applicable plan provides for a greater payment for a participant whose employment terminates prior to the end of an incentive period, the applicable plan payment shall be made. Executive acknowledges that this Section 3.3 modifies and supersedes any payment provisions under any existing or future bonus plan. 3.4 Merix will pay up to $12,500 to a third-party outplacement firm selected by Executive to provide career counseling assistance to Executive for a period of one year following the date of Termination of Executive’s Employment. Executive may elect to receive the $12,500 in cash in lieu of payment to a third-party outplacement firm. 3.5 All outstanding stock options, restricted stock, stock bonuses or other stock awards shall be governed by the terms of the applicable agreement or plan.   4. Additional Compensation Upon Termination Following a Change of Control. In the event of a Termination of Executive’s Employment other than for Cause, death or Disability within 24 months following a Change of Control (as defined in Section 9.3), or prior to a Change of Control at the direction of a person who has entered into an agreement with Merix, the consummation of which will constitute a Change of Control, and contingent upon Executive’s execution of the Release of Claims and compliance with Sections 5 and 11, Executive shall be entitled to the following benefits, which benefits shall be in addition to the benefits provided in Section 3: 4.1 Merix shall pay Executive, in a single payment within the later of (a) eight days after the last day of employment, including employment during the up-to-six-months-employment period referred to in Section 5 if Merix or the surviving company has requested Executive to continue employment during such period and (b) eight days after execution of the Release of Claims without revocation, an amount in -------------------------------------------------------------------------------- cash equal to one year of Executive’s annual base pay at the rate in effect immediately prior to the date of Termination of Executive’s Employment. 4.2 Executive shall be entitled to receive an amount such that the amount payable pursuant to Section 3.3 plus the amount payable pursuant to this Section 4.2 equals 100 percent of the Executive’s target benefit for the year under annual cash incentive plans in effect at the time of Termination of Executive’s Employment. The amount payable pursuant to Section 4.2 shall be paid on the same date that the Section 4.1 payment is payable. 4.3 Merix shall maintain in full force and effect, at its sole cost and expense, for Executive’s continued benefit for a period terminating 18 months after the date of Termination of Executive’s Employment, a life insurance policy insuring Executive’s life with coverage equal to two times Executive’s annual base pay in effect immediately prior to Termination of Executive’s Employment, provided that Executive’s continued participation is possible under the general terms and provisions of such policy. At Executive’s election, or if Executive’s continued participation in such policy is barred, Merix shall make a lump-sum payment to Executive equal to the total premiums that would have been paid by Merix for such 18-month period. The maximum amount that Merix shall be obligated to pay pursuant to this Section 4.3 in premiums and payments to Executive shall be $5,000. 4.4 The possibility of forfeiture to Merix of all stock issued to Executive under all Executive Stock Bonus Agreements shall immediately lapse. 4.5 All outstanding stock options held by Executive under all stock option and stock incentive plans of Merix shall become immediately exercisable in full and shall remain exercisable until the earlier of (a) two years after Termination of Executive’s Employment or (b) the option expiration date as set forth in the applicable option agreement. 4.6 Notwithstanding any provision in this Agreement, in the event that Executive would receive a greater after-tax benefit from the Capped Benefit (as defined in the next sentence) than from the payments pursuant to this Agreement (the “Specified Benefits”), the Capped Benefit shall be paid to Executive and the Specified Benefits shall not be paid. The Capped Benefit is the Specified Benefits, reduced by the amount necessary to prevent any portion of the Specified Benefits from being “parachute payments” as defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (“IRC”), or any successor provision. For purposes of determining whether Executive would receive a greater after-tax benefit from the Capped Benefit than from the Specified Benefits, there shall be taken into account all -------------------------------------------------------------------------------- payments and benefits Executive will receive upon a Change in Control of Merix (collectively, excluding the Specified Benefits, the “Change of Control Payments”). To determine whether Executive’s after-tax benefit from the Capped Benefit would be greater than Executive’s after-tax benefit from the Specified Benefits, there shall be subtracted from the sum of the before-tax Specified Benefits and the Change of Control Payments (including the monetary value of any non-cash benefits) any excise tax that would be imposed under IRC § 4999 and all federal, state and local taxes required to be paid by Executive in respect of the receipt of such payments, assuming that such payments would be taxed at the highest marginal rate applicable to individuals in the year in which the Specified Benefits are to be paid or such lower rate as Executive advises Merix in writing is applicable to Executive. 4.7 If Executive’s employment with Merix terminates for any reason prior to a Change of Control, other than at the direction of a person who has entered into an agreement with Merix, the consummation of which will constitute a Change of Control, Executive shall not be entitled to benefits under Section 4 of this Agreement.   5. Additional Service. Executive agrees that, if requested by Merix or the surviving company following a Change of Control, Executive will continue his or her employment with Merix or the surviving company for a period of up to six months following the Change of Control in any capacity requested by Merix or the surviving company consistent with Executive’s areas of professional expertise. During this period Executive shall receive the same salary and substantially the same benefits as in effect prior to the Change of Control. Executive shall not be entitled to any benefits provided by Section 4 if Executive fails to perform in accordance with this Section 5.   6. Noncompetition 6.1 Executive acknowledges that as part of Executive’s employment with Merix, Executive will have access to confidential information related to Merix’s products, services, customers, processes, business strategy and other confidential information that will be inevitably disclosed to a Competing Business if Executive engages in, is employed by, performs services for, participates in the ownership, management, control or operation of, or is otherwise connected with, either directly or indirectly, any Competing Business. 6.2 During the Term, Executive will not, directly or indirectly, engage in, be employed by, perform services for or otherwise participate in any Competing Business (as defined in Section 9.5 of this Agreement) or any other activity which conflicts with the interests of Merix. -------------------------------------------------------------------------------- 6.3 Executive’s execution, delivery and performance of this Agreement and the performance of Executive’s other obligations and duties to Merix will not cause any breach, default or violation of any other employment, nondisclosure, confidentiality, consulting or other agreement to which Executive is a party or by which Executive may be bound. 6.4 During Executive’s employment with Merix and for two years after Termination of Executive’s Employment, Executive will not induce, or attempt to induce, any employee or independent contractor of Merix to cease such employment or relationship to engage in, be employed by, perform services for, participate in the ownership, management, control or operation of, or otherwise be connected with, either directly or indirectly, any Competing Business. 6.5 During Executive’s employment with Merix and for two years after Termination of Executive’s Employment, Executive will not (except on behalf of or with the prior written consent of Merix) directly or indirectly (a) solicit, divert, appropriate to or accept on behalf of any Competing Business, or (b) attempt to solicit, divert, appropriate to or accept on behalf of any Competing Business, any business from any customer or actively sought prospective customer of Merix with whom Executive has dealt, whose dealings with Merix have been supervised by Executive or about whom Executive has acquired confidential information in the course of Executive’s employment. 6.6 During Executive’s employment with Merix and for two years after Termination of Executive’s Employment, Executive will not engage in, be employed by, perform services for, participate in the ownership, management, control or operation of, or otherwise be connected with, either directly or indirectly, any Competing Business. For purposes of this Section 6, Executive will not be considered to be connected with any Competing Business solely on account of: Executive’s ownership of less than five percent of the outstanding capital stock or other equity interests in any person or entity carrying on the Competing Business. Executive agrees that this restriction is reasonable, but further agrees that should a court exercising jurisdiction with respect to this Agreement find any such restriction invalid or unenforceable due to unreasonableness, either in period of time, geographical area, or otherwise, then in that event, such restriction is to be interpreted and enforced to the maximum extent that such court deems reasonable. 6.7 Executive acknowledges that Executive’s obligations under this Section 6 are important to Merix, and that Merix would not employ or continue to employ Executive without Executive’s agreement to such obligations. Executive also acknowledges that if Executive does not abide by Executive’s obligations in this -------------------------------------------------------------------------------- Section 6, Merix will suffer immediate and irreparable harm, and that the damage to Merix will be difficult to measure and financial relief will be incomplete. Accordingly, and notwithstanding Section 12 hereof, Merix will be entitled to injunctive relief and other equitable remedies in an arbitration or in a court of competent jurisdiction in the event of a breach by Executive of any obligation under this Agreement. The rights and remedies of Merix under this Section 6.7 are in addition to all other remedies. 6.8 Executive has carefully read all of the provisions of this Section 6 and agrees that (a) the same are necessary for the reasonable and proper protection of Merix’s business, (b) Merix has been induced to enter into its relationship with Executive in reliance upon Executive’s compliance with the provisions of this Section 6, (c) every provision of this Section 6 is reasonable with respect to its scope and duration, (d) Executive has executed this Agreement without duress or coercion from any source, and (e) Executive has received a copy of this Agreement.   7. Tax Withholding; Subsequent Employment. 7.1 All payments provided for in this Agreement are subject to applicable tax withholding obligations imposed by federal, state and local laws and regulations. 7.2 The amount of any payment provided for in this Agreement shall not be reduced, offset or subject to recovery by Merix by reason of any compensation earned by Executive as the result of employment by another employer after Termination of Executive’s Employment.   8. Other Agreements. This Agreement replaces and supersedes any severance agreement or other similar agreement between Executive and Merix entered into prior to the date of this Agreement. In the event that severance benefits are payable to Executive under any other agreement with Merix in effect at the time of Termination of Executive’s Employment (including but not limited to any employment agreement, but excluding for this purpose any stock option agreement or stock bonus agreement or stock appreciation right agreement that may provide for accelerated vesting or related benefits upon the occurrence of a Change in Control), the benefits provided in this Agreement shall not be payable to Executive. Executive may, however, elect to receive all of the benefits provided for in this Agreement in lieu of all of the benefits provided in all such other agreements. Any such election shall be made with respect to the agreements as a whole, and Executive cannot select some benefits from one agreement and other benefits from this Agreement. -------------------------------------------------------------------------------- 9. Definitions. 9.1 Termination of Executive’s Employment. “Termination of Executive’s Employment” means that Merix has terminated Executive’s employment with Merix (including any subsidiary of Merix). For purposes of Section 3, if Executive is assigned additional or different titles, tasks or responsibilities from those currently held or assigned, consistent with Executive’s areas of professional expertise and with no decrease in annual base compensation, whether at Merix or any subsidiary of Merix, such circumstances shall not constitute a Termination of Executive’s Employment. For purposes of Section 4, Termination of Executive’s Employment shall include termination by Executive, within 24 months of a Change of Control, by written notice to Merix referring to the applicable paragraph of Section 9.1, for “Good Reason” based on: (a) the assignment to Executive of a different title, job or responsibilities that results in a decrease in the level of responsibility of Executive with respect to the surviving company after the Change of Control when compared to Executive’s level of responsibility for Merix’ operations prior to the Change of Control; provided that Good Reason shall not exist if Executive continues to have the same or a greater general level of responsibility for the former Merix operations after the Change of Control as Executive had prior to the Change of Control even if the former Merix operations are a subsidiary or division of the surviving company; (b) a reduction by Merix or the surviving company in Executive’s annual base pay as in effect immediately prior to the Change of Control; (c) a significant reduction by Merix or the surviving company in total benefits available to Executive under cash incentive, stock incentive and other employee benefit plans after the Change of Control compared to the total package of such benefits as in effect prior to the Change of Control; (d) a requirement by Merix or the surviving company that Executive be based more than 50 miles from where Executive’s office is located immediately prior to the Change of Control, except for required travel on company business to an extent substantially consistent with the business travel obligations that Executive undertook on behalf of Merix prior to the Change of Control; or (e) the failure by Merix to obtain from any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Merix (“Successor”) the assent to this Agreement contemplated by Section 10 hereof. -------------------------------------------------------------------------------- 9.2 Cause. Termination of Executive’s Employment for “Cause” shall mean termination upon (a) the willful and continued failure by Executive to perform substantially Executive’s reasonably assigned duties with Merix (other than any such failure resulting from Executive’s incapacity due to physical or mental illness) after a demand for substantial performance is delivered to Executive by the Board, the Chief Executive Officer or the President of Merix that specifically identifies the manner in which the Board or Merix believes that Executive has not substantially performed Executive’s duties or (b) the willful engaging by Executive in illegal conduct that is materially and demonstrably injurious to Merix. No act, or failure to act, on Executive’s part shall be considered “willful” unless done, or omitted to be done, by Executive without reasonable belief that Executive’s action or omission was in, or not opposed to, the best interests of Merix. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for Merix shall be conclusively presumed to be done, or omitted to be done, by Executive in the best interests of Merix. 9.3 Change of Control. A Change of Control shall mean that one of the following events has taken place: (a) The shareholders of Merix approve one of the following (“Approved Transactions”): (i) Any merger or statutory plan of exchange involving Merix (“Merger”) in which Merix is not the continuing or surviving corporation or pursuant to which shares of Merix’s common stock would be converted into cash, securities or other property, other than a Merger involving Merix in which the holders of shares of Merix’s common stock immediately prior to the Merger have the same proportionate ownership of common stock of the surviving corporation after the Merger; or (ii) Any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Merix or the adoption of any plan or proposal for the liquidation or dissolution; (b) A tender or exchange offer, other than one made by Merix, is made for shares of Merix’s common stock (or securities convertible into shares of Merix’s common stock ), and such offer results in a portion of those securities being purchased and the offeror after the consummation of the offer is the beneficial owner (as determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as -------------------------------------------------------------------------------- amended (the “Exchange Act”)), directly or indirectly, of securities representing at least 20 percent of the voting power of outstanding securities of Merix; (c) Merix receives a report on Schedule 13D of the Exchange Act reporting the beneficial ownership by any person of securities representing 20 percent or more of the voting power of outstanding securities of Merix, except that if such receipt shall occur during a tender offer or exchange offer described in (b) above, a Change of Control shall not take place until the conclusion of such offer; or (d) During any period of 12 months or less, individuals who at the beginning of such period constituted a majority of the Board of Directors cease for any reason to constitute a majority thereof, unless the nomination or election of such new directors was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period. Notwithstanding anything in the foregoing to the contrary, no Change of Control shall be deemed to have occurred for purposes of this Agreement by virtue of any transaction that results in Executive, or a group of persons that includes Executive, acquiring, directly or indirectly, securities representing 20 percent or more of the voting power of outstanding securities of Merix. 9.4 Disability. Termination of Executive’s Employment based on “Disability” shall mean termination without further compensation under this Agreement, due to a mental or physical impairment of Executive that is expected to result in death or that has lasted or is expected to last for a continuous period of 12 months or more and that causes Executive to be unable, with reasonable accommodation in the opinion of the Committee, to perform his or her duties for Merix and to be engaged in any substantial gainful activity. 9.5 Competing Business Competing Business means any business whose efforts are in competition with the efforts of Merix. A Competing Business includes any business whose efforts involve any research and development, products or services in competition with products or services which are, during Executive’s employment with Merix and/or upon Termination of Executive’s Employment, either (a) produced, marketed or otherwise commercially exploited by Merix or (b) in actual or demonstrably anticipated research or development by Merix. -------------------------------------------------------------------------------- 10. Successors; Binding Agreement. 10.1 This Agreement shall be binding on and inure to the benefit of Merix and its Successors and assigns. Upon Executive’s written request, Merix will seek to have any Successor, by agreement, assent to the fulfillment by Merix of its obligations under this Agreement. If such a request is made, failure of Merix to obtain such assent prior to or at the time a company becomes a Successor shall constitute Good Reason for termination by Executive of his or her employment and, if a Change of Control of Merix has occurred, shall entitle Executive to the benefits pursuant to Section 4. 10.2 This Agreement shall inure to the benefit of and be enforceable by Executive and Executive’s legal representatives, executors, administrators and heirs.   11. Resignation of Corporate Offices. Executive will resign Executive’s office, if any, as a director, officer or trustee of Merix, its subsidiaries or affiliates and of any other corporation or trust of which Executive serves as such at the request of Merix, effective as of the date of Termination of Executive’s Employment. Executive agrees to provide Merix such written resignation(s) upon request and that no severance will be paid until after such resignation(s) are provided.   12. Governing Law; Arbitration. This Agreement shall be construed in accordance with and governed by the laws of the State of Oregon. Any dispute or controversy arising under or in connection with this Agreement, or the breach thereof, shall be settled exclusively by arbitration under the Mutual Agreement to Arbitrate Claims signed by the Executive, and judgment upon the award rendered by the Arbitrator may be entered in any Court having jurisdiction thereof. Notwithstanding any provision in the Mutual Agreement to Arbitrate Claims, Merix shall pay all arbitration fees and reasonable attorney’s fees and expenses (including at trial and on appeal) of Executive in enforcing its rights under this Agreement in the event of a Termination of Executive’s Employment within 24 months following a Change of Control. Notwithstanding the foregoing, any dispute or controversy arising under or in connection with Section 6 of this Agreement or a breach thereof shall be settled in accordance with the terms of Section 6.7 of this Agreement. -------------------------------------------------------------------------------- 13. Amendment. No provision of this Agreement may be modified unless such modification is agreed to in writing signed by Executive and Merix.   14. Severability. If any of the provisions or terms of this Agreement shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other terms of this Agreement, and such provision shall be interpreted, construed or reformed to the extent reasonably required to render the same valid, enforceable and consistent with the original intent underlying such provision of this Agreement.   MERIX CORPORATION By:   /s/ Mark R. Hollinger Name:   Mark R. Hollinger Title:   President & CEO /s/ Kelly Lang Kelly Lang

EXHIBIT 10.1   FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT This First Amendment to Asset Purchase Agreement (this “Amendment”) dated as of January 20, 2006, and entered into by and among Nayna Networks, Inc., a Nevada corporation (the “Buyer”), Abundance Networks, Inc., a Delaware corporation and wholly-owned subsidiary of the Buyer, Abundance Networks, LLC, a Delaware limited liability company (the “Seller”) and Abundance Networks (India) Pvt Ltd, an India private limited company and wholly owned subsidiary of the Seller (collectively, the “Parties”). WITNESSETH WHEREAS: The Parties previously entered into that certain Asset Purchase Agreement, dated as of December 1, 2005 (the “Original Agreement”). WHEREAS: Section 10.9 of the Original Agreement provides that any term of the Original Agreement may be amended with the written consent of each of the Parties. WHEREAS: In connection with the Parties’ desire to amend the payment terms contained in the Original Agreement, the parties hereto wish to amend the Original Agreement as set forth herein.   NOW, THEREFORE, the Parties hereto, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby agree as follows:   1. Section 1.3(a)(i) of the Original Agreement shall be deleted in its entirety and replaced with the following in lieu thereof:   “(i) 1,150,000 shares (the “Initial Shares”) plus an additional number of shares equal to $500,000 divided by the Average Closing Price on the Closing Date shall be issued to Seller;”   2. Section 1.3(b)(i) of the Original Agreement shall be deleted in its entirety and replaced with the following in lieu thereof:   “(i)  If, on the one-year anniversary of the Closing, the Initial Shares do not have an Average Closing Price of at least $2.00 per share, then Buyer shall issue an additional number of shares of Common Stock to Seller as is determined by the following formula: (1,150,000 x ($2.00 - the Average Closing Price)) / the Average Closing Price (the “Initial True-Up Shares”).”   3. Section 1.3(b)(iii) of the Original Agreement shall be deleted in its entirety and replaced with the following in lieu thereof:   “(iii)  If, on the date that the Second Earnout Shares (as defined below) become due and issuable (the “Second Earnout Date”) to Seller, any Earnout Shares, that have been issued or are due and issuable, do not have an Average Closing Price of at least $2.00 per share, then, on such Second Earnout Date Buyer shall issue an additional number of shares of Common Stock to Seller as is determined by the following formula: (the number of shares earned pursuant to subsection (c) and (d) below x ($2.00 - the Average Closing Price at the Second Earnout Date)) / the Average Closing Price at the Second Earnout Date (the “Earnout True-Up Shares” and, together with the Initial True-Up Shares, the Indemnification True-Up Shares, collectively, the “True-Up Shares”).”   --------------------------------------------------------------------------------   4. Section 1.3(c) of the Original Agreement shall be deleted in its entirety and replaced with the following in lieu thereof:   “(c)  If, for the 12-month period ending March 31, 2006 (the “First Earnout Period”), the revenue generated by the Seller’s business (on a stand-alone basis as a wholly-owned subsidiary or division, as the case may be, of Buyer and from sales of Seller’s products by Buyer or its other Subsidiaries or affiliates) (the “Revenue”) is at least $2,000,000, then, within ten business days of the date on which Buyer’s independent accountants have completed their review of the financial statements indicating the revenues so generated, the Escrow Agent shall release a number of shares (the “First Earnout Shares”) equal to the product of (i) 875,000 shares multiplied by (ii) a fraction, the numerator of which is the Revenues actually generated during the First Earnout Period and the denominator of which is $6,000,000 multiplied by (iii) a fraction, the numerator of which is the Adjusted EBITDA (as defined below) actually generated during the First Earnout Period based on the Revenues earned for such period and the denominator of which is $900,000; provided, however, that the First Earnout Shares shall in no event exceed 875,000. Buyer shall use good faith reasonable efforts to have their independent accountants complete their review of the financial statements for the 12-month period ending March 31, 2006, as soon as practicable following March 31, 2006.” 5. This Amendment shall be governed by and construed in accordance with the internal laws of the State of California, without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of laws of any jurisdictions other than those of the State of California.   6. This Amendment may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. [Remainder of Page Intentionally Left Blank]   -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Parties have caused this First Amendment to Asset Purchase Agreement to be duly executed as of the date first above written. NAYNA NETWORKS, INC. a Nevada corporation   By:  /s/ Naveen S. Bisht -------------------------------------------------------------------------------- Name: Naveen S. Bisht Title: President & CEO   ABUNDANCE NETWORKS, INC. a Delaware corporation   By:  /s/ Naveen S. Bisht -------------------------------------------------------------------------------- Name: Naveen S. Bisht Title: President & CEO   ABUNDANCE NETWORKS, LLC a Delaware limited liability company   By:  /s/ Suresh R. Pillai -------------------------------------------------------------------------------- Name: Suresh R. Pillai Title: President & CEO   ABUNDANCE NETWORKS (INDIA) PVT LTD an India private limited company   By: /s/ Suresh R. Pillai -------------------------------------------------------------------------------- Name: Suresh R. Pillai Title: President & CEO                             --------------------------------------------------------------------------------

Exhibit 10.80 AMENDMENT NO. 9 TO THE SENIOR CREDIT FACILITY AMENDMENT NO. 9 TO LOAN AND SECURITY AGREEMENT, dated as of February 24, 2006, entered into by and among Wachovia Bank, National Association, successor by merger to Congress Financial Corporation (Florida), in its capacity as agent acting for and on behalf of the parties to the Loan Agreement (as hereinafter defined) as lenders (in such capacity, “Agent”), the parties to the Loan Agreement as lenders (individually a “Lender” and collectively, “Lenders”), Supreme International, LLC, a Delaware limited liability company formerly known as Supreme International, Inc. (“Supreme”), Jantzen, LLC, a Delaware limited liability company formerly known as Jantzen, Inc. (“Jantzen”), Perry Ellis Menswear, LLC, a Delaware limited liability company formerly known as Perry Ellis Menswear, Inc. (“Perry Ellis Menswear”), Perry Ellis Europe Limited, formerly known as Farah Manufacturing (U.K.) Limited, a private limited company incorporated in England and Wales (“Perry Europe”), Salant Holding, LLC, a Delaware limited liability company formerly known as Salant Holding Corporation (“Salant Holding” and together with Supreme, Jantzen, Perry Europe and Perry Ellis Menswear, each individually “Borrower” and collectively, “Borrowers”), Perry Ellis International, Inc., a Florida corporation (“Parent”), PEI Licensing, Inc., a Delaware corporation (“PEI Licensing”), Jantzen Apparel, LLC, a Delaware limited liability company formerly known as Jantzen Apparel Corp. (“Jantzen Apparel”), Supreme Real Estate I, LLC, a Florida limited liability company (“Supreme I”), Supreme Real Estate II, LLC, a Florida limited liability company (“Supreme II”), Supreme Realty, LLC, a Florida limited liability company (‘Supreme Realty”), Supreme Munsingwear Canada Inc., a Canada corporation (“Supreme Canada”), Perry Ellis Shared Services Corporation, a Delaware corporation (“PE Shared Services”), Winnsboro DC, LLC, a Delaware limited liability company (“Winnsboro”), Tampa DC, LLC, a Delaware limited liability company (“Tampa DC”), Perry Ellis International Group Holdings Limited, a private company incorporated under the laws of Ireland having its principal place of business in the Bahamas (“Group Holdings”) and Perry Ellis Real Estate, LLC, a Delaware limited liability company formerly known as Perry Ellis Real Estate Corporation (“PE Real Estate” and, together, with Parent, PEI Licensing, Jantzen Apparel, Supreme I, Supreme II, Supreme Realty, Group Holdings, PE Shared Services, Winnsboro, Tampa DC, and Supreme Canada, each individually a “Guarantor” and collectively, “Guarantors”). W I T N E S S E T H : WHEREAS, Agent, Lenders, Borrowers and Guarantors have entered into financing arrangements pursuant to which Lenders (or Agent on behalf of Lenders) have made and may make loans and advances and provide other financial accommodations to Borrowers as set forth in the Loan and Security Agreement, dated October 1, 2002, by and among Agent, Lenders, Borrowers and Guarantors, as amended by Amendment No. 1 to Loan and Security Agreement, dated June 19, 2003, Amendment No. 2 to Loan and Security Agreement, dated September 22, 2003, Amendment No. 3 to Loan and Security Agreement, dated December 1, 2003, Amendment No. 4 to Loan and Security Agreement, dated February 25, 2004, Amendment No. 5 to Loan and   1 -------------------------------------------------------------------------------- Security Agreement, dated July 1, 2004, Amendment No. 6 to Loan and Security Agreement, dated as of September 30, 2004, Amendment No. 7 to Loan and Security Agreement, dated as of February 26, 2005 and Amendment No. 8 to Loan and Security Agreement, dated as of September 30, 2005 (as the same may hereafter be further amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”, and together with all agreements, documents and instruments at any time executed and/or delivered in connection therewith or related thereto, as from time to time amended, modified, supplemented, extended, renewed, restated, or replaced, collectively, the “Financing Agreements”); WHEREAS, Borrowers and Guarantors have requested that Agent and Lenders agree to make certain amendments to the Loan Agreement, and Agent and Lenders are willing to do so, subject to the terms and conditions set forth in this Amendment No. 9; and WHEREAS, by this Amendment No. 9, Agent, Lenders, Borrowers and Guarantors desire and intend to evidence such amendments. NOW, THEREFORE, in consideration of the foregoing, the mutual agreements and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. 1.1 Additional Definition. As used herein, the following terms shall have the meanings given to them below, and the Loan Agreement and the other Financing Agreements are hereby amended to include, in addition and not in limitation, the following definitions: (a) “Amendment No. 9” shall mean Amendment No. 9 to Loan and Security Agreement by and among Agent, Lenders, Borrowers and Guarantors, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. (b) “Gotcha” shall mean Gotcha International, L.P., a Delaware limited partnership. (c) “Gotcha Acquisition” shall mean the acquisition of certain assets, including the Gotcha Intellectual Property, by Parent from Gotcha, pursuant to the Asset Purchase Agreement, dated as of November 18, 2005, by and among Parent, Gotcha and its partners, as amended by the First Amendment to Asset Purchase Agreement dated as of December 27, 2005 and the Second Amendment to Asset Purchase Agreement dated as of January 27, 2006 and as the same is in effect on the date hereof. (d) “Gotcha Intellectual Property” shall mean the intellectual property of Gotcha acquired by Parent pursuant to the Gotcha Acquisition.   2 -------------------------------------------------------------------------------- 1.2 Amendment to Definition. The definition of “Excess Availability” in Section 1.40 of the Loan Agreement is hereby amended by adding the following immediately before the period at the end thereof: “; provided, that, solely for the purpose determining Quarterly Average Excess Availability in connection with the calculation of the Applicable Margin during the period from March 1, 2006 through June 30, 2006, Excess Availability shall be calculated without regard to the Loan Limit of any Borrower; provided, further, that, if Agent shall have received the notice, substantially in the form of Exhibit A to Amendment No. 9 (the “Section 1.2 Termination Notice”), duly executed and delivered by Parent, then Section 1.2 of Amendment No. 9 shall terminate and cease to be in full force and effect commencing on the third Business Day after the receipt by Agent of the Section 1.2 Termination Notice (it being understood and agreed that, once delivered by Parent to Agent, the Section 1.2 Termination Notice shall be irrevocable).” 1.3 Interpretation. For purposes of this Amendment No. 9, unless otherwise defined herein, all capitalized terms used herein which are defined in the Loan Agreement shall have the meanings given to such terms in the Loan Agreement. 2. Collateral Matters. Section 12.11(e) of the Loan Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following: “(e) [Intentionally Deleted]” 3. Gotcha Intellectual Property. Notwithstanding the provisions of Section 9.10(i)(x) of the Loan Agreement and subject to Section 5 of this Amendment No. 9, Agent and Lenders waive the condition to the consummation of the Gotcha Acquisition that the security interest of Agent in any of the Gotcha Intellectual Properly shall be filed with the United States Patent and Trademark Office or the United States Copyright Office. 4. Representations. Warranties and Covenants. Borrowers and Guarantors, jointly and severally, represent, warrant and covenant with and to Agent and Lenders as follows, which representations, warranties and covenants shall survive the execution and delivery hereof: 4.1 this Amendment No. 9 has been duly authorized, executed and delivered by all necessary action on the part of each Borrower and Guarantor which is a party hereto and, if necessary, their respective stockholders, and is in full force and effect as of the date hereof, and the agreements and obligations of Borrowers and Guarantors contained herein constitute legal, valid and binding obligations of Borrowers and Guarantors enforceable against them in accordance with their terms except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors’ rights and (ii) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); 4.2 neither this Amendment No. 9 nor the transactions contemplated hereby are in contravention of any applicable law, or the terms of any agreement to which any Borrower or Guarantor is a party or by which any property of any Borrower or Guarantor is bound; 4.3 as of the date hereof, no Default or Event of Default exists or has occurred and is continuing; and   3 -------------------------------------------------------------------------------- 4.4 as of the date hereof, no Person has any security interest or lien on any of the Released Trademarks (as defined below), other than Agent, Senior Note Trustee and Letter of Credit Issuers. 5. Release of Lien on Trademark Collateral. (a) Upon the satisfaction of the conditions set forth in Section 5(b) hereof, (i) Agent shall release and terminate its security interest in and lien on the trademarks, service marks, trade names, trade styles, service marks, trademark applications and service mark applications of Borrowers and Guarantors, all licenses and rights of Borrowers and Guarantors to use any of the foregoing, all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing, and all rights of Borrowers and Guarantors to sue for past, present or future infringement of any of the foregoing (collectively, the “Released Trademarks”) and (ii) the term “Collateral” as used in the Loan Agreement and the other Financing Agreements shall not include the Released Trademarks. (b) The effectiveness of the release and termination contained in Section 5(a) hereof shall only be effective upon the satisfaction of each of the following conditions precedent in a manner satisfactory to Agent: (i) Agent shall have received evidence, in form and substance satisfactory to Agent, that each Letter of Credit Issuer shall have released and terminated its security interest in and lien on the Released Trademarks; (ii) Agent shall have received evidence, in form and substance satisfactory to Agent, that Senior Note Trustee shall have released and terminated its security interest in and lien on the Released Trademarks; and (iii) the conditions precedent in Section 7 hereof shall have been satisfied. (c) Nothing contained herein shall be deemed to be a release or termination by Agent of (or an agreement by Agent to release or terminate) any security interest in or lien on any assets of Borrowers or Guarantors other than the Released Trademarks, all of which shall continue in full force and effect. 6. Limited License to Use Released Trademarks. For the purpose of enabling Agent to exercise the rights and remedies under the Loan Agreement and the other Financing Agreements, each Borrower and Guarantor hereby grants to Agent an irrevocable, non-exclusive license (exercisable at any time an Event of Default shall exist or have occurred and for so long as the same is continuing) without payment of royalty or other compensation to any Borrower or Obligor, to use, license or sublicense any of the Released Trademarks, whether now owned or hereafter acquired, wherever the same may be located, including in such license reasonable access to all media in which any of the foregoing items may be recorded or stored and to all computer programs used for the compilation or printout thereof.   4 -------------------------------------------------------------------------------- 7. Conditions Precedent. The effectiveness of the amendments contained herein shall only be effective upon the satisfaction of each of the following conditions precedent in a manner satisfactory to Agent: 7.1 Agent shall have received executed counterparts of this Amendment No. 9, duly authorized, executed and delivered by Borrowers, Guarantors and the Required Lenders; 7.2 No Default or Event of Default shall exist or have occurred and be continuing; 7.3 Agent shall have received, in form and substance satisfactory to Agent, (a) a Collateral Assignment of Acquisition Agreements, duly authorized, executed and delivered by Parent and (b) the consent of Gotcha to such Collateral Assignment of Acquisition Agreements, duly authorized, executed and delivered by Parent and Gotcha; and 7.4 Agent shall have received, in form and substance satisfactory to Agent, all consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or reasonably desirable in order to effectuate the provisions of this Amendment No. 9. 8. Redemption of Senior Notes. Agent, for itself and on behalf of the Lenders, hereby (a) acknowledges receipt of notice from Parent pursuant to Section 9.9(f)(v)(A)(1) of the Loan Agreement of Parent’s intention to redeem all of the outstanding Senior Notes on or about March 15, 2006, in accordance with the terms of Section 9.9(f)(v)(A) of the Loan Agreement, at a redemption price equal to 102.375% of the aggregate outstanding principal amount of the Senior Notes and (b) waives all further notice required by Section 9.9(f)(v)(A) of the Loan Agreement, provided, that, Borrowers and Guarantors comply with clauses (2) and (3) of such Section 9.9(f)(v)(A). 9. Effect of this Amendment. This Amendment No. 9 and the instruments and agreements delivered pursuant hereto (if any) constitute the entire agreement of the parties with respect to the subject matter hereof and thereof, and supersede all prior oral or written communications, memoranda, proposals, negotiations, discussions, term sheets and commitments with respect to the subject matter hereof and thereof. Except as expressly amended pursuant hereto, no other changes or modifications to the Financing Agreements are intended or implied, and in all other respects the Financing Agreements are hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date hereof. To the extent that any provision of the Loan Agreement or any of the other Financing Agreements are inconsistent with the provisions of this Amendment No. 9, the provisions of this Amendment No. 9 shall control. 10. Amendment Fee. Borrowers shall pay to Agent, for the account of Lenders (in accordance with the arrangements between Agent and Lenders), a monthly amendment fee in the amount equal to $15,000 per month, which fee shall be payable in advance on the first day of each month, commencing on March 1, 2006 and ending June 1, 2006; provided, that, Borrowers shall not be obligated to pay such amendment fee for any month if Section 1.2 of Amendment No. 9 shall have been terminated and ceased to be in full force and effect prior to the first day of   5 -------------------------------------------------------------------------------- such month in accordance with the terms of the second proviso to the definition of Excess Availability set forth in Section 1.40 of the Loan Agreement. Once paid the foregoing fees shall be fully earned and nonrefundable. Agent may, at its option, charge any of the foregoing fees to any loan account of Borrowers maintained with Agent. 11. Further Assurances. Each Borrower and Guarantor shall execute and deliver such additional documents and take such additional action as may be reasonably requested by Agent to effectuate the provisions and purposes of this Amendment No. 9. 12. Governing Law. The rights and obligations hereunder of each of the parties hereto shall be governed by and interpreted and determined in accordance with the internal laws of the State of Florida (but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of Florida). 13. Binding Effect. This Amendment No. 9 shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns. 14. Counterparts. This Amendment No. 9 may be executed in any number of counterparts, but all of such counterparts shall together constitute but one and the same agreement. In making proof of this Amendment No. 9, 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 No. 9 by telecopier or other method of electronic transmission shall have the same force and effect as delivery of an original executed counterpart of this Amendment No. 9. Any party delivering an executed counterpart of this Amendment No. 9 by telecopier or other method of electronic transmission also shall deliver an original executed counterpart of this Amendment No. 9, but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Amendment No. 9 as to such party or any other party. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]   6 -------------------------------------------------------------------------------- [SIGNATURES CONTINUED FROM PRECEDING PAGE]       PERRY ELLIS SHARED SERVICES CORPORATION       By:   /s/    Illegible       Title:   CFO     WINNSBORO DC, LLC       By:   Perry Ellis International, Inc., its Managing Member       By:   /s/    Illegible       Title:   CFO     TAMPA DC, LLC       By:   Perry Ellis International, Inc., its Managing Member       By:   /s/    Illegible       Title:   CFO     PERRY ELLIS REAL ESTATE, LLC, formerly known as Perry Ellis Real Estate Corporation       By:   Perry Ellis International, Inc., its Managing Member       By:   /s/    Illegible       Title:   CFO LOGO [g98852img_002.jpg]     By:   /s/    Illegible [SIGNATURES CONTINUE ON FOLLOWING PAGE] -------------------------------------------------------------------------------- [SIGNATURES CONTINUED FROM PRECEDING PAGE]       JANTZEN APPAREL, LLC, formerly known as Jantzen Apparel Corp.       By:   PEI Licensing, Inc., its Managing Member       By:   /s/    Illegible       Title:   CFO     SUPREME REAL ESTATE I, LLC       By:   /s/    Illegible       Title:   CFO     SUPREME REAL ESTATE II, LLC       By:   /s/    Illegible       Title:   CFO     SUPREME REALTY, LLC       By:   /s/    Illegible       Title:   CFO LOGO [g98852img_002.jpg]     By:   /s/    Illegible [SIGNATURES CONTINUE ON FOLLOWING PAGE] -------------------------------------------------------------------------------- [SIGNATURES CONTINUED FROM PRECEDING PAGE]       PERRY ELLIS EUROPE LIMITED, formerly known as Farah Manufacturing (U.K.) Limited       By:   /s/    Illegible       Title:   CFO       By:            Title:          Present when the Common Seal of PERRY ELLIS INTERNATIONAL GROUP HOLDINGS LIMITED hereunto offered       By:   /s/    Illegible       Title:   CFO       By:            Title:          PERRY ELLIS INTERNATIONAL, INC. PEI LICENSING, INC.       By:   /s/    Illegible       Title:   CFO     SUPREME MUNSINGWEAR CANADA, INC.       By:   /s/    Illegible       Title:   CFO LOGO [g98852img_002.jpg]     By:   /s/    Illegible [SIGNATURES CONTINUE ON FOLLOWING PAGE] -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 9 to be duly executed and delivered by their authorized officers as of the day and year first above written.       SUPREME INTERNATIONAL, LLC, formerly known as Supreme International, Inc.       By:   Perry Ellis International, Inc., its Managing Member       By:   /s/    Illegible       Title:   CFO     JANTZEN,  LLC, formerly  known as Jantzen, Inc.       By:   Perry Ellis International, Inc., its Managing Member       By:   /s/    Illegible       Title:   CFO     PERRY ELLIS MENSWEAR, LLC, formerly known as Perry Ellis Menswear, Inc.       By:   Perry Ellis International, Inc., its Managing Member       By:   /s/    Illegible       Title:   CFO     SALANT HOLDING, LLC, formerly known as Salant Holding Corporation       By:   Perry Ellis International, Inc., its Managing Member       By:   /s/    Illegible       Title:   CFO LOGO [g98852img_002.jpg]     By:   /s/    Illegible [SIGNATURES CONTINUE ON FOLLOWING PAGE] -------------------------------------------------------------------------------- [SIGNATURES CONTINUED FROM PRECEDING PAGE]   AGREED:     WACHOVIA BANK, NATIONAL ASSOCIATION, successor by merger to Congress Financial Corporation (Florida), as Agent and a Lender     By:   /s/    Illegible       Title:   Managing Director       THE CIT GROUP/COMMERCIAL SERVICES, INC.     By:   /s/    Illegible       Title:   Vice President       THE ISRAEL DISCOUNT BANK OF NEW YORK     By:   /s/    Illegible     By:   /s/    Illegible Title:   Senior Vice President     Title:   Vice President [SIGNATURES CONTINUE ON FOLLOWING PAGE] -------------------------------------------------------------------------------- [SIGNATURES CONTINUED FROM PRECEDING PAGE]   HSBC BANK USA, NATIONAL ASSOCIATION By:   /s/    Barbara Baltar Title:   First Vice President HSBC BUSINESS CREDIT (USA) INC. By:   /s/    Illegible Title:   First Vice President BURDALE FINANCIAL LIMITED By:   /s/    Illegible Title:   Director -------------------------------------------------------------------------------- Exhibit A Section 1.2 Termination Notice [Letterhead of Perry Ellis International, Inc.]                     ,           Wachovia Bank, National Association, as Agent 110 East Broward Boulevard Fort Lauderdale, Florida 33301     Re: Loan and Security Agreement,        dated October 1, 2002, as amended Ladies and Gentlemen: Wachovia Bank, National Association, successor by merger to Congress Financial Corporation (Florida), in its capacity as agent pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf of the parties thereto as lenders (in such capacity, “Agent”) and the parties to the Loan Agreement as lenders (collectively, “Lenders”) have entered into financing arrangements with Perry Ellis International, Inc. (“Parent”) and certain of its affiliates pursuant to the Loan and Security Agreement, dated October 1, 2002 (as heretofore amended and as the same may be further amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”), by and among Agent, Lenders, Parent and certain affiliates of Parent. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Loan Agreement. In accordance with the terms of Amendment No. 9, this will serve to notify you that, effective on the third Business Day after the receipt by Agent of this notice, Section 1.2 of Amendment No. 9 shall terminate and cease to be in full force and effect. This notice is the Section 1.2 Termination Notice and shall be irrevocable. Except as expressly provided in the immediately preceding paragraph, the undersigned (on behalf of Borrowers and Guarantors) hereby agrees that no other changes or modifications to the Financing Agreements (including, without limitation, Amendment No. 9) are intended or implied and in all other respects the Financing Agreements (including, without limitation, Amendment No. 9) are hereby specifically ratified, restated and confirmed as of the date hereof. Delivery of an executed copy of this notice by telecopier or other method of electronic transmission shall have the same force and effect as delivery of an originally executed copy of this notice.   1 -------------------------------------------------------------------------------- Sincerely, PERRY ELLIS INTERNATIONAL, INC. By:      Title:        2

Exhibit 10.1 AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”), effective as of the 26th day of October, 2006, is by and between Amedisys, Inc., (“Amedisys” or the “Company”), a Delaware corporation having its principal place of business at 11100 Mead Road, Suite 300, Baton Rouge, Louisiana, 70816, and Alice Ann Schwartz (“Executive”), an individual of the full age of majority and capacity. RECITALS WHEREAS, Amedisys owns, manages, and/or operates agencies and facilities for the provision of home health nursing services, in-home hospice care services, therapy staffing services and nurse practitioner medical services to patients and customers (collectively, the “Business”); and WHEREAS, Executive currently holds the position of Chief Information Officer of the Company. NOW THEREFORE, in consideration of the premises, as well as other mutual promises and covenants contained in this Agreement, the parties hereto agree as follows:   1. Incorporation of Recitals; Prior Agreements.     1.1 Recitals. The above recitations are incorporated herein by this reference.     1.2 Prior Agreements. This Agreement supercedes any prior employment agreement entered into between the Company and Executive in its entirety.   2. Performance of Duties.     2.1 Duties. Executive shall perform such duties as are usually performed by the chief information officer of a publicly-traded company similar in size and scope to the Company. Executive shall also perform such other reasonable additional duties as may be prescribed from time to time by the Company’s Board of Directors (the “Board”), the Company’s Chief Operating Officer and President or the Company’s Chief Executive Officer, consistent with the expectation of the Company and the Company’s operations and taking into account Executive’s expertise and job responsibilities, including but not limited to adherence to internal compliance policies, regulatory agency rules and regulations and applicable Federal and State laws. Executive shall have the title of Chief Information Officer and shall report directly to the Company’s Chief Operating Officer and President (or his designee) and indirectly to the Company’s Chief Executive Officer. Nothing herein shall prohibit or restrict the Company’s Board, Chief Operating Officer and President or Chief Executive Officer from changing the title and job responsibilities of Executive, in its or his discretion, as may be -------------------------------------------------------------------------------- necessitated by the ongoing conduct of the Company’s Business. Executive shall carefully avoid all personal acts that might in any way, directly or indirectly, harm the reputation of the Company.     2.2 Devotion of Time. Executive agrees to actively and industriously devote her time and attention to the business affairs of the Company to the extent necessary to discharge the responsibilities assigned to her and to use her reasonable best efforts to perform faithfully and efficiently such responsibilities. During the term of this Agreement, Employee shall not render services to or be employed by a party other than the Company unless authorized to do so by the Company.   3. Term of Employment. This Agreement shall be effective as of the execution hereof and shall continue for an indefinite period of time, subject to the provisions of Section 5 hereto, it being expressly understood and agreed to by the parties that the employment relationship between the Company and Executive shall be “at will.”   4. Compensation.     4.1 Base Salary. In consideration of Executive’s employment, Company shall pay Executive an annual salary in the amount of Two Hundred Thousand Dollars ($200,000), which amount shall be payable in twenty-six (26) biweekly payments according to the Company’s regular payroll distribution schedule, subject to applicable withholding and other taxes. Executive is eligible to receive annual salary adjustments in conformity with the Company’s policies. Should Executive receive payments from an insurer while employed by the Company under the provisions of any short term or long term disability plan provided by the Company for its employees, the Company’s obligation to pay the salary of Executive will be reduced by the amount of such payments.     4.2 Bonus. Executive shall be eligible for a bonus in accordance with the terms of the Company’s Corporate Incentive Plan (as such plan may be amended, modified or terminated by the Board from time to time) in an amount up to fifty percent (50%) of her annual base salary (the “Eligible Bonus Percentage”). Bonuses are not guaranteed.     4.3 Long-Term Equity-Based Incentive Compensation. Executive shall be eligible to receive long-term equity-based incentive compensation in accordance with the terms of the Company’s Corporate Incentive Plan (as such plan may be amended, modified or terminated by the Board from time to time). All long-term equity-based incentive compensation awarded pursuant to this Section 4.3, to the extent they constitute securities, shall be “restricted securities” as that term is defined under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “Act”). Executive hereby represents that all long-term equity incentive awards pursuant to this Section 4.3 will be acquired for investment purposes and not with a view to any resale, redistributions except in accordance with the Act.   2 --------------------------------------------------------------------------------   4.4 Professional Organization Membership Fees; Professional Certifications. The Company will reimburse Executive for all out-of-pocket membership fees/dues for professional organizations and annual maintenance fees for professional certifications.   5. Termination of Employment. Executive’s employment may be terminated at any time in accordance with, and subject to, the following terms and conditions:     5.1 Termination by Company. The Company shall have the right to terminate Executive’s employment, with or without cause, upon notice to Executive, at any time and subject to the sole discretion of the Company.     5.1.1 Termination of Employment for Cause. The Company may terminate Executive’s employment if such termination is for “cause,” which shall specifically include, but shall not be limited to the following occurrences:     a. A material default or breach by Executive of any of the provisions of this Agreement which breach is detrimental to the Company or the Business;     b. Actions by Executive constituting fraud, abuse, criminal activity (other than motor vehicle infractions) or embezzlement;     c. Intentionally furnishing materially false, misleading, or ommissive information to the Company’s Chief Executive Officer, Chief Operating Officer and President, or Chief Financial Officer, or to the Board or any committee thereof (specifically including the Company’s Audit Committee and/or Compliance Committee);     d. Actions constituting a breach of the confidentiality of the Business and/or trade secrets of the Company;     e. Violation of the restrictive covenants contained in this Agreement; and     f. Willful failure to follow reasonable and lawful directives of the Company’s Chief Executive Officer, Chief Operating Officer and President or the Board, which are consistent with Executive’s job responsibilities and performance as defined by the Board or Chief Executive Officer in its or his discretion.     g. Death of executive, in which case employment shall automatically terminate as of date of death.     h. Disability of Executive; Executive shall be considered “disabled” if (i) due to physical or mental illness or injury, Executive shall   3 --------------------------------------------------------------------------------      have been absent from her duties hereunder on a full-time basis for at least twelve (12) consecutive weeks or absent from her duties hereunder on a part-time basis for periods aggregating twelve (12) weeks in any twelve (12) month period and (ii) Executive is determined by a physician designated by the Company to be incapacitated or disabled and a physician designated by Executive concurs in such determination. In the event the two physicians are in disagreement regarding Executive’s condition, they shall seek a third physician designated by both physicians whose determination shall be binding for the purposes of this Agreement. Executive hereby agrees to submit to medical examinations as necessary to make such determinations.     5.1.2 Effect of Termination of Employment for Cause. In the event that the Company terminates the employment of Executive for cause, Executive shall cease to be an employee of Company and shall cease to have any power or authority of her position as of the effective date of the termination. In such event, Executive shall forfeit any unearned salary or other compensation, and the Company shall be relieved of any further obligation under this Agreement. Further, Executive shall forfeit and shall not be entitled to any bonus compensation, the payment date of which would occur after the date of termination for cause. In such event, Executive shall also not be entitled to receive Severance Compensation (as defined in Section 5.3, below). Notwithstanding the foregoing, in the event that Executive is terminated for cause, Executive shall nonetheless remain bound by the provisions of Sections 7 and 8 hereof and shall continue to abide by its restrictions for the duration provided therein.     5.1.3 Effect of Termination of Employment Without Cause or upon a Change In Control.     a. In the event that the Company terminates the employment of Executive without cause or if Executive’s employment is terminated by the Company or by the acquiring surviving entity upon a Change of Control (as defined below), Executive shall cease to be an employee of Company and shall cease to have any power or authority of her position as of the effective date of the termination. In such event, the Company will discontinue compensation payments (as provided in Section 4 herein) to Executive and shall be relieved of further obligation to Executive under this Agreement, except for the obligation to provide Severance Compensation to Executive pursuant to Section 5.3 below. Executive shall at all times remain bound by the provisions of Sections 7 and 8 hereof and shall continue to abide by its restrictions for the duration provided therein.   4 --------------------------------------------------------------------------------   b. For purposes of this Agreement, a “Change in Control” is the acquisition by any person, entity or “group” within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of either the then outstanding shares of the Company’s common stock or the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors; provided however, purchase by underwriters in a firm commitment public offering of the Company’s securities or any securities purchased for investment only by professional investors shall not constitute a Change of Control.     c. In the event that Executive’s employment is terminated by the acquiring surviving entity upon a Change of Control, all unvested equity-based compensation (for example, stock options, restricted stock, stock appreciation rights, etc.) previously awarded to Executive under the terms of any employee stock incentive plan adopted by the Company shall immediately vest and shall automatically become exercisable or transferable, as the case may be.     5.2. Termination of Employment by Executive. Executive may terminate her employment with the Company upon ninety (90) days written notice to the Company. Such notice shall set forth in sufficient detail the reasons underlying said termination. In such event, Executive shall cease to be an employee of Company and shall cease to have any power or authority of her position as of the effective date of termination (i.e., ninety (90) days following submission of notice) or such earlier time as the Company may elect in its sole discretion; at which time the Company shall be relieved of further obligation to Executive, including the payment of further compensation as outlined in Section 4 herein. In the event that Executive terminates her employment with the Company, the Company may but shall have no obligation to issue Severance Compensation to Executive pursuant to Section 5.3 below. Notwithstanding the foregoing, Executive agrees to remain bound by the provisions of Sections 7 and 8 hereof upon voluntary termination of her employment, and shall continue to abide by its restrictions for the duration provided therein.     5.3 Severance Compensation. In the event that the Company is obligated to (pursuant to Section 5.1 above) or agrees to (pursuant to Section 5.2 above) provide Executive Severance Compensation, Executive hereby agrees that any such agreement or obligation on the part of Company shall be conditioned upon and subject to Executive’s execution of a Severance Agreement addendum to this Agreement (hereinafter referred to as “Severance Agreement”), which shall contain all terms and conditions governing Executive’s ongoing entitlement to   5 --------------------------------------------------------------------------------      receipt thereof, specifically including but not limited to any restrictive covenants contained therein. In such circumstances, Executive shall be entitled to Severance Compensation in an amount equal to (i) Executive’s current monthly salary times (ii) the number of full months that Executive has been employed by the Company, up to a maximum of twelve (12) months, (hereinafter referred to as “Severance Compensation”), payable in one lump sum no later than 10 business days after the execution date of the Severance Agreement. Should, for any reason, Executive refuse or fail to timely execute the Severance Agreement as presented by the Company, Executive shall be deemed to have foregone the entirety of Severance Compensation otherwise due or offered to her, and Executive shall not be entitled to any further compensation from Company.   6. Representations by Executive. Executive hereby represents to the Company that she is physically and mentally capable of performing her duties hereunder and she has no knowledge of present or past physical or mental conditions that would cause her not to be able to perform her duties hereunder. Executive further represents to the Company that she has never been convicted of any criminal offense (other than minor vehicle infractions) or found (either through adjudication or settlement) civilly liable for any violation of any federal or state health care fraud or abuse law. Executive further represents to the Company that she has not been sanctioned, excluded, debarred, suspended, or otherwise prohibited from participation in a federal health care program pursuant to the provisions of 42 U.S.C. Section 1320a et seq. Executive further represents that she is not bound by any agreement that prevents her entering into this Agreement or restricts or limits her abilities to perform her duties hereunder.   7. Confidentiality and Non-Disclosure of Information.     7.1 Confidentiality. Executive shall not, during her employment with the Company or at any time thereafter, divulge, disclose, communicate, furnish, distribute, or make available or accessible to anyone, without the Company’s prior written consent, any knowledge or information with respect to any confidential or secret aspect or trade secret of the Company or its Business which, if disclosed, may reasonably be expected to have a material adverse effect on the Company or its Business (the “Confidential Information”).     7.2 Ownership of Information. Executive recognizes that any and all Confidential Information and copies or reproductions or portions thereof relating to the Company’s operations and activities made or received by Executive in the course of her employment are and shall be the exclusive property of the Company, and Executive holds and uses same as trustee and a fiduciary for the Company and, at all times, subject to the Company’s sole control; and Executive will deliver same to the Company at the termination of her employment, or earlier if so requested by the Company in writing, without retaining copies thereof in any form. All patient and client files and records are the property of the Company, and Executive, upon the termination of her employment, shall not remove from the offices of the Company any patient or client files or records for any reason. All of   6 --------------------------------------------------------------------------------      such Confidential Information, and/or any portion(s) thereof, which if lost or used by Executive outside the scope of her employment, could cause irreparable and continuing injury to the Company and its Business for which there may not be an adequate remedy at law, and for which the Company is entitled to secure the relief afforded in Section 9, in addition to any other right or remedy available under law, equity, or this Agreement. Accordingly, Executive acknowledges that compliance with the provisions of this Section 7 is necessary to protect the goodwill and other proprietary interests of the Company and is a material condition of employment.   8. Restrictive Covenants.     8.1 Non-Solicitation/Non-Tamper Covenants. As an inducement to cause the Company to enter into this Agreement, and for all consideration contained herein and afforded hereby, Executive covenants and agrees that during her employment and for a period of twenty-four (24) months after she ceases to be employed by the Company, regardless of the manner or cause of termination:     8.1.1 Solicitation of Business. She will not initiate any contact with, call upon, solicit business from, sell or render services to any Client (as defined below), referral source, or patient of the Company or any affiliate of the Company within the area in which such entities conduct or actively solicit business, a descriptive list of which is included in Schedule A, which is attached hereto and expressly incorporated herein (hereinafter referred to as “Restricted Areas”), for or on behalf of himself or any business, firm, proprietorship, corporation, partnership, company, association, entity, or venture engaged in the Business (hereinafter referred to as a “Competing Business”), and Executive shall not directly or indirectly aid, assist, or consult with any other person, firm, or organization to do any of the aforesaid acts. For purposes of this Agreement, a “Client(s)” is any individual or entity with which the Company has engaged in business or proposed business dealings.     8.1.2 Solicitation of Employees. She will not directly or indirectly, as principal, agent, owner, partner, stockholder, member, officer, director, employee, independent contractor, representative, or consultant of any Competing Business, or in any individual or representative capacity hire or solicit, directly or indirectly, or cause (an)other(s) to hire or solicit, directly or indirectly, the employment of any officer, agent, employee (inclusive of nurses, sales persons, office staff, or corporate personnel) of the Company or any affiliate of the Company, for the purpose of causing said individual(s) to terminate employment with the Company or any affiliate of the Company and be employed by such Competing Business.     8.1.3 The parties acknowledge that the Business is rapidly expanding, and it is the parties’ intent that Executive’s responsibilities extend to the entirety of   7 --------------------------------------------------------------------------------      the service area in which the Company conducts business; and in order to prevent ongoing, repetitious amendments to this agreement solely for the purpose of updating the Restricted Areas, the parties agree that the Restricted Areas, inclusive of Schedule A shall be self-amending to include all parishes, counties and States in which the Company conducts business or actively solicits business at any time during Executive’s employment with the Company, and in no event shall such Restricted Area be less than that contained in Schedule A. In the event Company’s service area extends into parishes, counties and/or States beyond those specifically denominated in Schedule A, the parties intend and agree that Executive’s continued employment thereafter shall serve as the parties’ constructive acceptance of an amendment to the Restricted Areas, to include such parishes, counties and/or states.     8.2 Employment Covenant. As an inducement to cause the Company to enter into this Agreement, and for other consideration contained herein, Executive covenants and agrees that during her employment, and for a period of twenty-four (24) months after she ceases to be employed by the Company, regardless of the manner or cause of termination: She will not accept, engage, or commence employment with, or consult, contract, or otherwise provide services to any Competing Business within the Restricted Areas. Executive acknowledges, represents, and agrees that such restriction does not nor will not preclude him from earning a livelihood.     8.3 Material Violation. A proven material violation of this Section 8 shall constitute a material and substantial breach of this Agreement and shall result in the imposition of the Company’s remedies contained in Section 9 herein.     8.4 Covenants. It is understood by and between the parties that the covenants set forth in Sections 7 and 8 are essential elements of this Agreement, and that, but for the Agreement of Executive to comply with such covenants, the Company would not have entered into this Agreement. Such covenants by Executive shall be construed as agreements independent of any other provision of this Agreement and the existence of any claim or cause of action Executive may have against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of these covenants.     8.5 Executive Default and Deferred Compensation. In the event that Executive breaches any of the covenants set forth in Sections 7 and 8, in addition to any other remedy of which the Company may be entitled to avail itself, Executive shall return to the Company any Severance Compensation already paid to Executive at the time of said breach, and all of Executive’s rights to receive any portion of her Severance Compensation not already paid to him shall immediately terminate. The right to receive unpaid Severance Compensation will not be reinstated notwithstanding any cessation by Executive of any breach by him of the covenants in Sections 7 and 8.   8 -------------------------------------------------------------------------------- 9. Remedies. Executive hereby acknowledges, covenants, and agrees that in the event of a material default or breach under this Agreement, in addition to any other remedy set forth herein:     9.1 Scope of Remedies. Executive acknowledges that the Company may suffer irreparable and continuing damages as a result of such breach and that its remedy at law will be inadequate. Executive agrees that in the event of a violation or a breach of this Agreement, in addition to any other remedies available to it, the Company shall be entitled to an injunction restraining any such default or any other appropriate decree of specific performance, without the requirement to prove actual damages or to post any bond or other security, and the Company shall also be entitled to any other equitable relief the court deems proper.     9.2 Non-Exclusivity of Remedies. Any and all of the Company’s remedies described in this Agreement shall not be exclusive, both as among themselves and as applied with other modes of legal redress, and shall be in addition to any and all other remedies which the Company may have at law, contract, or in equity, including, but not limited to, the right to monetary damages.   10. Additional Benefits.     10.1 Paid Time Off. Executive shall be entitled to paid time off based upon years of service in accordance with the Company’s paid time off policy for executive officers. In addition, Executive shall be entitled to paid time off for Company holidays, as established by the Company’s Board.     10.2 Reimbursement of Expenses. Executive is entitled to incur reasonable travel and other expenses in connection with the Business and the performance of her duties under this Agreement. The Company shall reimburse Executive for all reasonably incurred business expenses upon compliance by Executive with the Company’s policy therefor. All reimbursable travel and business expenses shall be in accordance with Company policy.     10.3 Participation in Employee Benefit Plans. Until the termination of her employment in accordance with Section 5 herein, to the extent that Executive meets the eligibility requirements entitling Executive to participate thereunder, Executive shall be entitled to participate in any life insurance plan, long-and short-term disability plan, incentive compensation plan, and group hospitalization, health or dental care plan, as may be adopted or amended by the Company from time to time, subject to the Company’s right to modify or terminate any such plan.     10.4 Participation in Deferred Compensation Plan. Until the termination of her employment in accordance with Section 5 herein, Executive shall be eligible for participation in the Company’s deferred compensation plan.   9 --------------------------------------------------------------------------------   10.5 Participation in Amedisys, Inc. 401(k) Plan and Employee Stock Purchase Plan. Until the termination of her employment in accordance with Section 5 herein, Executive shall be eligible for participation in the Company’s 401(k) Plan and Employee Stock Purchase Plan, subject to the Company’s right to modify or terminate any such plan.     10.6 Directors’ and Officers’ Insurance; Indemnity. Executive shall be named as a covered participant under the Company’s directors’ and officers’ liability insurance policy, and the Company will not reduce such coverage except as part of a reduction applicable to all officers of the Company. Further, Executive shall also be covered under the Company’s indemnification arrangements for its officers.   11. Severability/Savings Clause. The invalidity of any one or more of the words, phrases, sentences, clauses, sections, subdivisions, or subparagraphs contained in this Agreement shall not affect the enforceability of the remaining portions of this Agreement or any part thereof, all of which are inserted conditionally on their being legally valid. If any court of competent and proper jurisdiction finds that this Agreement is overly broad or otherwise unenforceable, for any reason whatsoever, then it is hereby agreed that this Agreement shall be reduced and/or amended so as to render it enforceable to the fullest extent allowable under the applicable law, and that any court of competent jurisdiction shall have the power to alter the scope of any provision herein in order that said provision would be made legal and enforceable upon the effectiveness of said alteration.   12. Successors/Assigns     12.1 Successors. This Agreement shall be binding upon all the parties hereto and their successors and assigns. For purposes of this Agreement, the term “successor” of Company shall include any person or entity that, whether directly or indirectly, and/or whether by purchase, merger, consolidation, operation of law, assignment, or otherwise acquires or controls (with or without the consent of the Company’s stockholders): (i) all or substantially all of the assets of Company or (ii) more than fifty percent (50%) of the total voting capital stock of the Company, and was not affiliated with or in common control of Company as of the date of this Agreement.     12.2 Assignment. This Agreement shall be non-assignable by Executive without the written consent of the Company, it being understood that the obligations and performance of this Agreement by Executive are entirely and wholly personal in nature.   13. Miscellaneous Provisions.     13.1 Amendment. No amendment, waiver, or modification of this Agreement or any provisions of this Agreement shall be valid unless in writing and duly executed by both parties. However, Executive agrees that, as set forth in Section 8.1.3,   10 -------------------------------------------------------------------------------- Schedule A to this Agreement shall be self-amending to include all parishes, counties and states in which the Company or any of its affiliates conduct or actively solicit business at any time during Executive’s employment hereunder.     13.2 Binding Agreement. This Agreement shall be binding and inure to the benefit of the parties and their respective heirs, legal representatives, and permitted successors and assigns.     13.3 Waiver. Any waiver by any party of any breach of any provision of this Agreement shall not be considered as or constitute a continuing waiver or waiver of any other breach of any provision of this Agreement.     13.4 Captions. Captions contained in this Agreement are inserted only as a matter of convenience or for reference and in no way define, limit, extend, or describe the scope of this Agreement or the intent of any provisions of this Agreement.     13.5 Interpretation. No inference or interpretation of the provisions of this Agreement shall be made based on the authorship of this document by any particular party.     13.6 Attorneys’ Fees. In the event of any litigation arising out of this Agreement, the prevailing party shall be entitled to recover from the other party its attorneys’ fees and costs, including those attorneys’ fees and costs incurred on appeal.     13.7 Prior Agreements. This Agreement supersedes and replaces all prior Agreements between the parties hereto (written or oral) dealing with the subject matter hereof.     13.8 Governing Law and Forum. This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of Louisiana. The parties stipulate and agree that venue and jurisdiction for any controversies, disputes, or legal proceedings involving or arising out of this Agreement shall be proper in the Nineteenth Judicial District Court in the Parish of East Baton Rouge, State of Louisiana.     13.9 Execution. It is the intention of the parties hereto that this Agreement will not be valid and binding upon the parties hereto until such time as this Agreement is executed by both parties in accordance herewith.     13.10 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be considered an original, but all of which shall together constitute one and the same instrument. For purposes hereof, facsimile copies hereof and facsimile signatures hereof shall be authorized and deemed effective.   14. Disputes. In the event that either party to this Agreement has any claim, right or cause of action against the other party to this Agreement, which the parties are unable to settle by agreement between themselves, such claim, right or cause of action, to the extent that the   11 --------------------------------------------------------------------------------    relief sought by such party is for monetary damages or awards, will be determined by arbitration in accordance with the provisions of this Section 14.     14.1 The party requesting arbitration will serve upon the other a demand therefor, in writing, specifying the matter to be submitted to arbitration, and nominating a competent disinterested person to act as an arbitrator. Within fifteen (15) days after receipt of such written demand and nomination, the other party will, in writing, nominate a competent disinterested person, and the two arbitrators so designated will, within fifteen (15) days thereafter, select a third arbitrator. The three arbitrators will give immediate written notice of such selection to the parties and will fix in said notice a time and place of the meeting of the arbitrators which will be in Baton Rouge, Louisiana, where all proceedings will be conducted, and will be held as soon as conveniently possible (but in no event later than forty-five (45) days after the appointment of the third arbitrator), at which time and place the parties to the controversy will appear and be heard with respect to the right, claim or cause of action. In case the notified party or parties will fail to make a selection upon notice within the time period specified, the party asserting such claim will appoint an arbitrator on behalf of the notified party. In the event that the first two arbitrators selected will fail to agree upon a third arbitrator within fifteen (15) days after their selection, then such arbitrator may, upon application made by either of the parties to the controversy, be appointed by any judge of the United States District Court for the Middle District of Louisiana.     14.2. Each party will present such testimony, examinations and investigations in accordance with such procedures and regulations as may be determined by the arbitrators and will also recommend to the arbitrators a monetary award to be adopted by the arbitrators as the complete disposition of such claim, right or cause of action. After hearing the parties in regard to the matter in dispute, the arbitrators will make their determination with respect to such claim, right or cause of action, within thirty (30) days of the completion of the examination, by majority decision signed in writing (together with a brief written statement of the reasons for adopting such recommendation), and will deliver such written determination to each of the parties. The decision of said arbitrators, absent fraud, duress or manifest error, will be final and binding upon the parties to such controversy and may be enforced in any court of competent jurisdiction. The arbitrators may consult with and engage disinterested third parties to advise the arbitrators. The arbitrators shall not award any punitive damages. If any of the arbitrators selected hereunder should die, resign or be unable to perform his or her duties hereunder, the remaining arbitrators or any judge of the United States District Court for the Middle District of Louisiana shall select a replacement arbitrator. The procedure set forth in this Section 14 for selecting the arbitrators shall be followed from time to time as necessary. As to any claim, controversy, dispute or disagreement that under the terms hereof is made subject to arbitration, no lawsuit based on such matters shall be instituted by any of the parties, other than to compel arbitration proceedings or enforce the award of a majority of the arbitrators. All privileges under Louisiana and federal law, including attorney-client   12 -------------------------------------------------------------------------------- and work-product privileges, shall be preserved and protected to the same extent that such privileges would be protected in a federal court proceeding applying Louisiana law.     14.3 The Company shall be responsible for advancing the cost of the arbitrators as well as the other costs of the arbitration. Each party will pay the fees and expenses of its own counsel.     14.4 Notwithstanding any other provisions of this Section 14, in the event that a party against whom any claim, right or cause of action is asserted commences, or has commenced against it, bankruptcy, insolvency or similar proceedings, the party or parties asserting such claim, right or cause of action will have no obligations under this Section 14 and may assert such claim, right or cause of action in the manner and forum it deems appropriate, subject to applicable laws. No determination or decision by the arbitrators pursuant to this Section 14 will limit or restrict the ability of any party hereto to obtain or seek in any appropriate forum, any relief or remedy that is not a monetary award or money damages.     14.5 Any court proceedings relating to this Agreement shall be filed exclusively in the federal and state courts domiciled in Baton Rouge, Louisiana, and the parties hereto consent to the venue and jurisdiction of such courts. [Signature page follows]   13 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have signed and executed this Agreement as of the day and year first written hereinabove.   AMEDISYS, INC. By:       William F. Borne   Chief Executive Officer EXECUTIVE   Alice Ann Schwartz   14 -------------------------------------------------------------------------------- SCHEDULE A RESTRICTED AREA Intentionally Omitted -------------------------------------------------------------------------------- SEVERANCE AGREEMENT ADDENDUM THIS SEVERANCE AGREEMENT (this “Agreement”) entered into as of the      day of                     , 200        , (“Effective Date”) by and between Amedisys, Inc., a corporation organized under the laws of the State of Delaware, (“Company”) and Alice Ann Schwartz (“Employee”), a person of the full age of majority.   1. Severance of Relationship. Effective as of the date first written above, Employee shall no longer be employed by Company or any of its affiliates (“Termination”).   2. Severance Compensation. In consideration of the obligations contained herein, Company shall pay Employee severance compensation in an aggregate amount equivalent to (i) Employee’s current monthly salary times (ii) the number of full months that Employee has been employed by the Company, up to a maximum of twelve (12) months (hereinafter referred to as “Severance Compensation”), payable in one lump sum no later than 10 business days after the Effective Date of this Agreement. Employee acknowledges that all Severance Compensation paid pursuant this Agreement will be subject to all applicable federal and state tax withholdings and deductions.   3. Obligations of Employee     a. Employee agrees to return, upon termination, all property of Company in Employee’s possession, including but not limited to, keys to any Company building or office, pager, cell phone, computer equipment, books, manuals, office equipment and office supplies.     b. Employee shall not divulge, furnish or make accessible to anyone, without Company’s prior written consent, any knowledge or information with respect to any confidential or secret aspect of Amedisys’ business or the business of any Amedisys affiliate or subsidiary, which, if disclosed, may reasonably be expected to have a material adverse effect on Company’s business (“Confidential Information”). Employee recognizes that all Confidential Information and copies or reproductions thereof, relating to Company’s operations and activities, or the operations and activities of any Company affiliate, made or received by Employee in the course of his/her employment are the exclusive property of Company and/or its affiliates, as the case may be. All of such Confidential Information, which if misappropriated or used by Employee to the detriment of Company, could cause irreparable and continuing injury to Company’s business for which there may not be an adequate remedy at law. Employee acknowledges that compliance with the provisions of this Section is necessary to protect the goodwill and other proprietary interests of Company and its affiliates and is a material condition of this Agreement.     c. Employee agrees not to disclose, either directly or indirectly, any information regarding the existence or substance of this Agreement to any person or party, except to an attorney or accountant retained by Employee, or under direction of subpoena or court order. --------------------------------------------------------------------------------   d. In consideration of the Severance Compensation obligation of Amedisys herein, Employee covenants and agrees that, for a period of twenty-four (24) months from the Effective Date of this Addendum, she will continue to abide by the Restrictive Covenants contained in Section 8 of Executive’s Employment Agreement, which are expressly incorporated herewith and made a part of this Addendum.     e. Employee shall not speak negatively regarding Company or any affiliate thereof, or otherwise cause destruction to the good will or going concern of Company’s business, or the business of any Company affiliate.     f. Employee agrees to forever hold Company and/or any Company affiliate and/or subsidiary harmless for, from, and against any claim(s), liability(s), damage(s), or cause(s) of action Employee may have against such entities, arising out of Employee’s employment with and separation of employment from Company and/or any Company affiliate, including but not limited to, any action for wrongful termination, any action for breach of contract, any action under the Fair Labor Standards Act (FLSA), Older Worker Benefit Protection Act, Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act (ADEA), the Older Workers Benefit Protection Act (OWPBA), the Worker Adjustment and Retraining Notification Act (WARN), or any action under any other federal or state law pertaining to any form of discrimination.   4. Remedies     a. It is understood by and between the parties that the foregoing covenants contained in Section 3 are essential elements of this Agreement, and that but for the Agreement of Employee to comply with such covenants, Company would not have entered into this Agreement. Such covenants by Employee shall be construed as agreements independent of any other provision of this Agreement and the existence of any claim or cause of action Employee may have against Company whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Company of these covenants.     b. If Employee breaches any requirement of Section 3 hereinabove, in addition to any other remedy to which the Company may be entitled, all of Employee’s rights to receive any portion of the severance compensation not already paid to Employee shall terminate, and Employee shall be deemed to have so waived such rights. The right to receive unpaid severance compensation will not be reinstated notwithstanding any cessation by Employee of her breach of Section 3. --------------------------------------------------------------------------------   c. Employee hereby acknowledges, covenants and agrees that in the event of a material default or breach by Employee under this Agreement:     i. Company may suffer irreparable and continuing damages as a result of such breach and its remedy at law will be inadequate. Employee agrees that in the event of a violation or breach of this Agreement, in addition to any other remedies available to it, Company shall be entitled to an injunction restraining any such default or any other appropriate decree of specific performance, with the requirement to prove actual damages or to post any bond or any other security being waived, and to any other equitable relief the court deems proper; and     ii. Employee shall be obligated to pay all costs incurred by Company in the enforcement of this Agreement, including but not limited to attorneys’ fees and court costs.     iii. Any and all of Amedisys’ remedies described in this Agreement shall not be exclusive and shall be in addition to any other remedies which Amedisys may have at law or in equity including, but not limited to, the right to monetary damages.   5. Miscellaneous     a. Time to Consider Agreement/Right to Revoke Acceptance     i. Employee represents and certifies that he/she has carefully read and fully understands all of the provisions and effects of the Agreement. Employee represents that he/she has been advised by Company to seek legal advice of counsel regarding the Agreement prior to executing same and that he/she has been afforded a reasonable time, not less than twenty-one (21) days, in which to seek this advice. Employee further represents that he/she is voluntarily entering into the Agreement and that neither Company nor any affiliate thereof, nor any of their respective agents, representatives, or attorneys have made any representations other than those set forth herein.     ii. Employee understands that for a period of seven (7) days after execution of the Agreement, Employee will retain the right to revoke the Agreement. Employee further understands that the Agreement shall not become effective or enforceable until the seven (7) day revocation period has expired.     iii. The Agreement does not attempt to waive any claims that may arise after its date of execution. The Agreement is intended to be construed as broadly as possible and is intended to cover Employee’s entire period of employment by Company and any of Company’s owners, managers, predecessors, successors, or their respective affiliates. --------------------------------------------------------------------------------   b. Amendment. No amendment, waiver or modification of this Agreement or any provisions of this Agreement shall be valid unless in writing and duly executed by both parties.     c. Successors. This Agreement shall be binding upon the parties hereto and their successors and assigns. For purposes of this Agreement, the term “successor” of Company shall include any person or entity, whether direct or indirect, whether by purchase, merger, consolidation, operation of law, assignment, or otherwise acquires or controls: (i) all or substantially all of the assets of Company, or (ii) more than fifty percent (50%) of the total voting capital stock, and was not affiliated with or in common control of Amedisys as of the date of this Agreement.     d. Assignment. This Agreement shall be non-assignable by Employee without the written consent of Company, it being understood that the obligations and performance of this Agreement by Executive are personal in nature.     e. Waiver. Any waiver by any party of any breach of any provision of this Agreement shall not be considered as or constitute a continuing waiver or waiver of any other breach of any provision of this Agreement.     f. Severability. The invalidity of any one or more of the words, phrases, sentences, clauses, sections, subdivisions, or subparagraphs contained in this Agreement shall not affect the enforceability of the remaining portions of this Agreement or any part thereof, all of which are inserted conditionally on their being legally valid. If any court of proper jurisdiction finds that this agreement is overly broad or unenforceable for any reason whatsoever, then it is hereby agreed that this Agreement will be reduced or amended to be enforceable to the extent allowable under applicable law, and that any court of competent jurisdiction shall have the power to alter the scope of any provision herein in order that said provision would be made legal and enforceable upon the effectiveness of said alteration.     g. Interpretation. Should any provision of this Agreement require judicial interpretation, the parties hereto agree that the court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against one party by reason of the rule of construction that a document is to be construed more strictly against the party which itself or through its agent prepared the same.     h. Captions. Captions contained in this Agreement are inserted only as a matter of convenience or for reference and in no way define, limit, extend, or describe the scope of this Agreement or the intent of any provisions of this Agreement. --------------------------------------------------------------------------------   i. Prior Agreements. Except as may otherwise be provided in Section 8 and Section 9(c) of the Employment Agreement between Amedisys and Executive, this Agreement supersedes and replaces all prior agreements between the parties hereto dealing with the subject matter hereof.     j. Governing Law. This Agreement shall be governed by the laws of the State of Louisiana, without regard to the conflicts of laws provisions thereof.     k. Execution. It is the intention of the parties hereto that this Agreement will not be valid and binding upon the parties hereto until such time as this Agreement is executed by both parties in accordance herewith.     l. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be considered an original, but all of which shall together constitute one and the same instrument. For purposes hereof, facsimile copies hereof and facsimile signatures hereof shall be authorized and deemed effective. IN WITNESS WHEREOF, the parties have executed this Severance Agreement as of the day and year first written hereinabove.   AMEDISYS INC. By:       William F. Borne,   Chief Executive Officer EMPLOYEE:   Alice Ann Schwartz

    AMENDED AND RESTATED EMPLOYMENT AGREEMENT             This Amended and Restated Employment Agreement (this "Agreement") is made and entered into as of September 8, 2006 (the "Effective Date"), by and between Home Solutions of America, Inc., a Delaware corporation (the "Employer") and Rick J. O'Brien, an individual resident of the State of Texas (the "Executive"). RECITALS:             A.        The Employer and the Executive, along with Fiber-Seal Systems, L.P., a Texas limited partnership ("FIBER-SEAL") entered into that certain Executive Employment Agreement, dated July 31, 2003, as amended by that certain Agreement dated December 2, 2003 (as amended, the "Original Agreement").             B.         The Original Agreement sets forth the terms and conditions pursuant to which the Executive is employed jointly by the Employer and FIBER-SEAL as the Vice President of Employer and the President of FIBER-SEAL.             C.        The Employer, FIBER-SEAL, and the Executive have mutually agreed that the Executive will no longer be employed by FIBER-SEAL.  The Employer and the Executive desire to amend the Original Agreement to implement this change and certain other material changes to the terms and conditions of Executive's employment.              D.        In connection with amending the Original Agreement to implement the material changes to the terms and conditions of Executive's employment, the Employer and the Executive have decided that it would be appropriate to amend and restate the Original Agreement in its entirety, as follows: WITNESSETH: WHEREAS, the Executive has certain skills, experience, and abilities that may be valuable to the success of the Employer's operations and future profitability; and WHEREAS, the Employer desires to employ and retain the services of the Executive as a full-time employee in the positions of President and Chief Operating Officer of Employer, and the Executive desires to work for and be employed by Employer in such positions; and WHEREAS, the Employer and the Executive desire to set forth the terms and conditions pursuant to which the Executive will be employed by the Employer. NOW, THEREFORE, in consideration of the foregoing premises and of the mutual covenants and undertakings contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:     1 -------------------------------------------------------------------------------- Section 1:         EMPLOYMENT TERM AND DUTIES 1.01     Employment.  The Employer hereby employs the Executive, and the Executive hereby accepts employment by the Employer, upon the terms and conditions set forth in this Agreement. 1.02     Term.  The term of the Executive's employment with the Employer pursuant to this Agreement shall commence on the Effective Date and shall continue until December 31, 2007, subject to the termination provisions in Section 4 of this Agreement. 1.03     Duties and Services.  The Executive will be employed as the President and Chief Operating Officer of Employer in Dallas, Texas, and will have such duties and perform such services as are customary with such positions.  The Executive shall report directly and only to the Employer's Chief Executive Officer and to the Employer's Board of Directors (the "Board"). The Executive will devote at least 90% of his business time, attention, skill, and energy exclusively to the business of the Employer.  The Executive will comply with all applicable Employer policies and procedures as well as with all applicable laws in performing his duties for the Employer.  The Executive will be available to travel on Employer business as the needs of the Employer may reasonably require. Section 2:         COMPENSATION 2.01     Salary.  During the Employment Period, the Executive will be paid an annual base salary of $250,000 (such amount is hereinafter referred to as "Salary").  The Employer shall withhold from each installment of the Salary, all applicable federal, state, and local income and other payroll taxes. 2.02     Benefits.  During the Employment Period and as otherwise set forth herein, the Executive and his dependents (if applicable), will be permitted to participate in all of the Employer's employee benefit plans for its employees and its senior management (collectively, "Benefits") that may be in effect from time to time to the extent the Executive and his dependents are eligible for participation under the terms of such plans.  2.03     Bonuses; Long Term Incentive Compensation.  For each of the Employer's fiscal years, the Executive may be awarded cash and/or equity-based bonuses and long term incentive compensation based on the recommendation of the Board's Compensation Committee (the "Committee") and approved by the independent members of the Board, as set forth in the Executive Compensation Plan for the Executive adopted by the Committee and the independent members of the Board of Directors, a copy of which is attached hereto as Exhibit A. 2.04     Indemnification.  The Executive is and shall be entitled to mandatory indemnification and advancement of expenses from the Employer to the fullest extent permitted by law and to directors' and officers' liability insurance coverage to the maximum extent that any other officer of the Employer is covered.   2   -------------------------------------------------------------------------------- Section 3:         FACILITIES AND EXPENSES             The Executive will be entitled to use the office space, equipment, supplies, and such other facilities, property, and personnel as are currently being provided by the Employer and as such may hereafter be necessary or appropriate for such purposes to perform his duties under this Agreement.  The Employer will reimburse the Executive for reasonable expenses incurred by the Executive in the performance of his duties in accordance with the Employer's employment policies in effect from time to time; provided, however, that the Executive must file written expense reports with respect to such expenses, in accordance with the Employer's employment policies, before the Executive may receive such reimbursement. Section 4:         TERMINATION 4.01     Termination of Employment Period. (a)        Death of the Executive.  The Employment Period shall terminate immediately and automatically upon the death of the Executive. (b)        Termination by the Employer.  The Employer may terminate the Employment Period (i) immediately upon the delivery of a Notice of Termination (as defined in Section 4.01(d) of this Agreement) by the Employer to the Executive setting forth the facts that indicate that a determination has been made that the Executive has a Disability in accordance with Section 4.02 of this Agreement; (ii) immediately upon delivery of a Notice of Termination by the Employer to the Executive setting forth the facts that indicate that an event constituting Cause (as defined in Section 4.03 of this Agreement) has occurred, or on such later date as may be set forth in such Notice of Termination; or (iii) at any time without Cause effective as of the 30th day following the delivery of a Notice of Termination by the Employer to the Executive. (c)        Termination by the Executive.  The Executive may terminate the Employment Period (i) immediately upon delivery of a Notice of Termination by the Executive to the Employer setting forth facts that indicate that an event constituting Good Reason (as defined in Section 4.04 of this Agreement) has occurred within the 60 days immediately prior to the date of delivery of such Notice of Termination, or (ii) at any time without Good Reason effective as of the 30th day following the delivery of a Notice of Termination by the Executive to the Employer.                         (d)        Notice of Termination.  For purposes of this Agreement, a "Notice of Termination" shall mean a written notice (delivered in accordance with Section 7.05 herein) that indicates the specific termination provision in this Agreement upon which the party intending to terminate the Employment Period is relying and sets forth in reasonable detail the facts and circumstances that provide a basis for termination of the Employment Period under such termination provision. 3   -------------------------------------------------------------------------------- 4.02     Definition of "Disability."  For purposes of this Agreement, the Executive will be deemed to have a "Disability" under any of the following conditions: (a) the Executive is unable to render and perform substantially and continuously the Executive's duties and services as required  by this Agreement by reason of any medically determinable physical or mental condition that is expected to result in death or can reasonably be expected to last for a continuous period of not less than 12 months, (b) the Executive is determined to be disabled in accordance with a disability income insurance program sponsored by the Employer, provided the definition of disability applied under such program complies with the requirements of Section 409A of the Code, or (c) the Executive is determined to be totally disabled by the Social Security Administration .  Upon the request of either party hereto following written notice to the other, the Disability of the Executive in accordance with part (a) of the preceding sentence will be determined by a medical doctor (the "Examining Doctor") who shall be selected as follows: the Employer and the Executive shall each select a medical doctor, and those two medical doctors will select a third medical doctor who will be the Examining Doctor.  The determination of the Examining Doctor as to whether or not the Executive has a Disability pursuant to part (a) of this Section 4.02 will be binding on both parties hereto.  For purposes of part (a) of this Section 4.02, the Executive must submit to a reasonable number of examinations by the Examining Doctor, and the Executive hereby authorizes the disclosure and release to the Employer of such determination and the results of such examinations; provided, however, if the Executive is not legally competent, the Executive's legal guardian or duly authorized attorney-in-fact will act in the Executive's stead under this Section 4.02 for the purposes of submitting the Executive to examinations and providing any such authorizations of disclosure.  4.03     Definition of "Cause."  For purposes of this Agreement, "Cause" shall mean: (a) the Executive's material and persistent failure to perform his duties and services in accordance with this Agreement, unless such failure is due to the Executive's Disability; (b) the Executive's material violation of this Agreement or any material inaccuracy of any representation or warranty of the Executive contained herein; (c) the appropriation (or willful attempted appropriation) by the Executive of a material business opportunity of the Employer that is not waived in writing or renounced in writing by the Employer, including, but not limited to, attempting to secure or securing any personal profit in connection with any transaction entered into on behalf of the Employer; (d) the theft or embezzlement by the Executive of any material real or personal property, tangible or intangible, of the Employer or any of its Affiliates (as defined in Section 8 of this Agreement); (e) the commission of an act of fraud by the Executive upon, or bad faith or willful misconduct toward, the Employer or any of its Affiliates; (f) conduct by the Executive constituting gross negligence that is materially injurious to the Employer, a customer of the Employer, or any of the Employer's Affiliates; or (g) the conviction of, the indictment for (or its procedural equivalent), or the entering of a guilty plea or plea of no contest by the Executive with respect to, a felony, the equivalent thereof, or any other crime with respect to which imprisonment is a possible punishment.  The Board has the exclusive right on behalf of Employer to determine whether "Cause" exists.  Before making a decision of whether "Cause" exists, the Board shall grant the Executive a reasonable period of time to cure the conduct in question, if the Board determines the matter is curable.  The Board shall provide the Executive with a written statement of the alleged conduct which it is considering as "Cause" for termination and provide the Executive with a reasonable opportunity to meet with the Board to discuss the alleged conduct before the Board makes a final decision on whether there is "Cause" to terminate the Executive's employment.       4   -------------------------------------------------------------------------------- 4.04     Definition of "Good Reason."  For the purposes of this Agreement, the phrase "Good Reason" means (i) the Employer's reduction of the Executive's Salary or any material breach of this Agreement and the Employer's failure to remedy such breach within 10 days following the delivery of written notice of such breach by the Executive to the Employer; (ii) the assignment by the Employer to the Executive, without the prior written consent of the Executive, of responsibilities or duties that are substantially different from the duties and services set forth in Section 1.03 of this Agreement; (iii) the relocation of the Executive from Dallas, Texas; (iv) any demotion of the Executive in rank, title, duties, authority or reporting status; (v) any material impairment of Executive's opportunity to earn a bonus or long-term incentive compensation; or (vi) any failure of the Employer to obtain an assumption of the Employer's obligations under this Agreement from a successor to the Employer as provided in Section 7.04 of this Agreement. 4.05     Effect of Termination of Employment Period; Post-Termination Benefits.  Upon the termination of the Employment Period in accordance with Section 4 of this Agreement, the Executive's obligation to render to the Employer the services described in Section 1.03 of this Agreement shall cease and the Employer shall pay the Executive or, in the event of his death while amounts remain payable hereunder, his Designated Beneficiary (as defined in this Section 4.05), if at all, as follows:                        (a)        Termination by the Employer with Cause or by the Executive without Good Reason.  If the Employment Period is terminated in accordance with Section 4.01(b)(ii) or Section 4.01(c)(ii) of this Agreement, the Executive will be entitled to receive solely that portion of his Salary accrued by the Executive through the date on which the Executive's employment is terminated and the Employment Period ends (the "Employment Termination Date").  The Executive shall not receive, and shall not be entitled to receive, any Salary or Benefits thereafter, except as otherwise required in accordance with federal or state law or the terms of the plans or agreements governing the Benefits provided hereunder.  Any salary to which the Executive is entitled under this Section 4.05(a) shall be paid in accordance with the Employer's normal payroll practices as in effect on the date of this Agreement.                        (b)        Termination by the Employer without Cause or by the Executive with Good Reason.  If the Employment Period is terminated in accordance with Section 4.01(b)(iii) or Section 4.01(c)(i) of this Agreement, the Executive will be entitled to receive (i) the Salary that would have been payable to him during the remainder of the term of this Agreement if his employment hereunder had continued, and (ii) an amount equal to the product of (x) the Severance Percentage (as defined below), multiplied by (y) the Executive's Actual Aggregate Compensation (as defined in Section 4.05(d) below) for the Employer's fiscal year most recently ended prior to the termination.  For purposes of this Agreement, the "Severance Percentage" shall mean the percentage resulting from the following calculation:  (x) the number of days during the period from January 1, 2006 through the Employment Termination Date that the Executive was employed by the  Company, divided by (y) 730.  The Executive also will be entitled to receive the amount of Salary, bonus and long-term incentive compensation which the Executive has earned through the Employment Termination Date as determined in good faith by the Committee.  In addition, if the Executive would lose coverage under the group health plan sponsored or maintained by the Employer as a result of the termination of the Executive's employment and Executive elects to continue health coverage through a group health plan sponsored or maintained by the Employer under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), the Employer will reimburse the Executive for the COBRA premiums for coverage for the Executive and his dependents for the initial twelve months of coverage, except that the Employer's obligations in this sentence will expire upon the Executive's and his dependents' becoming eligible for comparable coverage under another employer's health benefits plan or policy.  The cost of coverage under the Employer's group health plan will be payable solely by the Employer.  Except to the extent otherwise permitted under Section 409A of the Code, the Salary, bonuses and long-term incentive compensation and the payments for the cost of group health plan coverage under COBRA shall be accumulated by the Employer and paid to the Executive on the first day of the seventh calendar month following the Employment Termination Date or, if earlier, the date of the Executive's death, and thereafter payments to which the Executive is otherwise entitled hereunder shall be made in equal monthly installments on the first day of each calendar month for the remainder of the period.  If, at the Employment Termination Date, or at any time thereafter, the Salary, bonuses and long-term incentive compensation or payments for the cost of group health plan coverage under COBRA to which the Executive is entitled under this Section 4.05(b) are not required to be deferred under Section 409A of the Code, then such amounts shall instead be paid in equal monthly installments on the first day of each calendar month; provided, that the first installment shall be paid on the later of (i) the first day of the calendar month immediately following the Employment Termination Date or (ii) the date which is fifteen (15) days following the Employment Termination Date.  In addition, any restricted stock grants which have been made to the Executive upon the achievement of LTI Performance Criteria, and any other restricted stock grants to the Executive, and any outstanding stock options granted to the Executive, shall become fully vested. 5   --------------------------------------------------------------------------------                         (c)        Termination upon Death or Disability. If the Employment Period is terminated in accordance with Section 4.01(a) or Section 4.01(b)(i), the Employer will pay to the disabled Executive or to the Executive's Designated Beneficiary, as the case may be, one year of the Executive's Salary that would have been payable during the Employment Period following the date of the Executive's death or the date of the determination that the Executive has a Disability, whichever is applicable, if his employment hereunder had continued.  The Executive or the Executive's Designated Beneficiary also will be entitled to receive the amount of bonus and long-term incentive compensation which the Executive has earned through the Employment Termination Date as determined in good faith by the Committee.  In addition, in the event the Executive is determined to have a Disability and the Executive elects under COBRA to continue his health insurance through a group health insurance plan sponsored or maintained by the Employer, the Employer will reimburse the premiums for coverage for the Executive and his dependents for the initial twelve months of such coverage, except that the Employer's obligations in this sentence will expire upon the Executive's and his dependents' becoming eligible for comparable coverage under another employer's health benefits plan or policy.  Amounts to which the Executive or the Executive's Designated Beneficiary are entitled to receive hereunder shall be paid in equal monthly installments on the first day of each calendar month; provided, that the first installment shall be paid on the later of (i) the first day of the calendar month immediately following the Employment Termination Date or (ii) the date which is fifteen (15) days following the Employment Termination Date; except that benefits which the Executive is entitled to receive under the disability income insurance maintained by the Employer, if any, shall be paid in accordance with the terms of such program.  Further, any restricted stock grants which have been made to the Executive upon the achievement of LTI Performance Criteria, any other restricted stock grants to the Executive, and any outstanding stock options granted to the Executive shall become fully vested.  Except to the extent otherwise provided in this Section 4.05(c), the Executive or the Executive's Designated Beneficiary shall have no right to receive, and the Employer shall have no further obligation to pay to the Executive, further monthly installments of Salary or Benefits.  For the purposes of this Agreement, the Executive's "Designated Beneficiary" means such individual beneficiary or trust, located at such address as the Executive may designate by written notice to the Employer from time to time or, if the Executive fails to give written notice to the Employer of such a beneficiary, the Executive's estate; provided, however, that, notwithstanding the preceding clause of this sentence, the Employer shall have no duty under any circumstances to attempt to open an estate on behalf of the Executive, to determine whether any beneficiary designated by the Executive is alive, to determine the existence of any trust, to determine whether any person or entity purporting to act as the Executive's personal representative (or the trustee of a trust established by the Executive) is duly authorized to act in that capacity, or to locate or attempt to locate any beneficiary, personal representative, or trustee.         6   -------------------------------------------------------------------------------- (d)        Termination within One Year After a Change in Control.  If the Employment Period is terminated within one year after a Change of Control (as defined in this Section 4.05(d)), the Executive shall be entitled to receive (i) two years of compensation based on the Executive's Actual Aggregate Compensation (as defined in this Section 4.05(d)) for the Employer's fiscal year most recently ended prior to the Employment Termination Date and (ii) reimbursement for the cost of coverage for the Executive and his dependents under the group health plan sponsored by the Employer, or its successor, to the same extent as provided on the date immediately preceding the Change of Control or immediately preceding the Employment Termination Date, whichever is more advantageous to the Executive and his dependents, during the two years following the Employment Termination Date.  For purposes of clause (ii), the Employer or its successor will reimburse the Executive for the COBRA premiums for coverage for the Executive and his dependents until the end of the COBRA continuation coverage period applicable to the Executive, and for the remainder of the two-year period following the Employment Termination Date the Employer or its successor will arrange and pay for similar health insurance coverage; except that the Employer's and successor's obligation under clause (ii) will expire upon the Executive's becoming eligible for comparable coverage under another employer's health benefits plan or program.  All amounts to which the Executive is entitled to receive hereunder shall, except to the extent otherwise permitted under Section 409A of the Code, be paid at the times prescribed in Section 4.05(b) above with respect to such payments.  For the purposes of this Agreement, "Change in Control" shall mean (A) the acquisition of equity securities of the Employer resulting in the beneficial ownership by the acquiring Person of more than 50% of the common stock of the Employer, occurring by means of any transaction or series of related transactions, including, without limitation, any reorganization, sale of securities, merger, exchange or consolidation, but excluding any merger or conversion of the Employer effected exclusively for the purpose of changing the domicile of the Employer or (B) if, during the Employment Period, the majority of the persons who were serving as directors of the Board at the beginning of the Employment Period no longer serve as directors of the Board as the result of an actual or threatened proxy contest.  For purposes of this Agreement, the Executive's "Actual Aggregate Compensation" for the fiscal year in question shall mean the sum of (i) the Executive's Salary for such fiscal year, (ii) the cash bonuses earned by the Executive for his performance in such fiscal year, and (iii) the value of the long term incentive compensation awarded to the Executive for his performance in such fiscal year, as set forth in (or, if not so set forth, measured at the time of) the resolutions adopted by the Compensation Committee or the independent members of the Board of Directors, or both, in granting the award.  In addition, if not otherwise vested because of the Change of Control, any restricted stock grants which have been made to the Executive upon the achievement of the LTI Performance Criteria, any other restricted stock grants to the Executive, and any outstanding stock options granted to the Executive shall become fully vested. 7   -------------------------------------------------------------------------------- (e)       Accrued Benefits.  Unless otherwise required by this Agreement, federal or state law, or the terms of the relevant plans and agreements providing Benefits hereunder, the Executive's accrual of the Benefits pursuant to Section 2.02 hereof will cease on the date of the termination of the Employment Period, and the Executive will thereafter be entitled to the payment of accrued Benefits pursuant to such plans only as provided in such plans and agreements. (f)        Release.  No amount shall be payable to the Executive under Section 4.05(b), (c), or (d) following the termination of the Employment Period unless the Executive (or the Executive's Designated Beneficiary in the event of termination of employment due to the Executive's death) signs and delivers to the Employer the General Release attached as Exhibit B to this Agreement. (g)       No Mitigation.  The Executive shall not be obligated to seek or secure new employment or to become self-employed after the Employment Termination Date, and except as stated in Section 4.05(b) or Section 4.05(d), there shall be no offset against any severance payment or other post-employment amount or benefit under this Agreement on account of any compensation or benefits from any subsequent employment (including, without limitation, self-employment) that the Executive may obtain after the Employment Termination Date. Section 5:         NON-DISCLOSURE COVENANT 5.01     Confidential Information Defined.  For the purposes of this Section 5, the phrase "Confidential Information" means any and all of the following information or items that the Employer treats as confidential: trade secrets concerning the business and affairs of the Employer or its Affiliates, product specifications, data, know-how, formulae, compositions, processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas, past, current, and planned research and development, current and planned distribution methods and processes, customer lists, current and anticipated customer requirements, price lists, market studies, business plans, computer software and programs (including object code, machine code, and source code), computer software and database technologies, systems, structures, and architecture (and related formulae, compositions, processes, improvements, devices, know-how, inventions, discoveries, concepts, ideas, designs, and methods); information concerning the business and affairs of the Employer or its Affiliates (which includes historical financial statements, financial projections and budgets, historical and projected sales, capital spending budgets and plans, the names and backgrounds of key personnel, personnel training techniques and materials, however documented); and notes, analysis, compilations, studies, summaries, and other material prepared by or for the Employer or its Affiliates containing or based, in whole or in part, on any information included in the foregoing.  Notwithstanding the foregoing, Confidential Information shall not include any information that was or became or is or becomes available to the public or to the Employer's industry other than as a result of a disclosure of such information by the Executive or any other person under a duty to keep such information confidential.    8 --------------------------------------------------------------------------------   5.02     Executive's Access to the Confidential Information.  Immediately upon the Executive's execution of this Agreement and continuing throughout his employment with the Employer, the Employer shall provide the Executive with access to Confidential Information that Executive had not previously received.  The Executive acknowledges:  (a) that the Employer has devoted substantial time, effort, and resources to develop and compile the Confidential Information; (b) unauthorized or improper public disclosure of such Confidential Information by the Executive would have an adverse effect on the Employer and its business; (c) the Employer would not disclose such information to the Executive, nor employ or continue to employ the Executive without the agreements and covenants set forth in this Section 5; and (d) the provisions of this Section 5 are reasonable and necessary to prevent the improper use or disclosure of Confidential Information. 5.03     Executive's Nondisclosure Duties Regarding the Confidential Information.  (a)        Nondisclosure Commitment.  The Executive will hold in strictest confidence the Confidential Information and will not disclose it to any Person (as defined in Section 8 of this Agreement) except with the specific prior written consent of the Employer or as may be required by court order, law, government agencies with which the Employer deals in the ordinary course of its business, or except to the extent such disclosure is necessary or appropriate for the Executive to perform his duties under this Agreement.  Any trade secrets of the Employer will be entitled to all of the protections and benefits afforded under applicable laws.  If any Confidential Information that the Employer deems to be a trade secret is ruled by a court of competent jurisdiction not to be a trade secret, such information will, nevertheless, be considered Confidential Information for purposes of this Agreement.  The Executive hereby waives any requirement that the Employer submit proof of the economic value of any trade secret or post a bond or other security.  The Executive will not remove from the Employer's premises or record (regardless of the media) any Confidential Information of the Employer or its Affiliates, except to the extent such removal or recording is necessary or appropriate for the Executive to perform his duties or as may be required by court order, law, or governmental agencies with which the Employer deals in the ordinary course of its business.  The Executive acknowledges and agrees that all Confidential Information, and physical embodiments thereof, whether or not developed by the Executive, are the exclusive property of the Employer or its Affiliates, as the case may be. (b)        Third Party Information.  The Executive recognizes that the Employer and its Affiliates have received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the part of the Employer and its Affiliates to maintain the confidentiality of such information and to use it only for certain limited purposes.  The Executive agrees that he owes the Employer, its Affiliates, and such third parties, during the Employment Period and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any Person (except as necessary or appropriate in carrying out his duties for the Employer consistent with the Employer's agreement with such third party, or as may be required by court order, law, or government agencies with which the Employer deals in the ordinary course of its business), or to use it for the benefit of anyone other than for the Employer or such third party (consistent with the Employer's agreement with such third party) without the express written authorization of the Employer or its Affiliate, as the case may be.     9   -------------------------------------------------------------------------------- (b)        Third Party Information.  The Executive recognizes that the Employer and its Affiliates have received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the part of the Employer and its Affiliates to maintain the confidentiality of such information and to use it only for certain limited purposes.  The Executive agrees that he owes the Employer, its Affiliates, and such third parties, during the Employment Period and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any Person (except as necessary or appropriate in carrying out his duties for the Employer consistent with the Employer's agreement with such third party, or as may be required by court order, law, or government agencies with which the Employer deals in the ordinary course of its business), or to use it for the benefit of anyone other than for the Employer or such third party (consistent with the Employer's agreement with such third party) without the express written authorization of the Employer or its Affiliate, as the case may be. (c)        Returning Employer Property.  The Executive agrees that, at the time of the termination of the Employment Period, he will deliver to the Employer  (and will not keep in his possession or deliver to any other Person) 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 of the aforementioned items or any property belonging to the Employer or any of its Affiliates, and their respective successors or assigns, regardless of whether such items are represented in tangible, electronic, digital, magnetic or any other media, to the extent that any of the foregoing are in the Executive's possession or within his control.  In the event of the termination of the Employment Period, the Executive agrees to promptly sign and deliver to the Employer the "Termination Certification" attached hereto as Exhibit C. 5.04     Disputes or Controversies.  The Executive recognizes that should a dispute or controversy arising from or relating to this Agreement be submitted for adjudication to any court or other third party, the preservation of the secrecy of Confidential Information may be jeopardized.  All pleadings, documents, testimony, and records in Executive's possession or under his control relating to any such adjudication will be maintained in secrecy and will be available for inspection by the Employer, the Executive, and their respective attorneys and experts, who will agree, in advance and in writing, to receive, use, and maintain all such Confidential Information in secrecy, except as may be agreed by them in writing. Section 6:         NON-COMPETITION AND NON-INTERFERENCE 6.01     Restrictive Covenants.  The Executive agrees that the Employer's commitment described in Section 5.02 above to provide its Confidential Information to him gives rise to the Employer's interest in restraining Executive from competing against it and that the restrictions in this Section are designed to enforce Executive's promise in Section 5.03 not to use or disclose Confidential Information belonging to the Employer, except as permitted in Section 5.03.  The Executive agrees that the restrictions in this Section are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interests of the Employer.  For these reasons, the Executive agrees to the following:     10   -------------------------------------------------------------------------------- (a)        Noncompete.  During the Restricted Period, the Executive will not, directly or indirectly, on behalf of himself or any other person or entity, engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend the Executive's name or any similar name to, lend the Executive's credit to or render services that are similar to the services he rendered to the Employer under this Agreement to any business engaged or about to become engaged in the Business of the Employer, or any of its Affiliates, in the Market Area (defined below).  For purposes of this Agreement, the "Business" of the Employer is providing recovery, restoration, rebuilding/remodeling, and other specialty interior services to residential and commercial properties.  Nothing in this Section shall prohibit the Executive from purchasing or owning less than 5% of the stock of a publicly owned Business. (b)        Solicitation of Customers.  During the Restricted Period the Executive will not, directly or indirectly, on behalf of himself or any other person or entity, solicit a Current Customer (as defined in Section 8 below) of the Employer or its Affiliates with whom he had contact during the Employment Period, for purposes of selling products or services to such Current Customer that are in competition with the products and services offered or sold by the Employer or its Affiliates as part of the Business. (c)        Solicitation of Employees.  During the Restricted Period the Executive will not, directly or indirectly, on behalf of himself or any other person or entity, employ any current employee of the Employer or its Affiliates or any individual who was an employee of the Employer or its Affiliates at any time during Term, and will not solicit any employee of the Employer or its Affiliates for the purpose of encouraging such employee to leave or terminate his or her employment with the Employer or its Affiliates. (d)        Solicitation of Vendors.  During the Restricted Period the Executive will not, either directly or indirectly, on behalf of himself or any other person or entity, solicit a current vendor or supplier of the Employer or its Affiliates for purposes of encouraging such vendor or supplier to cease or diminish providing products or services to the Employer or its Affiliates, or to change adversely to the Employer or its Affiliates the terms under which such vendor or supplier provides such products or services to the Employer or its Affiliates. (e)        Non-interference.  Following the termination of the Employment Period, the Executive will not, either directly or indirectly, access the Employer's computer systems, download files or any other information from the Employer's computer systems or in any way interfere, disrupt, modify or change any computer program used by the Employer or any data stored on the Employer's computer systems. (f)         Restricted Period.  For purposes of this Section 6.01, the term "Restricted Period" means the period commencing with the Effective Date and terminating two years after the Employment Termination Date. (g)        Market Area.  For purposes of this Section 6.01, the term "Market Area" includes any state or province in which, during the Employment Period, (i) the Employer has provided goods or services and (ii) the Executive has overseen, directed, managed, or otherwise participated in the operations of the Employer.     11   -------------------------------------------------------------------------------- 6.02     Scope.  The Executive acknowledges and agrees that the geographic area, length and scope of the restrictions contained in Section 6.01 are reasonable and necessary to protect the legitimate business interests of the Employer.  The duration of the agreements contained in Section 6.01 shall be extended for the amount of any time of any violation thereof and the time, if greater, necessary to enforce such provisions or obtain any relief or damages for such violation through the court system.  The Employer may, at any time on written notice approved by its Board of Directors, reduce the geographic area, length or scope of any restrictions contained in Section 6.01 and, thereafter, the Executive shall comply with the restriction as so reduced, subject to subsequent reductions.  If any covenant in Section 6.01 of this Agreement is held to be unreasonable, arbitrary, or against public policy, such covenant will be considered to be divisible with respect to scope, time, and geographic area, and such lesser scope, time, or geographic area, or all of them, as an arbitrator or a court of competent jurisdiction may determine to be reasonable, not arbitrary, and not against public policy, will be effective, binding, and enforceable against the Executive.  In the event of termination of the Executive's employment with the Employer for any reason, the Executive shall inform any subsequent employer within the Restricted Period (if applicable) of the continuing restrictions and obligations imposed on the Executive under this Agreement. 6.03     Required Notice.  Executive agrees that during the Restricted Period following the termination of his employment with Employer, he will provide Employer with written notice of any new employment within 30 days after he commences that employment.  The notice will identify the Executive's new employer and include the Executive's representation that he has informed his new employer of his applicable confidentiality and other obligations under this Agreement. Section 7:         GENERAL PROVISIONS 7.01     Injunctive Relief and Additional Remedy.  The Executive acknowledges that the injury that would be suffered by the Employer as a result of a breach of the provisions of Sections 5 or 6 hereof might be irreparable and that an award of monetary damages to the Employer for such a breach would be an inadequate remedy.  Consequently, the Employer will have the right, in addition to any other rights it may have, to obtain injunctive relief to restrain any breach or overtly threatened breach or otherwise to specifically enforce the provisions of Sections 5 and 6 hereof. 7.02     Covenants of Sections 5 and 6 are Essential Covenants.  The covenants by the Executive in Sections 5 and 6 are essential elements of this Agreement, and without the Executive's agreement to comply with such covenants, the Employer would not have entered into this Agreement or employed or continued the employment of the Executive.  The Employer and the Executive 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 business conducted by the Employer.  If, following the Employment Period, the Employer has any obligation to pay severance or other amounts to or for the benefit of the Executive or provide any Benefits to the Executive and the Employer has failed to pay such severance or other amounts and/or provide such Benefits when due under this Agreement, then after written notice to the Employer regarding the failure to pay such severance or other amounts or provide such Benefits and a reasonable time to cure such failures, the Executive's obligations under Section 6 shall terminate.     12   -------------------------------------------------------------------------------- 7.03     Representations and Warranties by the Executive.  The Executive represents and warrants to the Employer that (a) the Executive has never taken any action of the types set forth in Section 4.03(b) though (f) and (b) the execution and delivery by the Executive of this Agreement does not, and the performance by the Executive of the Executive's obligations hereunder will not, with or without the giving of notice or the passage of time, or both: (i) violate any judgment, writ, injunction, or order of any court, arbitrator, or governmental agency applicable to the Executive; or (ii) conflict with, result in the breach of any provisions of or the termination of, or constitute a default under, any agreement to which the Executive is a party or by which the Executive is or may be bound. 7.04     Binding Effect; Delegation of Duties Prohibited.  This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective successors, assigns, heirs, and legal representatives, including any entity with which the Employer may merge or consolidate or to which all or substantially all of its assets may be transferred, and the Employer agrees it will not assign or delegate any of its obligations under this Agreement other than as part of any merger, consolidation, or transfer of all or substantially all of its assets, and in the event of such assignment, the Employer agrees that it will obtain from the legal successor of this Agreement an assumption of the Employer's obligations hereunder (although no such assumption shall be required if the successor assumes such obligations by operation of law).  The covenants of the Executive under this Agreement, being personal, may not be delegated. 7.05     Notices.  All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given and delivered when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested) or, (d) on the fifth business day after mailing or when received by the addressee, whichever is earlier, if mailed by registered or certified mail, postage prepaid and return receipt requested, in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties):             If to Employer: Home Solutions of America, Inc.   1500 Dragon Street, Suite B   Dallas, TX 75207   Facsimile: (214) 333-9435     With a copy to: Melissa Youngblood, Esq.   Hallett & Perrin, P.C.   2001 Bryan Street, Suite 3900   Dallas, TX 75201   Facsimile: (214) 922-4170                                                   13   -------------------------------------------------------------------------------- If to the Executive: Rick J. O'Brien   1500 Dragon Street, Suite B   Dallas, TX 75207   Facsimile: (214) 333-9435 7.06     Entire Agreement; Amendments.  This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, between the parties hereto with respect to the subject matter hereof; except that this Agreement does not affect any existing equity compensation plan or agreement between the parties.  This Agreement may be amended only by an agreement in writing signed by the parties hereto. 7.07     GOVERNING LAW; VENUE.  THIS AGREEMENT SHALL BE GOVERNED BY, ENFORCED UNDER, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS RULES OR CHOICE OF LAWS RULES THEREOF.  VENUE FOR ANY ACTION BROUGHT HEREUNDER SHALL BE IN DALLAS COUNTY, TEXAS. 7.08     Headings; Construction.  The headings in this Agreement are provided for convenience only and will not affect its construction or interpretation.  All references to "Section" or "Sections" refer to the corresponding Section or Sections of this Agreement unless otherwise specified.  All words used in this Agreement will be construed to be of such gender or number as the circumstances require. 7.09     Severability.  If any provision of this Agreement is held invalid or unenforceable by an arbitrator or any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect.  Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 7.10     Counterparts.  This Agreement may be executed in one or more counterparts, including by facsimile signature, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. 7.11     Survival of Obligations.  The obligations of the Employer and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term shall survive such expiration. 7.12     Withholding and Set Off.  All payments and benefits made or provided under this Agreement shall be subject to withholding as required under applicable law.  The Employer is further authorized to withhold and setoff against any such payments and benefits any amounts that the Executive owes the Employer, whether as a result of any breach of this Agreement or otherwise. 14   --------------------------------------------------------------------------------             7.13     Arbitration.  Any controversy or claim arising out of or relating to this Agreement, or the Executive's employment by the Employer under this Agreement, shall be settled by arbitration in accordance with the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association ("AAA"), and judgment rendered by the arbitrator may be entered in any court having jurisdiction thereover.  Provided, however, that nothing in this Section shall be construed as to deny the Employer or the Executive the right and power to seek and obtain injunctive relief in a court of competent jurisdiction for any breach or threatened breach of the covenants in this Agreement.  The arbitration shall be conducted in Dallas, Texas, unless otherwise agreed by the parties thereto. A party hereto shall initiate arbitration by sending written notice of its intention to arbitrate to the other party and to the AAA office located in Dallas, Texas.  Parties shall have the same period of time to file claims as provided by the applicable statute of limitation for such claim.  Such written notice will contain a description of the dispute and the remedy sought.  In the event that the parties have not mutually agreed on an acceptable arbitrator within thirty (30) days after the demand for arbitration is filed, the arbitrator shall be appointed in the manner provided by the AAA's Employment Arbitration Rules and Mediation Procedures.  The decision of the arbitrator will be final and binding on the parties hereto and their successors and assignees.  Where consistent with applicable law, the arbitrator shall have the authority to order the non-prevailing party to pay the prevailing party's attorney's fees and all costs of the arbitration.  The parties will participate in good faith in a non-binding mediation of their dispute at least 60 days prior to the date of the arbitration hearing.  The parties shall jointly select the mediator but if they are unable to agree on a mediator, then the arbitrator shall appoint the mediator.  The parties hereto intend that this agreement to arbitrate be irrevocable.             7.14     Income Taxation of Deferred Payments.  This Agreement shall be administered subject to and in compliance with the requirements of Section 409A of the Code.  The parties acknowledge that there are uncertainties in regard to the interpretation of Section 409A and agree to cooperate in good faith to preserve their respective economic rights and obligations in light of future amendments to, regulations under, or interpretations of Section 409A. Section 8:         CERTAIN DEFINITIONS In and for purposes of this Agreement, the following terms shall have the meanings indicated below: "Affiliate" shall mean, as to any Person, any Person controlled by, controlling, or under common control with such Person, and, in the case of a Person who is an individual, a member of the family of such individual consisting of a spouse, sibling, in-law, lineal descendant, or ancestor (including by adoption), and the spouses of any such individuals.  For purposes of this definition, "control" (including the terms "controlling", "controlled by" and "under common control with") of a Person means the possession, directly or indirectly, alone or in concert with others, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of securities, by contract or otherwise, and no Person shall be deemed in "control" of another solely by virtue of being a director, officer or holder of voting securities of any entity.  A Person shall be presumed to "control" any partnership of which such Person is a general partner. 15   -------------------------------------------------------------------------------- "Code" shall mean the Internal Revenue Code of 1986, as amended. "Current Customer" shall mean any person or entity who is currently utilizing any product or service sold or provided by the Employer through the facility managed by the Executive; any person or entity who utilized any such product or service within the previous 12 months; and any person or entity with whom the Employer or any of its Affiliates is currently conducting negotiations concerning the utilization of such products or services. "Employment Period" shall mean the period during which the Executive has an obligation under this Agreement to render to the Employer all or any portion of the services described in Section 1.03 of this Agreement. "Person" shall have the meaning given in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended, as modified and used in Sections 13(d)(3) and 14(d)(2) of such act.              16   -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. EMPLOYER:   HOME SOLUTIONS OF AMERICA, INC.   By:      /s/ Frank J. Fradella                                   Name: Frank J. Fradella                                    Title:    Chief Executive Officer                          EXECUTIVE: /s/  Rick J. O'Brien                                            Rick J. O'Brien   Agreed as to Paragraphs A, B, and C of the Recitals:   FIBER-SEAL SYSTEMS, L.P.   By: FSS Holding Corp. Its:  General Partner   By: /s/ Jeffrey M. Mattich                Name: Jeffrey M. Mattich               Title: CFO                                                  17   -------------------------------------------------------------------------------- EXHIBIT A Executive Compensation Plan - Rick J. O'Brien, President and COO Fiscal Years 2006 and 2007   Annual Base Salary: $250,000.00, payable in accordance with the Company's current payroll procedures     Level I Bonus Potential: up to $150,000.00 annually, (60% of Annual Base Salary), based on achievement of Level I Bonus Performance Criteria (see Page A-2)     Level II Bonus Potential: up to $100,000.00 annually, (40% of Annual Base Salary), based on achievement of Level II Bonus Performance Criteria (see Page A-2)     Long Term Incentive Compensation ("LTI"): Restricted Common Stock grants under the Company's 2001 Stock Option Plan, or any other plan adopted by the Company, valued in an amount up to $187,500.00 annually (75% of Annual Base Salary), based on achievement of LTI Performance Criteria (see page A-2), vesting monthly in thirty-six equal increments over three years (subject to acceleration of vesting as agreed by the Company)     Additional Cash and Equity Compensation: May be granted at the discretion of the Independent Board Members upon recommendation by the Compensation Committee     Potential Value of Aggregate Remuneration Annually  (based on Annual Base Salary, full achievement of Level I Bonus, Level II Bonus, and LTI without additional compensation): $687,500.00 A-1 -------------------------------------------------------------------------------- Performance Criteria For Executive Officers - Fiscal Years 2006 and 2007   General: The annual Level I Bonus, Level II Bonus, and LTI awards (collectively, the "Awards") shall be granted to the executive officers based upon both Objective Criteria and Subjective Criteria, as described below.  All Level I Bonus, Level II Bonus, and LTI awards are discretionary and subject to the approval of the Compensation Committee and the Independent Board Members.      Objective Criteria: The Objective Criteria for each Award shall be based on one or more measures of the Company's performance for the fiscal year, such as revenues, operating income, EBITDA, net income, EPS, aggregate indebtedness, net working capital, and stockholders equity, as compared to the budget for such fiscal year adopted prior to the commencement of such fiscal year (the "Budget"), as determined by the Compensation Committee and the Independent Board Members.  In analyzing the performance of the Company as compared to the Budget for such fiscal year, the Compensation Committee and the Independent Board Members may disregard the impact on the Company's financial statements of any acquisitions that occurred during such fiscal year (as the impact of such acquisitions would not have been included in the Budget).     Level I Bonus Performance Criteria: For the executive to be eligible for the Level I Bonus, the Company must have achieved at least 100% of the Objective Criteria determined by the Compensation Committee as compared to the Budget for the fiscal year in question.   For example, if the Objective Criteria consists of EBITDA and EPS, then in order for the executive to be eligible for the Level I Bonus, the performance of the Company for the fiscal year in question, as verified by the Company's audited financial statements for that year, must be equal to or greater than 100% of the Budget amount of EBITDA and EPS for the fiscal year in question.      Level II Bonus Performance Criteria: For the executive to be eligible for the Level II Bonus, the Company must have achieved at least 120% of the Objective Criteria determined by the Committee as compared to the Budget for the fiscal year in question.  For example, if the Objective Criteria consists of EBITDA and EPS, then in order for the executive to be eligible for the Level II Bonus, the performance of the Company for the fiscal year in question, as verified by the Company's audited financial statements for that year, must be equal to or greater than 120% of the Budget amount of EBITDA and EPS for the fiscal year in question.      A-2 -------------------------------------------------------------------------------- Long Term Incentive Compensation Performance Criteria: For the executive to be eligible for the LTI, the Company must have achieved  90%-120% of the Objective Criteria set forth on the Budget for the fiscal year in question, with the amount of LTI to be granted to be proportionate to the level of Company's achievement within the 90-120% range. For example, if the Objective Criteria consists of EBITDA and EPS, then in order for the executive to be eligible for the LTI, the performance of the Company for the fiscal year in question, as verified by the Company's audited financial statements for that year, must be in the range of 90% to 120% of the Budget amount of EBITDA and EPS for the fiscal year in question.      Subjective Criteria: In determining whether to grant each Award and the amount and type of the Awards (within the levels stated above) to be granted to the executive, the Compensation Committee and the Independent Board Members shall give consideration to various subjective criteria that they deem material to the performance of the executive, including the Company's public market capitalization, the position of the Company's assets and business operations in various geographic markets and industry segments, long term growth opportunities, enhancement of stockholder value and strategic objectives to ensure the survival and growth of the Company, customer satisfaction, public relations and similar variables appropriate to the executive's duties and performance in the fiscal year in question.      Award Terms and Payment Policies: The Awards, if any, shall be based upon the Company's audited financial statements for the fiscal year in question and shall be paid or issued in the calendar year in which the Company's financial statements for the fiscal year in question are audited.        Compliance with Tax Laws: Any Award issued under the Executive Compensation Plan that constitutes a deferral of compensation under a "nonqualified deferred compensation plan", as such term is defined under Section 409A(d)(1) of the Internal Revenue Code (the "Code") (or a successor provision thereto), shall comply with the requirements of Section 409A of the Code (or a successor provision thereto) and applicable guidance published in the Internal Revenue Bulletin.     A-3 --------------------------------------------------------------------------------   EXHIBIT B GENERAL RELEASE             For good and sufficient consideration, including but not limited to payments which Home Solutions of America, Inc. (the "Company") would not be obligated to pay to Rick J. O'Brien ("O'Brien") without O'Brien signing this Release, the receipt and sufficiency of which is hereby acknowledged, O'Brien does hereby forever release, remise, and discharge for himself and his heirs, executors, legal representatives, administrators, successors and assigns, the Company, its shareholders, directors, officers, employees and agents and their respective heirs, executors, administrators, successors, legal representatives and assigns, and all persons or entities related to or affiliated with any of the aforementioned persons (the "Releasees") of and from all claims, causes of action, suits, debts, agreements, promises and demands, of whatever nature or kind, in law or in equity which O'Brien now has, ever had, or but for this release hereafter would or could have against any of the Releasees arising in any manner out of O'Brien's employment with the Company and/or O'Brien's serving as an officer and/or director of the Company or any affiliated entity.             O'Brien warrants that he has read this General Release and fully understands it to be a compromise and settlement and release of all claims, known or unknown, present or future, that the undersigned has or may have against the Company and its affiliates as described above. Home Solutions of America, Inc. By:         Rick J. O'Brien                   Date Signed   Date Signed         B-1 -------------------------------------------------------------------------------- EXHIBIT C TERMINATION CERTIFICATION             I hereby certify that my employment with Home Solutions of America, Inc. (the "Company") has terminated effective as of ______________________________, and that as of ________________________________, I have fully complied with all of my obligations in Section 5.03(c) of the Amended and Restated Employment Agreement I entered into with the Company as of September 8, 2006.                                                                         Rick J. O'Brien                                                                           Date signed               C-1 --------------------------------------------------------------------------------

Exhibit 10.75   Confirmation of OTC Convertible Note Hedge   Date:   February 14, 2006       To:   Amgen Inc. (“Counterparty”)       Attention:   Treasurer       From:   Merrill Lynch International (“Bank”)     Dear Sir / Madam:   The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions of the above-referenced transaction entered into between Counterparty and Bank on the Trade Date specified below (the “Transaction”). This Confirmation constitutes a “Confirmation” as referred to in the Agreement specified below.   The definitions and provisions contained in the 2000 ISDA Definitions (the “Swap Definitions”) and the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions” and, together with the Swap Definitions, the “Definitions”), in each case as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of any inconsistency between the Swap Definitions and the Equity Definitions, the Equity Definitions will govern, and in the event of any inconsistency between the Definitions and this Confirmation, this Confirmation will govern. References herein to a “Transaction” shall be deemed to be references to a “Share Option Transaction” for purposes of the Equity Definitions and a “Swap Transaction” for the purposes of the Swap Definitions.   This Confirmation evidences a complete binding agreement between you and us as to the terms of the Transaction to which this Confirmation relates. This Confirmation (notwithstanding anything to the contrary herein), shall be subject to an agreement in the 1992 form of the ISDA Master Agreement (Multicurrency Cross Border) (the “Master Agreement” or “Agreement”) as if we had executed an agreement in such form (but without any Schedule and with elections specified in the “ISDA Master Agreement” Section of this Confirmation) on the Trade Date of the first such Transaction between us. In the event of any inconsistency between the provisions of that agreement and this Confirmation, this Confirmation will prevail for the purpose of this Transaction. The parties hereby agree that the Transaction evidenced by this Confirmation shall be the only Transaction subject to and governed by the Agreement.   The terms of the particular Transaction to which this Confirmation relates are as follows:   General Terms:   Trade Date:   February 14, 2006       Effective Date:   The date of issuance of the Reference Notes.       Option Style:   Bermuda       Seller:   Merrill Lynch International       Buyer:   Counterparty   1 --------------------------------------------------------------------------------   Shares:   The shares of common stock, $0.0001 par value, of Counterparty (Security Symbol: “AMGN”) or such other securities or property into which the Reference Notes are convertible on the date of determination.       Initial Payment Amount:   $328,100,000       Initial Payment Amount     Payment Date:   Effective Date       Potential Exercise Date:   Each Valuation Date       Exchange:   NASDAQ National Market       Related Exchange(s):   All Exchanges       Knock-in Event:   Not Applicable       Knock-out Event:   Not Applicable       Reference Notes:   0.125% Convertible Notes of Counterparty due 2011 in the original principal amount of $2.5 billion.       Applicable Portion of the     Reference Notes:   50%. For the avoidance of doubt, the Calculation Agent shall, as it deems necessary, take into account the Applicable Portion of the Reference Notes in determining or calculating any delivery or payment obligations hereunder, whether upon a Conversion Event (as defined below) or otherwise.       Conversion Event:   Each conversion of any Reference Note pursuant to the terms of the Note Indenture (the principal amount of Reference Notes so converted, the “Conversion Amount” with respect to such Conversion Event) occurring before the Termination Date.           If the Conversion Amount for any Conversion Event is less than the aggregate principal amount of Reference Notes then outstanding, then the terms of this Transaction shall continue to apply, subject to the terms and conditions set forth herein, with respect to the remaining outstanding principal amount of the Reference Notes multiplied by the Applicable Portion of the Reference Notes.       Conversion Date:   With respect to each Conversion Event, the date on which any conversion of any Reference Note into Shares becomes effective, as determined by Buyer in accordance with the terms of the Note Indenture.       Note Indenture:   The indenture, dated as of closing of the issuance of the Reference Notes, between Counterparty and JPMorgan Chase Bank, N.A., as trustee relating to the Reference Notes, as the same may be amended, modified or supplemented, subject to the “Additional Termination Events” provisions of this Confirmation.       Termination Date:   The earlier of (i) the maturity date of the Reference Notes and (ii) the first day on which none of such Reference Notes remain outstanding, whether by virtue of conversion, issuer repurchase or otherwise.   2 --------------------------------------------------------------------------------   Valuation:           Valuation Date:   The final “trading day” in the applicable “conversion reference period” (each as defined in the Note Indenture) in respect of each Conversion Event.       Settlement Terms:           Settlement Method:   Net Share Settlement or Net Cash Settlement consistent with Buyer’s election with respect to the Reference Notes converted in the applicable Conversion Event, provided that solely Net Share Settlement shall apply in the event that Buyer elects to deliver any shares in connection with the applicable Conversion Event.       Settlement Notice:   Buyer shall provide Seller with notice of its Settlement Method provided that in the event Buyer shall not deliver the Settlement Notice, the Settlement Method shall be Net Share Settlement but without regard to section (b) of the definition of Net Share Settlement. The Settlement Notice will include (to the extent not previously provided in the Conversion Notice with respect to the applicable Conversion Event) (i) the number of Reference Notes being converted, (ii) the first “trading day” in the relevant “conversion reference period” (each as defined in the Note Indenture) for the Reference Notes and (iii) if any, the applicable Cash Percentage.       Settlement Date:   Subject to the delivery of a Settlement Notice or Conversion Notice to the Seller, the third (3rd) “trading day” (as defined in the Note Indenture) following the applicable Valuation Date.       Conversion Notice:   Counterparty agrees to provide Seller with notice of any Conversion Event within two (2) ”trading days” after Counterparty’s receipt of notice of any Conversion Event from the Trustee (as defined in the Note Indenture) (such Conversion Notice can be provided by such Trustee). The Conversion Notice will include (i)  the number of Reference Notes being converted and (ii) the first “trading day” in the relevant “conversion reference period. “       Net Share Settlement:   On the Settlement Date, Seller shall deliver to Counterparty (a) a number of Shares equal to the related Net Share Settlement Amount and (b) (x) an amount in cash equal to the cash amount, if any, paid by Buyer in excess of the principal amount of the applicable Reference Notes for such Conversion Event under the Note Indenture multiplied by (y) the Applicable Portion of the Reference Notes.       Net Cash Settlement:   On the Settlement Date, Seller shall deliver to Counterparty an amount in cash equal to the related Net Cash Settlement Amount.       Net Share Settlement Amount:   For each Conversion Event, the number of Shares equal to the shares delivered by Buyer for such Conversion Event under the Note Indenture multiplied by the Applicable Portion of the Reference Notes, provided that with respect to such Conversion Event if neither a Settlement Notice nor a Conversion Notice shall be delivered to the Seller prior to the start of the “conversion reference period” (as defined in the Note Indenture) applicable to such Conversion Event, the Net Share Settlement Amount for such Conversion Event shall be reduced by an amount determined by the parties, in a commercially reasonable manner each acting in good faith, representing the additional cost and expenses of Seller in “unwinding” its hedge with respect to such Conversion Event during the period from the delivery of such notice to the end of the applicable “conversion reference period” rather than over the entire “conversion reference period” (as defined in the Note Indenture). No reduction of the Net Share Settlement Amount shall reduce the Net Share Settlement Amount below zero.   3 --------------------------------------------------------------------------------   Net Cash Settlement Amount:   For each Conversion Event, an amount equal to the cash delivered by the Buyer in excess of the principal amount of the applicable Reference Notes for such Conversion Event under the Note Indenture multiplied by the Applicable Portion of the Reference Notes, provided that with respect to such Conversion Event if the Settlement Notice shall not be delivered to the Seller prior to the start of the “conversion reference period” (as defined in the Note Indenture) applicable to such Conversion Event, the Net Cash Settlement Amount for such Conversion Event shall be reduced by an amount determined by the parties, in a commercially reasonable manner each acting in good faith, representing the additional cost and expenses of Seller in “unwinding” its hedge with respect to such Conversion Event during the period from the delivery of such notice to the end of the applicable “conversion reference period” rather than over the entire “conversion reference period” (as defined in the Note Indenture). No reduction of the Net Cash Settlement Amount shall reduce the Net Cash Settlement Amount below zero.       Share Adjustments:           Merger Event:   The Transaction will be adjusted consistent with the Reference Notes as provided in the Note Indenture.       Consequences for Merger Events:           Share-for-Share:   The Transaction will be adjusted consistent with the Reference Notes as provided in the Note Indenture.       Share-for-Other:   The Transaction will be adjusted consistent with the Reference Notes as provided in the Note Indenture.       Share-for-Combined:   The Transaction will be adjusted consistent with the Reference Notes as provided in the Note Indenture.       Tender Offer:   The Transaction will be adjusted consistent with the Reference Notes as provided in the Note Indenture.       Nationalization, Insolvency or Delisting:   Cancellation and Payment (Calculation Agent Determination), provided Buyer shall determine whether payment shall be settled in cash or Shares.       Additional Disruption Events:           Change in Law:   Not Applicable       Failure to Deliver:   Applicable. If there is inability in the market to deliver Shares due to illiquidity on a day that would have been a Settlement Date, then the Settlement Date shall be the first succeeding Exchange Business Day on which there is no such inability to deliver, but in no such event shall the Settlement Date be later than the date that is two (2) Exchange Business Days immediately following what would have been the Settlement Date but for such inability to deliver.   4 --------------------------------------------------------------------------------   Insolvency Filing:   Applicable       Hedging Disruption Event:   Not Applicable       Increased Cost of Hedging:   Not Applicable       Hedging Party:   Seller       Loss of Stock Borrow:   Not Applicable       Increased Cost of Stock Borrow:   Not Applicable       Determining Party:   Seller       Non-Reliance:   Applicable       Agreements and Acknowledgments     Regarding Hedging Activities:   Applicable       Additional Acknowledgments:   Applicable   Additional Agreements, Representations and Covenants of Counterparty, Etc.:   1.                           Counterparty hereby represents and warrants to Seller, on each day from the Trade Date to and including the earlier of (i) February 17, 2006 and (ii) the date by which Seller is able to initially complete a hedge of its position relating to this Transaction, that:   a.               it will not, and will not permit any person or entity subject to its control to, bid for or purchase Shares during such period except as disclosed in the Offering Memorandum relating to the Reference Notes; and   b.              Counterparty has publicly disclosed all material information necessary for Counterparty to be able to purchase or sell Shares in compliance with applicable federal securities laws and that it has publicly disclosed all material information with respect to its condition (financial or otherwise).   2.                           The parties hereby agree that all documentation with respect to this Transaction is intended to qualify this Transaction as an equity instrument for purposes of EITF 00-19. If Counterparty would be obligated to receive cash from Seller pursuant to the terms of this Agreement for any reason without having had the right (other than pursuant to this paragraph (2)) to elect to receive Shares in satisfaction of such payment obligation, then Counterparty may elect that Seller deliver to Counterparty a number of Shares having a cash value equal to the amount of such payment obligation (such number of Shares to be delivered to be determined by the Calculation Agent acting in a commercially reasonable manner to determine the number of Shares that could be purchased over a reasonable period of time with the cash equivalent of such payment obligation). Settlement relating to any delivery of Shares pursuant to this paragraph (2) shall occur within a reasonable period of time.   Additional Termination Events:   The occurrence of any of the following shall be an Additional Termination Event with respect to Counterparty (which shall be the sole Affected Party and this Transaction shall be the sole Affected Transaction):   1.                           an Amendment Event (as defined below) occurs (in which case the entirety of this Transaction shall be subject to termination);   5 --------------------------------------------------------------------------------   2.                           a Repayment Event (as defined below) occurs (in which case this Transaction shall be subject to termination only in respect of the principal amount of Reference Notes that cease to be outstanding in connection with or as a result of such Repayment Event); or   3.                           the transactions contemplated by the Purchase Agreement shall fail to close for any reason, in which case the entirety of this Transaction shall terminate automatically.   If the transactions contemplated by the Purchase Agreement shall fail to close for any reason other than a breach of the Purchase Agreement by the Initial Purchasers or the Counterparty, then the entirety of this Transaction shall terminate automatically and all payments previously made hereunder shall be returned to the person making such payment, including the Initial Payment Amount, less an amount equal to the product of (a) 15,655,875 Shares and (b) the sum of (i) US$0.50 per Share and (ii) an amount equal to the excess, if any, of the closing price of the Shares on the Trade Date over the closing price of the Shares on the date of the Termination Event (the “Break Expense”); provided that any negative amount shall be replaced by zero and provided further that to the extent the Initial Payment Amount has not been paid, Counterparty shall promptly pay Seller the Break Expense. Seller and Counterparty agree that actual damages would be difficult to ascertain under these circumstances and that the amount of liquidated damages resulting from the determination in the preceding sentence is a good faith estimate of such damages and not a penalty.   If the transactions contemplated by the Purchase Agreement shall fail to close because of a breach of the Purchase Agreement by the Initial Purchasers, then the entirety of this Transaction shall terminate automatically, and all payments previously made hereunder, including the Initial Payment Amount, shall be promptly returned to the person making such payment.   Further, if an Amendment Event or Repayment Event occurs or the transactions contemplated by the Purchase Agreement shall fail to close as a result of any breach by any Initial Purchaser or as a result of any action, or failure to act, by any Initial Purchaser thereunder or as a result of a breach of the Counterparty’s obligations thereunder (collectively, an “Initial Purchase Event”), no payments shall be required hereunder in connection with the Termination Event arising as a result of such Amendment Event, Repayment Event or Initial Purchase Event.   “Amendment Event” means that the Counterparty amends, modifies, supplements or obtains a waiver of any term of the Note Indenture or the Reference Notes relating to the principal amount, coupon, maturity, repurchase obligation of the Counterparty, redemption right of the Counterparty, any material term relating to conversion of the Reference Notes (including changes to the conversion price, conversion settlement dates or conversion conditions), or any other term that would require consent of the holders of 100% of the principal amount of the Reference Notes to amend.   “Repayment Event” means that (a) any Reference Notes are repurchased (whether in connection with or as a result of a change of control, howsoever defined, or for any other reason) by the Counterparty, (b) any Reference Notes are delivered to the Counterparty in exchange for delivery of any property or assets of the Counterparty or any of its subsidiaries (howsoever described), other than as a result of and in connection with a Conversion Event, (c) any principal of any of the Reference Notes is repaid prior to the Final Maturity Date, as defined in the Note Indenture (whether following acceleration of the Reference Notes or otherwise), provided that no payments of cash made in respect of the conversion of a Reference Note shall be deemed a payment of principal under this clause (c), (d) any Reference Notes are exchanged by or for the benefit of the holders thereof for any other securities of the Counterparty or any of its Affiliates (or any other property, or any combination thereof) pursuant to any exchange offer or similar transaction or (e) any of the Reference Notes is surrendered by Counterparty to the trustee for cancellation, other than registration of a transfer of such Reference Notes or as a result of and in connection with a Conversion Event.   6 --------------------------------------------------------------------------------   Staggered Settlement:   If Seller determines reasonably and in good faith that the number of Shares required to be delivered to Counterparty hereunder on any Settlement Date would exceed 8.0% of all outstanding Shares, then Seller may, by notice to Counterparty on or prior to such Settlement Date (a “Nominal Settlement Date”), elect to deliver the Shares comprising the related Net Share Settlement Amount on two or more dates (each, a “Staggered Settlement Date”) as follows:   1.                           in such notice, Seller will specify to Counterparty the related Staggered Settlement Dates (the first of which will be such Nominal Settlement Date and the last of which will be no later than twenty (20) “trading days” (as defined in the Note Indenture) following such Nominal Settlement Date) and the number of Shares that it will deliver on each Staggered Settlement Date;   2.                           the aggregate number of Shares that Seller will deliver to Counterparty hereunder on all such Staggered Settlement Dates will equal the number of Shares that Seller would otherwise be required to deliver on such Nominal Settlement Date; and   3.                           the Net Share Settlement terms will apply on each Staggered Settlement Date, except that the Shares comprising the Net Share Settlement Amount will be allocated among such Staggered Settlement Dates as specified by Seller in the notice referred to in clause (1) above.   Notwithstanding anything herein to the contrary, solely in connection with a Staggered Settlement Date, Seller shall be entitled to deliver Shares to Counterparty from time to time prior to the date on which Seller would be obligated to deliver them to Counterparty pursuant to Net Share Settlement terms set forth above, and Counterparty agrees to credit all such early deliveries against Seller’s obligations hereunder in the direct order in which such obligations arise. No such early delivery of Shares will accelerate or otherwise affect any of Counterparty’s obligations to Seller hereunder. In addition, during the 30 day period prior to the Termination Date or any Settlement Date, each of Seller and Counterparty shall use its reasonable efforts to refrain from activities which could reasonably be expected to result in Seller’s ownership of Shares exceeding 8% of all issued and outstanding Shares.   Compliance with Securities Laws:   Each party represents and agrees that it has complied, and will comply, in connection with this Transaction and all related or contemporaneous sales and purchases of Shares, with the applicable provisions of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations each thereunder, including, without limitation, Rules 10b-5 and 13e and Regulation M under the Exchange Act; provided that each party shall be entitled to rely conclusively on any information communicated by the other party concerning such other party’s market activities; and provided  further that Counterparty shall have no liability as a result of a breach of this representation due to Seller’s gross negligence or willful misconduct. Each party further represents that if such party (“X”) purchases any Shares from the other party pursuant to this Transaction, such purchase(s) will comply in all material respects with (i) all laws and regulations applicable to X and (ii) all contractual obligations of X.           Each party acknowledges that the offer and sale of the Transaction to it is intended to be exempt from registration under the Securities Act by virtue of Section 4(2) thereof. Accordingly, Counterparty represents and warrants to Seller that (i) it has the financial ability to bear the economic risk of its investment in the Transaction and is able to bear a total loss of its investment, (ii) it is an “accredited investor” as that term is defined in Regulation D as promulgated under the Securities Act and (iii) the disposition of the Transaction is restricted under this Confirmation, the Securities Act and state securities laws. On or prior to the Trade Date, Counterparty shall deliver to Seller a resolution of Counterparty’s board of directors authorizing the Transaction and such other certificate or certificates as Seller shall reasonably request.   7 --------------------------------------------------------------------------------       Counterparty represents and acknowledges that as of the date hereof:           (a) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required in connection with the execution, delivery or performance by Company of this Confirmation, except such as have been obtained or made and such as may be required under the Securities Act or state securities laws.           (b) without limiting the generality of Section 13.1 of the Equity Definitions, Seller is not making any representations or warranties with respect to the treatment of the Transaction under FASB Statements 149 or 150, EITF Issue No. 00-19 (or any successor issue statements) or under FASB’s Liabilities & Equity Project.   Account Details:   Account for payments to Counterparty: Not Applicable             Account for payment to Seller: Chase Manhattan Bank, New York       ABA#: 021-000-021       FAO: ML Equity Derivatives       A/C: 066213118   Bankruptcy Rights:   In the event of Counterparty’s bankruptcy, Seller’s rights in connection with this Transaction shall not exceed those rights held by common shareholders. For the avoidance of doubt, the parties acknowledge and agree that Seller’s rights with respect to any other claim arising from this Transaction prior to Counterparty’s bankruptcy shall remain in full force and effect and shall not be otherwise abridged or modified in connection herewith.       Set-Off:   Each party waives any and all rights it may have to set-off, whether arising under any agreement, applicable law or otherwise.       Collateral:   None.       Transfer:   The Counterparty shall have the right to assign its rights and obligations hereunder with respect to any portion of this Transaction, subject to Seller’s consent, such consent not to be unreasonably withheld; provided that such assignment or transfer shall be subject to receipt by Seller of opinions and documents reasonably satisfactory to Seller and effected on terms reasonably satisfactory to the Seller with respect to any legal and regulatory requirements relevant to the Seller; provided further that Counterparty shall not be released from its Settlement Notice obligation. Seller may transfer any of its rights or delegate its obligations under this Transaction with the prior written consent of Counterparty, which consent shall not be unreasonably withheld.       Regulation:   Seller is regulated by The Securities and Futures Authority Limited and has entered into this Transaction as principal.   8 --------------------------------------------------------------------------------   ISDA Master Agreement   With respect to the Agreement, Seller and Counterparty each agree as follows:   Specified Entities:   (i) in relation to Seller, for the purposes of:   Section 5(a)(v):               not applicable Section 5(a)(vi):            not applicable Section 5(a)(vii):         not applicable Section 5(b)(iv):           not applicable   and (ii) in relation to Counterparty, for the purposes of:   Section 5(a)(v):               not applicable Section 5(a)(vi):            not applicable Section 5(a)(vii)            not applicable Section 5(b)(iv):           not applicable   “Specified Transaction” will have the meaning specified in Section 14 of the Agreement.   The “Credit Event Upon Merger” provisions of Section 5(b)(iv) of the Agreement will not apply to Seller and Counterparty.   The “Automatic Early Termination” provision of Section 6(a) of the Agreement will not apply to Seller or to Counterparty.   Payments on Early Termination. For the purpose of Section 6(e) of the Agreement:  (i) Market Quotation shall apply; and (ii) the Second Method shall apply.   “Termination Currency” means USD.   Tax Representations:   (I)                                    For the purpose of Section 3(e) of the Agreement, each party represents to the other party that 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 Agreement) to be made by it to the other party under the Agreement. In making this representation, each party may rely on (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of the Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of the Agreement, and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of the Agreement, and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of the Agreement; provided that it will not be a breach of this representation where reliance is placed on clause (ii) above and the other party does not deliver a form or document under Section 4(a)(iii) of the Agreement by reason of material prejudice to its legal or commercial position.   (II)                                For the purpose of Section 3(f) of the Agreement, each party makes the following representations to the other party:   (i)                         Seller represents that it is a corporation organized under the laws of England and Wales.   (ii)                      Counterparty represents that it is a corporation incorporated under the laws of the State of Delaware.   9 --------------------------------------------------------------------------------   Delivery Requirements:  For the purpose of Sections 3(d), 4(a)(i) and (ii) of the Agreement, each party agrees to deliver the following documents:   Tax forms, documents or certificates to be delivered are:   Each party agrees to complete (accurately and in a manner reasonably satisfactory to the other party), execute, and deliver to the other party, United States Internal Revenue Service Form W-9 or W-8 BEN, or any successor of such form(s): (i) before the first payment date under this agreement; (ii) promptly upon reasonable demand by the other party; and (iii) promptly upon learning that any such form(s) previously provided by the other party has become obsolete or incorrect.   Other documents to be delivered:   Party Required to Deliver Document   Document Required to be Delivered   When Required   Covered by Section 3(d)  Representation Counterparty   Evidence of the authority and true signatures of each official or representative signing this Confirmation   Upon or before execution and delivery of this Confirmation   Yes Counterparty   Certified copy of the resolution of the Board of Directors or equivalent document authorizing the execution and delivery of this Confirmation   Upon or before execution and delivery of this Confirmation   Yes Seller   Guarantee of its Credit Support Provider, substantially in the form of Exhibit A attached hereto, together with evidence of the authority and true signatures of the signatories, if applicable   Upon or before execution and delivery of this Confirmation   Yes   Additional Notice Requirements:  The Counterparty hereby agrees to promptly deliver to Seller a copy of all notices and other communications required or permitted to be given to the holders of any Reference Notes pursuant to the terms of the Note Indenture on the dates so required or permitted in the Note Indenture and all other notices given and other communications made by Counterparty in respect of the Reference Notes to holders of any Reference Notes. The Counterparty further covenants to Seller that it shall promptly notify Seller of each Conversion Event (identifying in such Conversion Notice the principal amount at maturity of Reference Notes being converted), Amendment Event (including in such notice a detailed description of any such amendment) and Repayment Event (identifying in such notice the nature of such Repayment Event and the principal amount at maturity of Reference Notes being paid).   Addresses for Notices:  For the purpose of Section 12(a) of the Agreement:   Address for notices or communications to Seller for all purposes:   Address: Merrill Lynch International   Merrill Lynch Financial Centre   2 King Edward Street   London EC1A 1HQ Attention: Manager, Fixed Income Settlements Facsimile No.: 44 207 995 2004 Telephone No.: 44 207 995 3769   10 --------------------------------------------------------------------------------   Additionally, a copy of all notices pursuant to Sections 5, 6, and 7 as well as any changes to Counterparty’s address, telephone number or facsimile number should be sent to:   Address: GMI Counsel   Merrill Lynch World Headquarters   4 World Financial Center   New York, New York 10080 Attention: Global Equity Derivatives Facsimile No.: (212) 449-6576 Telephone No.: (212) 449-6309   Address for notices or communications to Counterparty for all purposes:   Amgen Inc. One Amgen Center Drive Thousand Oaks, CA 91320-1799 Telephone No.: (805) 447-1000 Facsimile No.: (805) 449-2863 Attention:  Treasurer   Process Agent:  For the purpose of Section 13(c) of the Agreement, Seller appoints as its Process Agent:   Address: Merrill Lynch, Pierce, Fenner & Smith Incorporated   222 Broadway, 16th Floor   New York, New York 10038 Attention: Litigation Department   Counterparty does not appoint a Process Agent.   Multibranch Party. For the purpose of Section 10(c) of the Agreement: Neither Seller nor Counterparty is a Multibranch Party.   Calculation Agent. The Calculation Agent is Seller, whose judgments, determinations and calculations in this Transaction and any related hedging transaction between the parties shall be made in good faith and in a commercially reasonable manner.   Credit Support Document.   Seller:  Guarantee of ML & Co. in the form attached hereto as Exhibit A   Counterparty:  Not Applicable   Credit Support Provider.   With respect to Seller:  ML & Co.   With respect to Counterparty:  Not Applicable.   Governing Law. This Confirmation will be governed by, and construed in accordance with, the laws of the State of New York.   Waiver of Jury Trial. Each party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding relating to this Transaction. Each party (i) certifies that no representative, agent or attorney of the other party has represented, expressly or otherwise, that such other party would not, in the event of such a suit, action or proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other party have been induced to enter into this Transaction, as applicable, by, among other things, the mutual waivers and certifications provided herein.   11 --------------------------------------------------------------------------------   Netting of Payments. The provisions of Section 2(c) of the Agreement shall not be applicable to this Transaction.   Basic Representations. Section 3(a) of the Agreement is hereby amended by the deletion of “and” at the end of Section 3(a)(iv); the substitution of a semicolon for the period at the end of Section 3(a)(v) and the addition of Sections 3(a)(vi), as follows:   Eligible Contract Participant; Line of Business. Each party agrees and represents that it is an “eligible contract participant” as defined in Section 1a(12) of the U.S. Commodity Exchange Act, as amended (“CEA”), this Agreement and the Transaction thereunder are subject to individual negotiation by the parties and have not been executed or traded on a “trading facility” as defined in Section 1a(33) of the CEA, and it has entered into this Confirmation and this Transaction in connection with its business or a line of business (including financial intermediation), or the financing of its business.   Amendment of Section 3(a)(iii). Section 3(a)(iii) of the Agreement is modified to read as follows:   No Violation or Conflict. Such execution, delivery and performance do not materially violate or conflict with any law known by it to be applicable to it, any provision of its constitutional documents, any order or judgment of any court or agency of government applicable to it or any of its assets or any material contractual restriction relating to Specified Indebtedness binding on or affecting it or any of its assets.   Amendment of Section 3(a)(iv). Section 3(a)(iv) of the Agreement is modified by inserting the following at the beginning thereof:   “To such party’s best knowledge,”   Acknowledgements:   (1) The parties acknowledge and agree that there are no other representations, agreements or other undertakings of the parties in relation to this Transaction, except as set forth in this Confirmation.   (2) The parties hereto intend for:   (a)                                  this Transaction to be a “securities contract” as defined in Section 741(7) of Title 11 of the United States Code (the “Bankruptcy Code”), qualifying for the protections under Section 555 of the Bankruptcy Code;   (b)                                 a party’s right to liquidate this Transaction and to exercise any other remedies upon the occurrence of any Event of Default under the Agreement with respect to the other party to constitute a “contractual right” as defined in the Bankruptcy Code;   (c)                                  all payments for, under or in connection with this Transaction, all payments for the Shares and the transfer of such Shares to constitute “settlement payments” as defined in the Bankruptcy Code.   Amendment of Section 6(d)(ii). Section 6(d)(ii) of the Agreement is modified by deleting the words “on any day” in the second line thereof and substituting therefore “on the day that is three Local Business Days after the day.”  Section 6(d)(ii) is further modified by deleting the words “two Local Business Days” in the fourth line thereof and substituting therefore “three Local Business Days.”   Amendment of Definition of Reference Market-Makers. The definition of “Reference Market-Makers” in Section 14 is hereby amended by adding in clause (a) after the word “credit” and before the word “and” the words “or to enter into transactions similar in nature to Transactions.”   12 --------------------------------------------------------------------------------   Consent to Recording. Each party consents to the recording of the telephone conversations of trading and marketing personnel of the parties and their Affiliates in connection with this Confirmation. To the extent that one party records telephone conversations (the “Recording Party”) and the other party does not (the “Non-Recording Party”), the Recording Party shall in the event of any dispute, make a complete and unedited copy of such party’s tape of the entire day’s conversations with the Non-Recording Party’s personnel available to the Non-Recording Party. The Recording Party’s tapes may be used by either party in any forum in which a dispute is sought to be resolved and the Recording Party will retain tapes for a consistent period of time in accordance with the Recording Party’s policy unless one party notifies the other that a particular transaction is under review and warrants further retention.   Disclosure. Each party hereby acknowledges and agrees that Seller has authorized Counterparty to disclose this Transaction and any related hedging transaction between the parties if and to the extent that Counterparty reasonably determines (after consultation with Seller) that such disclosure is required by law or by the rules of NASDAQ or any securities exchange. Notwithstanding any provision in this Confirmation or the Agreement, in connection with Section 1.6011-4 of the Treasury Regulations, the parties hereby agree that each party (and each employee, representative, or other agent of such party) may disclose to any and all persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of the Transaction and all materials of any kind (including opinions or other tax analyses) that are provided to such party relating to such U.S. tax treatment and U.S. tax structure, other than any information for which nondisclosure is reasonably necessary in order to comply with applicable securities laws.   Severability. If any term, provision, covenant or condition of this Confirmation, 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 as if this Confirmation had been executed with the invalid or unenforceable provision eliminated, so long as this Confirmation as so modified continues to express, without material change, the original intentions of the parties as to the subject matter of this Confirmation and the deletion of such portion of this Confirmation will not substantially impair the respective benefits or expectations of parties to this Agreement; provided, however, that this severability provision shall not be applicable if any provision of Section 2, 5, 6 or 13 of the Agreement (or any definition or provision in Section 14 to the extent that it relates to, or is used in or in connection with any such Section) shall be so held to be invalid or unenforceable.   Affected Parties. For purposes of Section 6(e) of the Agreement, each party shall be deemed to be an Affected Party in connection with Illegality and any Tax Event.   13 --------------------------------------------------------------------------------   Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us.   Very truly yours,   Merrill Lynch International     By:     Name: Title:   14 --------------------------------------------------------------------------------   Confirmed as of the date first above written:   AMGEN INC.     By:     Name: Title:   15 --------------------------------------------------------------------------------   EXHIBIT A   GUARANTEE OF MERRILL LYNCH & CO., INC.   FOR VALUE RECEIVED, receipt of which is hereby acknowledged, MERRILL LYNCH & CO., INC., a corporation duly organized and existing under the laws of the State of Delaware (“ML & Co.”), hereby unconditionally guarantees to Amgen, Inc. (the “Company”), the due and punctual payment of any and all amounts payable by Merrill Lynch International, a company organized under the laws of England and Wales (“ML”), under the terms of the Confirmation of OTC Convertible Note Hedge between the Company and ML (ML as Seller), dated as of February 14, 2006 (the “Confirmation”), including, in case of default, interest on any amount due, when and as the same shall become due and payable, whether on the scheduled payment dates, at maturity, upon declaration of termination or otherwise, according to the terms thereof. In case of the failure of ML punctually to make any such payment, ML & Co. hereby agrees to make such payment, or cause such payment to be made, promptly upon demand made by the Company to ML & Co.; provided, however that delay by the Company in giving such demand shall in no event affect ML & Co.’s obligations under this Guarantee. This Guarantee shall remain in full force and effect or shall be reinstated (as the case may be) if at any time any payment guaranteed hereunder, in whole or in part, is rescinded or must otherwise be returned by the Company upon the insolvency, bankruptcy or reorganization of ML or otherwise, all as though such payment had not been made.   ML & Co. hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Confirmation; the absence of any action to enforce the same; any waiver or consent by the Company concerning any provisions thereof; the rendering of any judgment against ML or any action to enforce the same; or any other circumstances that might otherwise constitute a legal or equitable discharge of a guarantor or a defense of a guarantor. ML covenants that this guarantee will not be discharged except by complete payment of the amounts payable under the Confirmation. This Guarantee shall continue to be effective if ML merges or consolidates with or into another entity, loses its separate legal identity or ceases to exist.   ML & Co. hereby waives diligence; presentment; protest; notice of protest, acceleration, and dishonor; filing of claims with a court in the event of insolvency or bankruptcy of ML; all demands whatsoever, except as noted in the first paragraph hereof; and any right to require a proceeding first against ML.   ML & Co. hereby certifies and warrants that this Guarantee constitutes the valid obligation of ML & Co. and complies with all applicable laws.   This Guarantee shall be governed by, and construed in accordance with, the laws of the State of New York.   This Guarantee may be terminated at any time by notice by ML & Co. to the Company given in accordance with the notice provisions of the Confirmation, effective upon receipt of such notice by the Company or such later date as may be specified in such notice; provided, however, that this Guarantee shall continue in full force and effect with respect to any obligation of ML under the Confirmation.   This Guarantee becomes effective concurrent with the effectiveness of the Confirmation, according to its terms.   16 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, ML & Co. has caused this Guarantee to be executed in its corporate name by its duly authorized representative.     MERRILL LYNCH & CO., INC.                 By:         Name:       Title:       Date:     17 --------------------------------------------------------------------------------  

    A.G. EDWARDS, INC.     EXCESS PROFIT SHARING     DEFERRED COMPENSATION PLAN     2002 RESTATEMENT     A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement             TABLE OF CONTENTS   1. Purpose 1 2. Eligibility 1 3. Basic Benefit 2 4. Plan Year Accounts 3 5. Pre-1987 Creditation of Interest 3 6. Plan Year Account Return Options – Post 1986 4 7. Fees Charged to Plan Year Accounts 5 8. Vesting Provisions for A Accounts 5 9. Vesting Provisions for B Accounts 7 10. Vesting Provisions For All Plan Year Accounts 8 11. Payment of A Accounts 9 12. Payment of B Accounts 12 13. Payment Upon Change in Control 13 14. Payment Upon Death 13 15. Severance Plan Override 14 16. Amendment or Discontinuance 14 17. Plan Administrator 14 18. Unfunded 14 19. Definitions and Rules of Construction 14 20. Official Actions 15 21. Tax Withholding 15       - i -           A.G. EDWARDS, INC.     EXCESS PROFIT SHARING     DEFERRED COMPENSATION PLAN     As Amended and Restated effective January 1, 2002     The A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan (the “Plan”) was originally effective beginning with the 1983 calendar year. The Plan was amended and restated as of January 1, 1987, January 1, 1994, January 1, 1995, August 20, 1999, and February 22, 2001. As of February 28, 2001, all existing post 1986 Plan Year Accounts were designated Plan Year A Accounts. Beginning with the 2001 Plan Year, awards are allocated evenly between an A Account and a B Account. Amounts allocated to B Accounts are subject to different vesting and payment provisions, as set forth in this restated instrument.   A.G. Edwards, Inc. now wishes to amend the Plan to accelerate vesting and payment of benefits for certain retirees and to add certain severance payment provisions.   NOW, THEREFORE, the Plan is hereby amended and restated by the following instrument, which shall be entitled the 2002 Restatement.   The amendments made by this 2002 Restatement generally are effective as of January 1, 2002, except as otherwise explicitly provided in the Plan.   The rights and benefits of a participant shall be governed by this Plan as amended from time to time and as in effect at the relevant time. Except as otherwise explicitly provided in the Plan, the rights and benefits of each participant shall be determined pursuant to the provisions of the Plan as in effect on the date of the applicable event.   1.           Purpose. The purpose of the Plan is to provide unfunded deferred compensation to certain highly compensated employees whose benefit under the A.G. Edwards, Inc. Retirement and Profit Sharing Plan (the “Profit Sharing Plan”) is limited by the Allocation Limitations contained in the Profit Sharing Plan. For purposes of this Plan, “Allocation Limitations” means the limitations on benefits in the Profit Sharing Plan imposed by Section 402(g) of the Code, which limits the amount an employee may elect to contribute to the Profit Sharing Plan, as described in Article VI of the Profit Sharing Plan, the limitation on the amount of Compensation which may be considered under the Profit Sharing Plan, as described in Article III of the Profit Sharing Plan, and the limitation imposed by Section 415 of the Code, which limits the amount that may be allocated to the account of an employee, as described in Section 7.6 of the Profit Sharing Plan.   2.           Eligibility. Any employee of A.G. Edwards, Inc. and its Affiliates (the “Company”) who is eligible to make a Deductible Employee Contribution pursuant to Section 6.1 of the Profit Sharing Plan for a Plan Year beginning after 1994 shall be eligible to participate in this Plan for that Plan Year whether or not a contribution is made.   - 1 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         3.           Basic Benefit. The “Basic Benefit” of a participant in this Plan for a Plan Year beginning after 1994 shall, subject to the limitations in this Paragraph 3, equal the sum of (A) and (B) as follows:   (A) The product of the “Applicable Percentage” of the participant for the Plan Year multiplied by the “Excess Profit Sharing Compensation” of the participant for the Plan Year where:     (i) The Applicable Percentage is the sum of (a) the rate of the Required Employer Non-matching Contribution with respect to Excess Compensation for that Plan Year made in accordance with Section 6.3 of the Profit Sharing Plan and (b) the rate of the FICA Discretionary Employer Non-matching Contribution for that Plan Year made in accordance with Section 6.4 of the Profit Sharing Plan; and     (ii) The Excess Profit Sharing Compensation for a Plan Year is Compensation as defined in the first Paragraph of Section 3.6 of the Profit Sharing Plan to the extent such compensation exceeds the limitation on Compensation in Sections 6.3 and 6.4 of the Profit Sharing Plan; and   (B) The amount, if any, that would have been prevented from being allocated to the account of the participant in the Profit Sharing Plan for the Plan Year with respect to Compensation below the limitation on Compensation in Sections 6.3 and 6.4 of the Profit Sharing Plan solely as a result of the dollar limitation of Section 415(c)(1)(A) of the Code as set forth in Section 7.6(A) of the Profit Sharing Plan if the participant had made the maximum Deductible Employee Contribution permitted for the participant by the Profit Sharing Plan.   Notwithstanding anything to the contrary in this Paragraph 3, in no event shall the amount of the Basic Benefit for a Plan Year under this Plan, when added to the combined maximum amount of the Employer Contributions under the Profit Sharing Plan, exceed the maximum amount, if any, established for such Plan Year by the Plan Administrator.   Notwithstanding anything to the contrary in this Paragraph 3, if the Basic Benefit of a participant for a Plan Year, computed pursuant to the formula as described above that is applicable to that Plan Year, shall be less than $500, such participant shall not be entitled to any benefit under this Plan for that Plan Year.       - 2 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         4.           Plan Year Accounts. A separate Plan Year Account shall be established and maintained for each participant with respect to each Plan Year for which the participant is entitled to creditation of a Basic Benefit. The Plan Administrator shall record the dollar amount of the Basic Benefit of a participant for each Plan Year to a separate Plan Year Account for that participant for that year.   As of February 28, 2001, all existing post-1986 Plan Year Accounts shall be designated Plan Year A Accounts. Beginning with the 2001 Plan Year, awards shall be allocated evenly between an A Account and a B Account for each participant.   5.           Pre-1987 Creditation of Interest. As of the last day of each Plan Year, the Plan Administrator shall adjust the pre-1987 Plan Year Accounts of each participant by crediting simple interest on the balance credited to each such account as of the beginning of the Plan Year (after reduction of the account balances to reflect the amount paid to participants during such Plan Year) at the applicable rate, as follows:   (A) Except as provided below in subparagraphs (B) and (C) of this Paragraph 5, the applicable rate shall be the average of the broker call rates of A.G. Edwards & Sons, Inc. as of the end of each month during the twelve-month period of the Plan Year.   (B) In the event a participant elects a lump-sum payment of the balance of a Plan Year Account after June 30 of a Plan Year, the Plan Administrator shall adjust the Plan Year Account by crediting simple interest on the balance credited to such account for the partial year ending on the last day of the month as of which such Account becomes payable at the average broker call rate of A.G. Edwards & Sons, Inc. as of the end of each month during the period from the last year-end date interest was credited until the end of the month preceding the payment date.   (C) The applicable rate for a participant who incurs a Termination of Employment before the participant attains sixty (60) years of age, for the period beginning on the January 1 of the calendar year in which such a Termination of Employment occurred, shall be the lesser of:     (i) The average of one-half of the broker call rates of A.G. Edwards & Sons, Inc. as of the end of each month during the twelve-month period of the Plan Year, and     (ii) The average of the Federal Reserve discount rates as of the end of each of such twelve (12) months.       - 3 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         In the event such a terminated participant is rehired before the first anniversary of his or her Termination of Employment, the applicable interest rate shall be the average broker call rate determined as if the participant had not incurred a Termination of Employment.   In the event such a terminated participant is rehired on or after the first anniversary of his or her Termination of Employment, the lower interest rate applicable to former employees as described above shall apply until the January 1 next following the date of reemployment of the participant, at which time the average broker call rate applicable to active employees shall again become applicable.   6.           Plan Year Account Return Options – Post 1986. On and after June 1, 2000, participants may base the return of a post-1986 Plan Year Account on the performance of one or a combination of securities (the “Funds”) designated from time to time by the Plan Administrator. Participants will have no ownership interest in the Funds, but their Plan Year Account balance shall increase or decrease based on the performance of the designated Fund(s). The Funds’ performance will be determined by industry acceptable performance measurement standards as determined by the Plan Administrator. Effective December 26, 2001, the broker call rate is eliminated as a basis for determining the return for any unvested Plan Year Account. The Plan Administrator in its sole discretion may from time to time add or delete Funds or other return options from the list of Funds or other return options which participants may base the return for a Plan Year Account   From time to time, at such times and upon such effective dates as the Plan Administrator may determine, participants may change the Fund(s) they have designated by notifying the Plan Administrator or its designee in such manner as determined by the Plan Administrator.   For Plan Year Accounts vested prior to December 26, 2001, for participants who choose not to base the return of a Plan Year Account on the performance of a Fund(s), the Plan Year Account will be credited interest monthly at the average of the A.G. Edwards & Sons, Inc. broker call rates determined as of the 30-day period ending in the previous month for which data is available. For participants choosing to base the return of a Plan Year Account previously based on broker call rates on the performance of a Fund(s), the Plan Year Account will be credited interest at the previous month’s average of the A.G. Edwards & Sons, Inc. broker call rates through the effective date of the transfer from the broker call rate method. No Plan Year Account Balance may be transferred from a Fund(s) to the broker call rate method. No Plan Year Account can have its return based on both the broker call rate and a Fund(s).   Effective with Plan Year 2001 awards, the return on all new Plan Year Accounts must be based on the performance of a Fund(s). The broker call rate method will no longer be a return measurement option. The return on new Plan Year Accounts initially will be based on the performance of the Fund(s) designated for the Plan Year Accounts of the participant for the immediately preceding Plan Year, if applicable. After the new Plan Year Account is initially directed to a Fund(s), the participant may change the Fund(s) on which the performance of the Plan Year Account is based, independent of other Plan Year Accounts.   - 4 - A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement     Participants who do not designate a return option for Plan Year Accounts will have the return on their Plan Year Accounts determined by a default Fund as determined by the Plan Administrator.   7.           Fees Charged to Plan Year Accounts. On and after January 1, 2001, all Plan Year Accounts based on the return of a Fund(s) will be charged an annual administration fee in the manner determined by the Plan Administrator, but in no event will the administration fee exceed 25 basis points of the Plan Year Account’s ending quarterly balance. The administration fee shall be based on the value of the Plan Year Account(s) at the end of the quarter and charged after the end of the quarter (retroactively), not in advance. The administration fee will apply if the return on the Plan Year Account(s) at any time during the quarter was based on a Fund(s). The Plan Administrator in its sole discretion shall determine which Fund(s) the administration fee will apply to.   8.           Vesting Provisions for A Accounts. The amount from time to time credited to each respective Plan Year A Account of a participant maintained for a Plan Year after 1986 shall vest at the rate for each year of service following the Plan Year for which the Basic Benefit was credited to that account of the participant, determined by the following schedule:     Years of Service Vested Percentage     Less than 6 0%   6 100%   The vested percentage of each separate Plan Year Account shall be determined independently of the vested percentage of any other Plan Year Account of that participant.   Years of Service. A year of service for purposes of this Paragraph means any calendar year during which the participant is employed continuously by the Company. An approved leave of absence for medical reasons shall be treated as a period of continuous employment for vesting. Any other leave of absence shall not count as a period of continuous employment for vesting, but commencing such a leave shall not cause a Termination of Employment. A participant shall receive no vesting credit for a calendar year unless the participant is employed continuously by the Company throughout such year.       - 5 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         Years of service completed prior to the Termination of Employment of a re-employed former participant shall be disregarded completely after the participant is rehired unless the participant is re-employed by the Company no later than the first anniversary of the Termination of Employment of the participant. In the event such a participant is re-employed on or before the first anniversary of his or her Termination of Employment, years of service completed before and after the Termination of Employment shall be aggregated for purposes of determining the vested percentage credited to the respective Plan Year A Accounts of the participant, regardless of whether the participant engages in competition with the Company during such a period of severance.   Forfeiture for Early Termination of Employment. Effective on and after March 1, 2001, in the event of Termination of Employment of a participant, for reasons other than death or disability, before the participant attains fifty-five (55) years of age, and before the combination of full years of age plus full years of service of the participant exceeds 70, the unvested portion of the respective Plan Year A Account balances of such a participant shall be forfeited at the time of such a Termination of Employment of the participant. In the event the participant is rehired by the Company on or before the first anniversary of such a Termination of Employment, no portion of the Plan Year A Account balances shall be forfeited or become payable to the participant on account of such a Termination of Employment and the previously forfeited Plan Year A Account balances of the participant shall be restored and distributed to the participant as determined under the remaining provisions of this Plan (including the provision mentioned previously in this Paragraph that only complete continuous years of employment are credited for increased vesting).   Extended Vesting - Early Retirement. Effective on and after March 1, 2001, upon Termination of Employment of a participant after the participant attains age fifty-five (55); or after the combination of full years of age plus full years of service of the participant exceeds 70, but before the participant attains sixty-five (65) years of age (“early retirement”), the respective Plan Year A Account balances of a participant that are not fully vested at the time the participant takes early retirement shall continue to vest as provided above, except that the time after early retirement during which the participant does not engage in competition, as defined in Article X of the Profit Sharing Plan, shall be treated as continued employment of the participant with the Company solely for purposes of vesting.   In the event a participant who takes early retirement shall subsequently engage in competition, as defined in Article X of the Profit Sharing Plan, each Plan Year A Account balance of the participant that is not fully vested at the time the participant first so engages in competition shall be forfeited, unless the participant is rehired by the Company on or before the first anniversary of his or her early retirement date.       - 6 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         Accelerated Vesting at Normal Retirement.   For each respective Plan Year A Account of a participant maintained for a Plan Year before 1995, upon Termination of Employment of the participant on or after the participant attains sixty-five (65) years of age, the full amount credited to the Plan Year A Account of the participant as of the last day of the calendar year during which such Termination of Employment occurred shall become fully vested regardless of the number of years of service of the participant at such time, and shall be paid at such time or times as provided below.   For each respective Plan Year A Account of a participant maintained for a Plan Year after 1994, upon the Termination of Employment of the participant on or after the participant attains sixty-five (65) years of age, the respective Plan Year A Account balances of the participant that are not fully vested at the time the participant so retires shall become fully vested at the earlier of the time such accounts vest in accordance with the above six-year schedule, or the first anniversary of the date of such a Termination of Employment. In the event a participant who so retires shall subsequently engage in competition, as defined in Article X of the Profit Sharing Plan, each Plan Year A Account balance of the participant that is not fully vested at the time the participant first so engages in competition shall be forfeited, unless the participant is rehired by the Company on or before the first anniversary of his or her retirement date. The balance credited to each respective Plan Year A Account of a participant that becomes fully vested after the participant so retires shall (so long as the participant is not rehired) be paid at such time or times as provided below as if the participant had incurred a Termination of Employment on the day which each such account becomes fully vested.     9. Vesting Provisions for B Accounts.   Forfeiture for Early Termination of Employment. In the event of Termination of Employment of a participant, for reasons other than death or disability, before the participant attains fifty-five (55) years of age, and before the combination of full years of age plus full years of service of the participant exceeds 70, the unvested portion of the respective B Account balance of such a participant shall be forfeited at the time of such a Termination of Employment of the participant. In the event the participant is rehired by the Company on or before the first anniversary of such a Termination of Employment, no portion of the B Account balance shall be forfeited on account of such a Termination of Employment and the previously forfeited B Account balance of the participant shall be restored and paid to the participant as determined under the remaining provisions of this Plan.   Vesting after Retirement. Upon Termination of Employment of a participant after the participant attains age fifty-five (55); or after the combination of full years of age plus full years of service of the participant exceeds 70, the balance remaining in the B Account at the end of each anniversary of the participant’s Termination of Employment shall vest over a six year period, as follows:     1st anniversary – 17% 4th anniversary – 67%     2nd anniversary –33% 5th anniversary – 83%     3rd anniversary – 50% 6th anniversary – 100%     - 7 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         Vesting of the B Account shall be suspended in the event such a retired participant is rehired by the Company. All amounts allocated to the B Account of the participant shall vest as described above upon the subsequent Termination of Employment of the participant, as if the participant had retired for the first time.   In the event a participant who so retires subsequently engages in competition, as defined in Article X of the Profit Sharing Plan, the B Account balance of the participant that is not fully vested at the time the participant first so engages in competition shall be forfeited, unless the participant is rehired by the Company on or before the first anniversary of his or her early retirement date.   The following provision is effective December 26, 2001   Accelerated Vesting at Normal Retirement. Upon Termination of Employment of the participant on or after the participant attains sixty-five (65) years of age, the full amount credited to the B Account of the participant shall become fully vested upon the first anniversary of such Termination of Employment regardless of the number of years of service of the participant at such time. In the event a participant who so retires shall subsequently engage in competition, as defined in Article X of the Profit Sharing Plan, the B Account balance of the participant that is not fully vested at the time the participant first so engages in competition shall be forfeited, unless the participant is rehired by the Company on or before the first anniversary of his or her retirement date. The balance credited to the B Account of a participant that becomes fully vested after the participant so retires shall (so long as the participant is not rehired) be paid as such time or times provided below as if the participant had incurred a Termination of Employment on the day the B Account becomes fully vested.     10. Vesting Provisions For All Plan Year Accounts.   Forfeiture for Cause. Notwithstanding anything to the contrary in the Plan, the entire balance credited to all respective Plan Year Accounts of a participant that are not fully vested shall be forfeited at the time of Termination of Employment in the event the participant is Terminated for Aggravated Cause, as defined in Article III of the Profit Sharing Plan.       - 8 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         Full Vesting for Disability. Upon the Termination of Employment of a participant on account of Total Disability (as defined in Article III of the Profit Sharing Plan), the full amount credited to all of the Accounts of the participant as of the last day of the calendar year during which such a Termination of Employment occurred shall become fully vested regardless of the number of years of service of the participant at such time, and shall be paid at such time or times as provided below.   Full Vesting at Death. In the event of the death of a participant, the entire balance credited to all of the Accounts of the participant that are not forfeited on account of an event, such as Termination of Employment or engaging in competition, that occurred prior to death, whether or not vested in accordance with Paragraphs 8 and 9, shall be fully vested.   Full Vesting at Change in Control. Notwithstanding the provisions prescribed in the preceding Paragraphs governing the time of vesting, the balance credited to all Plan Year Accounts of each participant shall become fully vested and nonforfeitable immediately upon a Change in Control and shall be paid to the participant in a single lump sum as soon as administratively feasible after the Change in Control occurs.   For purposes of this Paragraph, “Change in Control” means the occurrence of any of the following events without the prior approval of the Board of Directors: (a) a merger, consolidation or reorganization of the Company in which the Company does not survive as an independent entity; (b) a sale of all or substantially all of the assets of the Company; (c) the first purchase of shares of Common Stock of the Company pursuant to a tender or exchange offer for more than 20% of the Company’s outstanding shares of Common Stock; or (d) any change in control of a nature that, in the opinion of the Board of Directors, would be required to be reported under the federal securities laws; provided that such a change in control shall be deemed to have occurred if (i) any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the Company’s then outstanding securities; or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company cease for any reason to constitute a majority thereof unless the election of any director, who was not a director at the beginning of the period, was approved by a vote of at least 70% of the directors then still in office who were directors at the beginning of the period.     11. Payment of A Accounts.   Normal Time of Payment. Benefits payable under this Plan attributable to a Plan Year A Account that is vested at the time the participant incurs a Termination of Employment generally shall become payable after the end of the Plan Year in which the participant incurs a Termination of Employment; provided that benefits for a Plan Year after 1994 of a participant who incurs a Termination of Employment after attaining sixty-five (65) years of age shall become payable one (1) year after the Termination of Employment. Subject to the deferral election provisions below, such benefits shall be paid to the participant in one lump-sum payment as soon as practical after such time.     - 9 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         Effective on and after March 1, 2001, upon Termination of Employment of a participant after the participant attains age fifty-five (55); or after the combination of full years of age plus full years of service of the participant exceeds 70, but before the participant attains sixty-five (65) years of age (“early retirement”), the balance credited to a Plan Year A Account of the participant that becomes fully vested after the participant takes early retirement shall (so long as the participant is not rehired) be paid at such time or times as if the participant had incurred a Termination of Employment on the day on which each such account becomes fully vested.   Notwithstanding the above, benefits payable under this Plan attributable to a Plan Year A Account of a participant maintained for a Plan Year after 1986 that was fully vested on August 20, 1999, shall be payable at such time or times as determined in accordance with the terms of this Plan (including elective deferred payment date rules) as in effect before the adoption of the 1999 Restatement.   Accelerated Lump Sum Payment. A participant may elect to receive a lump sum distribution of the benefits payable under this Plan attributable to a Plan Year A Account that is vested. If such an election is made in the first six (6) months of the Plan Year, the Plan Year Account shall become payable after the end of the Plan Year in which the participant made the election. If such an election is made in the last six (6) months of the Plan Year, the Plan Year Account shall become payable after the end of the sixth full calendar month beginning after the participant made the election. An election to receive an accelerated lump sum payment of a Plan Year A Account balance shall be irrevocable.   Installment Payments. A participant may elect installment payments of the balances credited to his or her respective Plan Year A Accounts in lieu of a normal lump-sum distribution, subject to the following:   (A) A participant may elect to receive five (5) annual installment payments of the balance of a Plan Year A Account, with the first payment payable at the time a normal lump-sum distribution of such balance would have been paid but for such election, and each of the next four (4) annual installment payments payable as of the next four (4) anniversaries of such date; except that in the case of a participant who has attained sixty-five (65) years of age whose benefit is payable one (1) year after Termination of Employment, the first payment shall be payable after the end of the second Plan Year after Termination of Employment, and each of the next four (4) annual installment payments payable after the end of the next four Plan Years; and     - 10 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         (B) The first installment payment shall equal one-fifth (1/5) of the balance of such Plan Year A Account payable to the participant as of the normal payment date, the second installment payment shall equal one-fourth (1/4) of the remaining balance of such account as of the last day of the Plan Year immediately preceding the payment, the third installment payment shall equal one-third (1/3) of the remaining balance of such account as of the last day of the Plan Year immediately preceding the payment, the fourth installment payment shall equal one-half (1/2) of the remaining balance of such account as of the last day of the Plan Year immediately preceding the payment, and the fifth installment payment shall equal the entire remaining balance of such account as of the last day of the Plan Year immediately preceding the payment.   General Deferral Election. Effective March 1, 2001, a participant may elect to defer payment of a Plan Year A Account balance in a lump sum payment to the end of the first, second, third, fourth, or fifth year following the year in which the participant incurs a Termination of Employment. Such an election shall be made within (60) days after Termination of Employment but no later than December 31 of the year in which the participant incurs a Termination of Employment.   Age 65 Deferral Election. A participant who has attained sixty-five (65) years of age may elect to defer payment of a Plan Year A Account in one lump sum until after the end of the first, second, third, fourth or fifth year following the year in which the participant Retires, regardless of any previous election with respect to such Plan Year Account. Effective March 1, 2001, such an election shall be made no later than six (6) months before the day the Plan Year Account first becomes payable without regard to any election. For purposes of this Paragraph, “Retire” means the Termination of Employment of a participant after the participant attains sixty-five (65) years of age.   Election Procedures. Effective March 1, 2001, except as otherwise explicitly provided in this Paragraph, an election made pursuant to this Paragraph shall be made within sixty (60) days after termination or retirement but no later than December 31 in the year of termination or retirement; except that in the case of a participant who has attained age sixty-five (65) years of age electing installment payments, such an election shall be made no later than six (6) months before the day the Plan Year Account first becomes payable without regard to any election. An election to receive installment payments or to defer a benefit pursuant to this Paragraph must be delivered to the Plan Administrator at such time and in such form and manner as is acceptable to the Plan Administrator. An election shall be irrevocable after the deadline for making such election. A participant may elect a payment with respect to each Plan Year A Account independently of any other Plan Year A Account.     - 11 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         Payments scheduled to be made after the end of a Plan Year shall be made as soon as administratively practicable after the end of the year.     12. Payment of B Accounts.   Normal Time of Payment. The vested portion of the B Account shall become payable on the date such portion becomes vested in accordance with Paragraph 9 or 10, whichever is applicable, and shall be paid in a lump sum payment as soon as administratively feasible after such time.   Deferral Election. A participant may elect to defer payment of the vested amount, which otherwise would be paid each year at the time of vesting, to the following annual payment date. On the following annual payment date, the cumulative deferral (the current year vested portion and any previous year deferred payments) may be deferred to the following annual payment date. However, the Plan Year B Account will become payable when such account becomes fully vested, with no further elective deferrals after that time.   Except as otherwise explicitly provided in this Paragraph, an election made pursuant to this Paragraph shall be made no later than sixty (60) days before the amount would otherwise become payable; except in the case of a participant who has attained age sixty-five (65) years of age, such an election shall be made no later than six (6) months before the day the B Account first becomes payable (as explained below).   Effective December 26, 2001   Lump Sum Payment. A participant who has attained sixty-five (65) years of age may elect to defer payment of the B Account in one lump sum until after the end of the first second, third, fourth or fifth year following the year in which the participant Retires. Such election shall be made no later than six (6) months before the day the B Account first becomes payable. For purposes of this Paragraph, "Retire" means the Termination of Employment of a participant after the participant attains sixty-five (65) years of age.   Installment Payments. A participant who has attained sixty-five (65) years of age may elect installment payments credited to his or her respective B Account in lieu of a normal lump-sum distribution, subject to the following:       - 12 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         (A) The first payment shall be payable after the end of the second Plan Year after Termination of Employment, and each of the next four (4) annual installment payments payable after the end of the next four Plan Years.   (B) The first installment payment shall equal one-fifth (1/5) of the balance of such B Account payable to the participant as of the normal payment date, the second installment shall equal one-fourth (1/4) of the remaining balance of such account as of the last day of the Plan Year immediately preceding the payment, the third installment payment shall equal one-third (1/3) of the remaining balance of such account as of the last day of the Plan Year immediately preceding the payment, the fourth installment payment shall equal one-half (1/2) of the remaining balance of such account as of the last day of the Plan Year immediately preceding the payment, and the fifth installment payment shall equal the entire remaining balance of such account as of the last day of the Plan Year immediately preceding the payment.   Such election shall be made no later than six (6) months before the day the B Account first becomes payable.   An election to receive installment payments or to defer a payment pursuant to this Paragraph must be delivered to the Plan Administrator at such time and in such form and manner as is acceptable to the Plan Administrator. An election shall be irrevocable after the deadline for making such election.   13.        Payment Upon Change in Control. Notwithstanding the provisions prescribed in the preceding Paragraphs governing the time of payment, the balance credited to all Plan Year Accounts of each participant be paid to the participant in a single lump sum as soon as administratively feasible after the Change in Control, as defined in Paragraph 10, occurs.   14.        Payment Upon Death. In the event of the death of a participant, the entire balance credited to all Accounts of the participant at the time of the death of the participant shall be paid to the beneficiary in a single lump sum as soon as administratively practical after the death of the participant, or in five (5) annual installment payments (each in the amount described in subparagraph (B) of Paragraph 11), as determined by the Plan Administrator in its sole discretion.   Each participant may designate any person or persons, including a trust (concurrently, contingently, or successively) to whom his benefits under this Plan are to be paid if the participant dies before receipt of all such benefits. A beneficiary designation shall be effective only if made in writing in a form suitable to the Plan Administrator and filed with the Plan Administrator by the participant. Each participant may change a beneficiary designation from time to time. If a participant shall fail to designate a beneficiary pursuant to this Plan, the beneficiary under this Plan shall be the beneficiary of such participant determined pursuant to the Profit Sharing Plan.     - 13 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         15.        Severance Plan Override. Notwithstanding the provisions prescribed in the preceding Paragraphs, the provisions governing amounts credited to Accounts of Participants may be modified, as determined by the Plan Administrator, to conform to the terms, conditions and provisions of the A.G. Edwards, Inc. Severance Benefit Plan, including any Appendix thereto.   16.        Amendment or Discontinuance. A.G. Edwards, Inc. reserves the right to amend, alter or discontinue this Plan at any time, provided that no such amendment, alteration or discontinuance may cause any forfeiture or diminution of the rights and benefits under this Plan in which a participant shall have become vested on or before the date of such amendment, alteration or discontinuance. Such action may be taken by an instrument in writing signed by the President of A.G. Edwards, Inc. or by any other officer or committee who has been duly authorized by the Board of Directors of A.G. Edwards, Inc.   17.        Plan Administrator. The Plan Administrator of this Plan shall be the Plan Administrator appointed under the Profit Sharing Plan, and shall have all of the authority, rights and duties to administer this Plan as is assigned to the Plan Administrator to administer the Profit Sharing Plan.   18.        Unfunded. Benefits payable under this Plan shall be paid by the respective employer of each participant out of its general assets. A participant shall have no rights with respect to benefits under this Plan other than the unsecured right to receive payments from the Company as provided herein. The Company shall not be obligated to set aside, earmark or escrow any funds or other assets to satisfy its obligations hereunder. Any benefit payable hereunder shall not be represented by a note or any evidence of indebtedness other than the promises contained in this Plan. No benefit or any part thereof which shall be payable hereunder shall be subject in any manner to anticipation, alienation, transfer, sale, assignment, pledge, encumbrance, garnishment, attachment, execution, or the claims of creditors of any person having an interest hereunder, nor be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of such person.   19.        Definitions and Rules of Construction. The terms and provisions of this Plan shall be construed as defined in, and in accordance with the meaning under, the Profit Sharing Plan. Reference to a particular section or article of the Profit Sharing Plan shall refer to the section or article of such Plan as in effect on the date of adoption of this Plan or any comparable section or sections, or article or articles of any future plan document that amends, supplements or supersedes said section.     - 14 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         20.        Official Actions. Any action required to be taken by the Board of Directors of A.G. Edwards, Inc. pursuant to this Plan may be performed by any person or persons, including a committee, to which the Board of Directors of A.G. Edwards, Inc. delegates the authority to take actions of that kind. Whenever under the terms of this Plan a corporation is permitted or required to take some action, such action may be taken by an officer of the corporation who has been duly authorized by the Board of Directors of such corporation to take actions of that kind, and if no such authorization is given by the Board, by the President of such corporation.   21.        Tax Withholding. The Company will withhold any amount otherwise payable under this Plan as necessary to enable it to remit to the appropriate government entity or entities on behalf of the Employee the amount required to be withheld from wages with respect to benefits under this Plan.     IN WITNESS WHEREOF, A.G. Edwards, Inc. has adopted the foregoing amendment this 27th day of August,           2002.       A.G. EDWARDS, INC.         By: /s/ Robert L. Bagby           Title: Chairman                       ATTEST:   /s/ Douglas L. Kelly       - 15 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         FIRST AMENDMENT A.G. EDWARDS, INC. EXCESS PROFIT SHARING DEFERRED COMPENSATION PLAN 2002 RESTATEMENT     The A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan (the “Plan”) originally effective beginning with the 1983 calendar year. The Plan was amended and restated as of January 1, 1987, January 1, 1994, January 1, 1995, August 20, 1999, and February 22, 2001. As of February 28, 2001, all existing post 1986 Plan Year Accounts were designated Plan Year A Accounts. Beginning with the 2001 Plan Year, awards are allocated evenly between an A Account and a B Account. Amounts allocated to B Accounts are subject to different vesting and payment provisions, as set forth in this restated instrument.   A.G. Edwards, Inc., now wishes to amend the Plan allow the Plan Administrator to impose transfer restrictions on return options and to provide accelerate vesting and of benefits for certain Participants in conjunction with the sale of CPI Qualified Plan Consultants, Inc. by A.G. Edwards, Inc.   NOW THEREFORE, the Plan is hereby amended as follows:     1. Effective February 20, 2004, the following paragraph is added as the last paragraph of existing paragraph 7:   The Plan Administrator may from time to time impose transfer restrictions as to how often a participant may change his or her designation of a return option. The Plan Administrator may from time to time impose a redemption fee to be charged to a participant’s Account or Accounts for violation of such transfer restrictions or may take other actions including blocking or reversing transactions to enforce such restrictions.     2. Effective March 15, 2004, an additional paragraph is added to paragraph 10 as follows:   Accelerated Vesting Upon Sale of CPI. Upon the Termination of Employment of a Participant on the account of the sale of CPI Qualified Plan Consultants, Inc. by A.G. Edwards, Inc., the full amount credited to all the Accounts of the participant at the time of Termination of Employment shall become fully vested regardless of the number of years of service of the participant at such time, and shall be paid at such time or times as provided below.     - 16 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         IN WITNESS WHEREOF, the undersigned as Secretary of A.G. Edwards, Inc. hereby certifies that this First Amendment was duly adopted by A.G. Edwards, Inc.       By: /s/ Douglas L. Kelly                       Title: Corporate Secretary                         - 17 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         SECOND AMENDMENT A.G. EDWARDS, INC. EXCESS PROFIT SHARING DEFERRED COMPENSATION PLAN 2002 RESTATEMENT     The A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan (the “Plan”) was originally effective beginning with the 1983 calendar year. The Plan has been amended from time to time, most recently in the form of a restated plan document dated August 22, 2002 (the “2002 Restatement”) and a First Amendment to such Restatement.   A.G. Edwards, Inc. now wishes to amend the Plan.   NOW THEREFORE, the Plan is hereby amended as follows:     1. The first paragraph of existing Paragraph 6 is restated as follows:   Plan Year Account Return Options – Post 1986. On and after June 1, 2000, participants may base the return of a post-1986 Plan Year Account on the performance of one or a combination of securities (the “Funds”) designated from time to time by the Investment Committee. Participants will have no ownership interest in the Funds, but their Plan Year Account balance shall increase or decrease based on the performance of the designated Fund(s). The Funds’ performance will be determined by industry acceptable performance measurement standards as determined by the Investment Committee. Effective December 26, 2001, the broker call rate is eliminated as a basis for determining the return for any unvested Plan Year Account.   The Investment Committee in its sole discretion may from time to time add or delete Funds or other return options from the list of Funds or other return options which participants may base the return for a Plan Year Account.   2.           The following paragraph is added as the second to last paragraph of existing Paragraph 9:   Vesting After Age 65. The full amount credited to the B Account of the participant shall become fully vested on December 31 of the year in which the participant attains sixty-five (65) years of age and all subsequent amounts credited to the B Account of the participant shall vest on December 31 of the year awarded in which the amount is credited to the B Account.     - 18 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement           3. The last paragraph of Paragraph 9 is restated as follows:   Accelerated Vesting at Normal Retirement. Upon the Termination of Employment of the participant on or after the participant attains age sixty-five (65) years of age, the unvested balance of the B Account of the participant shall become fully vested upon the first anniversary of such Termination of Employment regardless of the number of years of service of the participant at such time. In the event a participant who so retires subsequently engages in competition, as defined in Paragraph 23 of this Plan, the B Account balance of the participant that is not fully vested at the time the participant first so engages in competition shall be forfeited, unless the participant is rehired by the Company on or before the first anniversary of his or her retirement date. The balance credited to the B Account of a participant that becomes fully vested after the participant so retires shall (so long as the participant is not rehired) be paid as such time or times provided below as if the participant had incurred a Termination of Employment on the day the B Account becomes fully vested.   4.           Change the heading of existing Paragraph 11 to read: Payment of A Accounts -- Pre-1999 Plan Years.     5. Add Paragraph 12 as follows and renumber remaining Paragraphs as applicable:     Payment of A Accounts – Post 1998 Plan Years.   Normal Time of Payment. Benefits payable under this Plan attributable to a Plan Year A Account shall become payable upon vesting and paid as soon as administratively practical after such time; provided that Benefits for a Plan year of a participant who incurs a Termination of Employment after attaining sixty-five (65) years of age shall become payable one (1) year after the Termination of Employment. Subject to the deferral election provisions below, such benefits shall be paid to the participant in one-lump sum payment as soon as practical after such time.   Upon Termination of Employment of a participant after the participant attains age fifty-five (55); or after the combination of full years of age plus full years of service of the participant exceeds 70, but before the participant attains sixty-five (65) years of age (“early retirement”), the balance credited to a Plan Year A Account of the participant that becomes fully vested after the participant takes early retirement shall (so long as the participant is not rehired) become payable upon vesting and paid as soon as administratively practical after such time.     - 19 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         General Deferral Election. A participant may elect to defer payment of a Plan Year A Account balance in a lump sum payment for a period of at least five (5) years from the normal time of payment. Such an election shall be made no later than twelve (12) months before the normal time of payment. A participant may again elect a further deferred payment date that is at least five years later than the previously scheduled payment date. Such a subsequent election also shall be made no later than twelve (12) months before the previously scheduled payment date.   Election Procedures. An election to defer a benefit pursuant to this Paragraph must be delivered to the Plan Administrator at such time and in such form and manner as is acceptable to the Plan Administrator. An election shall be irrevocable after the deadline for making such election. A participant may elect a payment with respect to each Plan Year A Account independently of any other Plan Year A Account.   A payment scheduled to be made after the end of a Plan Year shall be made as soon as administratively practicable after the end of the year.   Notwithstanding any of the payment provisions noted in this Paragraph, a participant will receive payment of all vested monies the earlier of 1) 5 years following termination of employment; or 2) his or her scheduled fixed payment date.     6. Existing Paragraph 12 is restated as follows:     13. Payment of B Accounts.   Normal Time of Payment. The vested portion of the B Account shall become payable on the date such portion becomes vested in accordance with Paragraph 9 or 10, whichever is applicable, and shall be paid in a lump sum payment as soon as administratively practicable after such time.       - 20 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement         Age 65 Deferral Election. Provided the participant is employed by the Company, the participant may elect to defer payment of his or her B Account balance in a lump sum payment for a period of at least five (5) years from the normal time of payment. Such an election shall be made no later than twelve (12) months prior to the normal time of payment.   Election Procedures. An election to defer pursuant to this Paragraph must be delivered to the Plan Administrator at such time and in such form and manner as is acceptable to the Plan Administrator. An election shall be irrevocable after the deadline for making such election.   Notwithstanding any of the payment provisions noted in this Paragraph, a participant will receive payment of all vested monies the earlier of 1) 5 years following termination of employment; or 2) his or her scheduled fixed payment date.     7. The first paragraph of existing Paragraph 14 is restated as follows:   Payment Upon Death. In the event of the death of a participant, the entire balance credited to all Accounts of the participant at the time of the death of the participant shall be paid to the beneficiary in a single lump sum as soon as administratively practical after the death of the participant as determined by the Plan Administrator in its sole discretion.     8. The following is added as the second paragraph to existing Paragraph 16:   The Plan Administrator may adopt policies and procedures necessary or advisable to implement the Treasury Department’s temporary regulations relating to the American Jobs Creation Act of 2004 (the “2004 Act”). The Executive Committee of A.G. Edwards, Inc. may approve any Plan amendments necessary or advisable to implement such temporary regulations of the 2004 Act.     9. Add Paragraph 19 as follows:   Investment Committee. The Plan Administrator shall appoint an Investment Committee to serve at its pleasure. The members of the Investment Committee may be a corporation (including the Sponsor), one or more individuals or any combination of the above. The Plan Administrator may change such appointments from time to time provided that such changes are published to the     - 21 -   A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan 2002 Restatement       extent of enabling interested parties to ascertain the person or persons responsible for operating the Plan.   In the absence of such an appointment, the Compensation Committee of A.G. Edwards & Sons, Inc. shall serve as the Investment Committee.   Any member serving on the Investment Committee may, but need not, be an employee, and may, but need not, be a participant. Any member shall serve, in the case of natural persons until his death, resignation or removal and in the case of a corporation until its liquidation, resignation or removal. The Compensation Committee of A.G. Edwards & Sons, Inc. in its sole discretion, may remove any member of the Investment Committee at any time. A member serving on the Investment Committee may resign by delivering a written resignation to the Compensation Committee of A.G. Edwards & Sons, Inc.   All resolutions and other actions of the Investment Committee may be adopted and effected by a majority of a quorum of the Investment Committee at the time of such action. A quorum of the Investment Committee shall be comprised of no fewer than fifty percent (50%) of the members then serving. An action of the Investment Committee also shall be valid if concurred in by unanimous written consent in lieu of a meeting. A member may participate in a meeting by means of a conference telephone or similar communications equipment.   The Investment Committee may appoint one or more of its members to carry out any particular duty or duties or to execute any and all documents. Any documents so executed shall have the same effect as if executed by all such persons. Such appointment shall be made by an instrument in writing that specifies which duties and powers are so allocated and to whom each such duty or power is so allocated.   IN WITNESS WHEREOF, the undersigned as Secretary of A.G. Edwards, Inc. hereby certifies that this Second Amendment was duly adopted by A.G. Edwards, Inc.     By: /s/ Douglas L. Kelly                       Title: Corporate Secretary                           - 22 -      

  Exhibit 10.11 Summary of Executive Compensation Arrangements                                   Named     Position     Effective Date     Base Salary     Annual Target     Executive Officer                       Bonus                             (% of Salary)     1. Jeffrey R. Rodek     Executive Chairman of the Board     July 1, 2006     $400,000     0%     2. Godfrey R. Sullivan     President and Chief Executive Officer     July 21, 2005     $535,000     100%     3. David W. Odell     Chief Financial Officer     July 21, 2005     $355,000     60%     4. Robin L. Washington     Chief Financial Officer     January 17, 2006     $355,000     60%     5. Mark D. Cochran     Vice President, General Counsel and Secretary     July 21, 2005     $286,000     60%     6. Heidi M. Melin     Chief Marketing Officer     June 13, 2005     $260,000     60%    

Exhibit 10.1 SECURITIES PURCHASE AGREEMENT                This Securities Purchase Agreement (this “AGREEMENT”) is dated as of May 26, 2006, among Arena Resources, Inc., a Nevada corporation (the “COMPANY”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, 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 and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, on the Closing Date, that number of Shares as is set forth on the Purchaser Signature Page of that Purchaser.                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 the Purchasers, acting severally, agree as follows: ARTICLE I. DEFINITIONS   1.1  DEFINITIONS.   In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings indicated in this Section 1.1:                “ACTION” shall have the meaning ascribed to such term in Section 3.1(j).                “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. With respect to a Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.                “CLOSING” means the closing of the purchase and sale of the Common Stock pursuant to Section 2.1.                “CLOSING DATE” means the Trading Day when all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities have been satisfied or waived. The Closing Date shall be May 30, 2006, but the Company may extend it one or more times, by notice to the Purchasers given at any time prior to or on the Closing Date (as previously extended, if applicable), to a date not later than the date set forth in Section 5.1.                “COMMISSION” means the Securities and Exchange Commission.                “COMMON STOCK” means the common stock of the Company, par value $.001 per share, and any securities into which such common stock may hereafter be reclassified. 1 --------------------------------------------------------------------------------                “COMMON STOCK EQUIVALENTS” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.                “COMPANY COUNSEL” means Johnson, Jones, Dornblaser, Coffman & Shorb.                “EFFECTIVE DATE” means the date that the initial registration statement filed by the Company for the Registrable Securities is first declared effective by the Commission.                “EVALUATION DATE” shall have the meaning ascribed to such term in Section 3.1(r).                “EXCHANGE ACT” means the Securities Exchange Act of 1934, as amended.                “GAAP” shall have the meaning ascribed to such term in Section 3.1(h).                “INTELLECTUAL PROPERTY RIGHTS” shall have the meaning ascribed to such term in Section 3.1(o).                “LEGEND REMOVAL DATE” shall have the meaning ascribed to such term in Section 4.1(c).                “LIENS” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.                “MATERIAL ADVERSE EFFECT” shall have the meaning ascribed to such term in Section 3.1(b).                “MATERIAL PERMITS” shall have the meaning ascribed to such term in Section 3.1(m).                “PER SHARE PURCHASE PRICE” equals $28.04, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement and have a record date prior to the Closing Date.                “PERSON” means an 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 other entity of any kind.                “PROCEEDING” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. 2 --------------------------------------------------------------------------------                “PURCHASER PARTY” shall have the meaning ascribed to such term in Section 4.9.                “REGISTRABLE SECURITIES” means all of the Shares held by the Purchasers, together with any shares of Common Stock issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the Shares.                “REGISTRATION STATEMENT” means a registration statement covering the resale of the Registrable Securities.                “REQUIRED APPROVALS” shall have the meaning ascribed to such term in Section 3.1(e).                “RULE 144” means Rule 144 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 effect as such Rule.                “SEC REPORTS” shall have the meaning ascribed to such term in Section 3.1(h).                “SECURITIES” means the Shares.                “SECURITIES ACT” means the Securities Act of 1933, as amended.                “SHARES” means the shares of Common Stock issued or issuable to each Purchaser pursuant to this Agreement.                “SHORT SALES” shall include, without limitation, all “short sales” as defined in Rule 3b-3 under the Exchange Act.                “SUBSCRIPTION AMOUNT” means, as to each Purchaser, the amounts set forth below such Purchaser’s signature block on the signature page hereto, in United States dollars and in immediately available funds.                “SUBSIDIARY” shall mean the subsidiaries of the Company, if any, as described in Section 3.1(a).                “TRADING DAY” means a day on which the Common Stock is traded on a Trading Market.                “TRADING MARKET” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the American Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market. 3 --------------------------------------------------------------------------------                “TRANSACTION DOCUMENTS” means this Agreement, the Registration Agreement and any other documents or agreements executed in connection with the transactions contemplated hereunder. ARTICLE II. PURCHASE AND SALE   2.1  CLOSING.   On the Closing Date, each Purchaser shall purchase from the Company, severally and not jointly with the other Purchasers, and the Company shall issue and sell to each Purchaser, a number of Shares equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price. The aggregate number of Shares sold hereunder shall not exceed 1,150,000. Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of Company Counsel or such other location as the parties shall mutually agree.   2.2  DELIVERIES.                (a)       On the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:   (i)        this Agreement duly executed by the Company;   (ii)       a copy of the irrevocable instructions to the Company’s transfer agent instructing the transfer agent to deliver, on an expedited basis, a certificate evidencing a number of Shares equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser;   (iii)      the Registration Agreement, duly executed by the Company; and   (iv)      a legal opinion of Company Counsel, substantially in the form of EXHIBIT A attached hereto.                (b)        On the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:   (i)        this Agreement duly executed by such Purchaser; and   (ii)       such Purchaser’s Subscription Amount by wire transfer to the account as specified in writing by the Company.   2.3  CLOSING CONDITIONS.                (a)   The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:   (i)        the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Purchasers contained herein; 4 --------------------------------------------------------------------------------   (ii)       all obligations, covenants and agreements of the Purchasers required to be performed at or prior to the Closing Date shall have been performed; and   (iii)      the delivery by the Purchasers of the items set forth in Section 2.2(b) of this Agreement.                (b)   The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:   (i)        the accuracy in all material respects on the Closing Date of the representations and warranties of the Company contained herein;   (ii)       all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;   (iii)      the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;   (iv)      there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and   (v)       From the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the Closing), and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg Financial Markets shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market that, in each such case, in the reasonable judgment of a majority in interest of the Purchasers, makes it impracticable or inadvisable to purchase the Shares at the Closing. ARTICLE III. REPRESENTATIONS AND WARRANTIES   3.1  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.   The Company hereby makes the representations and warranties set forth below to each Purchaser:                (a)     SUBSIDIARIES. Arena Drilling Co., a Texas corporation, is the only Subsidiary of the Company. The Company has no direct or indirect equity interest in any other entity. The Company owns, directly or indirectly, all of the capital stock or other equity interests of its Subsidiary free and clear of any Liens, and all the issued and outstanding shares of capital stock of its Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. 5 --------------------------------------------------------------------------------                (b)     ORGANIZATION AND QUALIFICATION. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise 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 or default 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 conduct 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 reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or financial condition of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “MATERIAL ADVERSE EFFECT”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.                (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 thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company in connection therewith other than in connection with the Required Approvals. Each of the Transaction Documents has been (or upon delivery will have been) duly executed by the Company and, 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 (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.                (d)     NO CONFLICTS. The execution, delivery and performance of the Transaction Documents by the Company, the issuance and sale of the Shares and the consummation by the Company of the other transactions contemplated thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not reasonably be expected to result in a Material Adverse Effect. 6 --------------------------------------------------------------------------------                (e)     FILINGS, CONSENTS AND APPROVALS. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission of a Registration Statement, (iii) application(s) to each applicable Trading Market for the listing of the Shares for trading thereon in the time and manner required thereby, and (iv) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “REQUIRED APPROVALS”).                (f)     ISSUANCE OF THE SECURITIES. 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 imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.                (g)     CAPITALIZATION. The authorized capital stock of the Company consists of 110,000,000 shares of capital stock, of which 100,000,000 shares are designated Common Stock and 10,000,000 shares are designated Series A Preferred Stock. As of May 2, 2006, there were 13,361,655 shares of Common Stock issued and outstanding, and no shares of Preferred Stock issued and outstanding. As of May 19, 2006, an aggregate of (i) 2,000,000 shares of Common Stock were reserved for issuance upon exercise of outstanding options and options remaining available for issuance upon exercise under the Company’s Stock Option Plan; and (ii) 340,829 shares of Common Stock were reserved for issuance upon exercise of outstanding warrants. Other than as specified above, no other shares or options, warrants or other rights to acquire shares of capital stock of the Company or securities convertible into capital stock of the Company are outstanding. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plan and pursuant to the conversion or exercise of outstanding Common Stock Equivalents. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as set forth in the Company’s SEC Reports, 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 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 Common Stock Equivalents. The issue and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of securities of the Company to adjust the exercise, conversion, exchange or reset price under such securities. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors of the Company or others is required for the issuance and sale of the Shares. Except as set forth in the Company Registration Statement on Form S-3 filed with the Commission on February 15, 2006, there are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders. 7 --------------------------------------------------------------------------------                (h)     SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC REPORTS”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted 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 of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.                (i)     MATERIAL CHANGES. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans. The Company does not have pending before the Commission any request for confidential treatment of information. 8 --------------------------------------------------------------------------------                (j)     LITIGATION. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “ACTION”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor, to the knowledge of the Company, any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or threatened, any investigation by the Commission involving the Company or any current director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.                (k)     LABOR RELATIONS. No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect.                (l)     COMPLIANCE. Except in each case as would not reasonably be expected to have a Material Adverse Effect, 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 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 applicable to its business.                (m)     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 reasonably be expected to 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. 9 --------------------------------------------------------------------------------                (n)     TITLE TO ASSETS. The Company and the Subsidiaries have good and defensible 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 defensible title to 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 securing borrowings as disclosed in the SEC Reports, Liens as do not materially affect the value of the Company’s properties taken as a whole and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance in all material respects.                (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 necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have could have a Material Adverse Effect (collectively, the “INTELLECTUAL PROPERTY RIGHTS”). Neither the Company nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the Company or any Subsidiary 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 of others.                (p)     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, excludingdirectors and officers insurance. 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.                (q)     TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set forth in the SEC Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $60,000 other than (i) for payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) for other employee benefits, including stock option agreements under any stock option plan of the Company.                (r)     SARBANES-OXLEY; INTERNAL ACCOUNTING CONTROLS. The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing Date. The Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure controls and procedures and internal controls and procedures as of the date prior to the filing date of the most recently filed periodic report under the Exchange Act (such date, the “EVALUATION DATE”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures and internal controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant changes in the Company’s internal controls (as such term is defined in Item 307(b) of Regulation S-K under the Exchange Act) or, to the Company’s knowledge, in other factors that could significantly affect the Company’s internal controls. 10 --------------------------------------------------------------------------------                (s)     CERTAIN FEES. Other than the fees payable to Capital One Southcoast, Inc and C. K. Cooper & Company (the “PLACEMENT AGENTS”) pursuant to the terms of their engagement letter with the Company of 6% of the aggregate Share Purchase Prices, divided 4.2% to the former and 1.8% to the latter, 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. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement.                (t)     PRIVATE PLACEMENT. Assuming the accuracy of the representations and warranties of the Purchasers set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.                (u)     INVESTMENT COMPANY. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Shares, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act.                (v)     LISTING AND MAINTENANCE REQUIREMENTS. The Company’s Common Stock is registered pursuant to Section 12(b) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.                (w)     APPLICATION OF TAKEOVER PROTECTIONS. The Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Certificate of Incorporation (or similar charter documents) or the laws of its state of incorporation or otherwise existing that is applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation the Company’s issuance of the Securities to each Purchaser pursuant to this Agreement. 11 --------------------------------------------------------------------------------                (x)     DISCLOSURE. The Company confirms that all disclosure provided to the Purchasers regarding the Company, its business and the transactions contemplated hereby, including the Company’s Private Placement Memorandum (the “PPM”) and the representations and warranties set forth in this Agreement do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. 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 hereof. The Company represents that the PPM does not contain any material nonpublic information concerning the Company or its securities, other than information that will be contained in the Current Report that is referred to in Section 4.4.                (y)     NO INTEGRATED OFFERING. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither the Company, nor to the Company’s knowledge, any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of the Securities Act or any applicable shareholder approval provisions, including, without limitation, under the rules and regulations of any Trading Market on which any of the securities of the Company are listed or designated.                (z)     SOLVENCY. Based on the financial condition of the Company as of the Closing Date after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the Company’s fair saleable value of its assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature; (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business for the current fiscal year as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof; and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debt when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. The SEC Reports set forth as of the dates thereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement, “INDEBTEDNESS” shall mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness. 12 --------------------------------------------------------------------------------                (aa)     TAXES. Except for matters that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, the Company and each Subsidiary have filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a material tax deficiency which has been asserted or threatened against the Company or any Subsidiary.                (bb)     NO GENERAL SOLICITATION. Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Shares by any form of general solicitation or general advertising. The Company has offered the Shares for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act and “qualified institutional buyers” as defined in Rule 144A(a) under the Securities Act.                (cc)     FOREIGN CORRUPT PRACTICES. Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.                (dd)     ACCOUNTANTS. The Company’s accountants are named in the Company’s Form 10-K for the year ended December 31, 2005. To the Company’s knowledge, such accountants, who the Company expects will express their opinion with respect to the financial statements to be included in the Company’s Annual Report on Form 10-K for the year ending December 31, 2006, are a registered public accounting firm as required by the Securities Act.                (ee)     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 the Transaction Documents and the transactions contemplated hereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (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 the Purchasers’ 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. 13 --------------------------------------------------------------------------------                (ff)     ACKNOWLEDGEMENT REGARDING PURCHASERS’ TRADING ACTIVITY. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(f), 3.2(h) and 4.8 hereof), it is understood and agreed by the Company (i) that none of the Purchasers have been asked to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term; (ii) that past or future open market or other transactions by any Purchaser, including Short Sales, and specifically including, without limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities; (iii) that any Purchaser, and counter parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, presently may have a “short” position in the Common Stock, and (iv) that each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction.                (gg)     NO MANIPULATION OF STOCK. The Company has not taken and will not, in violation of applicable law, take, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Shares.                (hh)     S-3 STATUS. The Company meets the requirements for the use of Form S-3 for the registration of the resale of the Shares by the Purchasers and will use its reasonable best efforts to maintain S-3 status with the SEC during the period it is required by the Registration Agreement to maintain such registration of the resale of the shares. To the knowledge of the Company, there exist no facts or circumstances that could reasonably be expected to prohibit or delay the preparation or initial filing of the Registration Statement that is required to effect such registration (the “REGISTRATION STATEMENT”).                (ii)     MATERIAL CONTRACTS. All material agreements to which the Company or any Subsidiary is a party and which are required to have been filed by the Company pursuant to the Securities Act or the Exchange Act have been filed by the Company with the SEC pursuant to the requirements of the Securities Act or the Exchange Act, as applicable. Each such agreement is in full force and effect and is binding on the Company or a Subsidiary, as applicable, and, to the Company’s knowledge, is binding upon such other parties, in each case in accordance with its terms, and neither the Company or a Subsidiary, as applicable, nor, to the Company’s knowledge, any other party thereto is in breach of or default under any such agreement, which breach or default would reasonably be expected to have a Material Adverse Effect. The Company has not received any written notice regarding the termination of any such agreements.   3.2  REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.   Each Purchaser hereby, for itself and for no other Purchaser, represents and warrants as of the date hereof and as of the Closing Date to the Company as follows: 14 --------------------------------------------------------------------------------                (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 full right, 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 thereunder. The execution, delivery and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate or similar action on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.                (b)     OWN ACCOUNT. Such Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof, has no present intention of distributing any of such Securities and has no arrangement or understanding with any other persons regarding the distribution of such Securities (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to a Registration Statement or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business. Such Purchaser does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities.                (c)     PURCHASER STATUS. At the time such Purchaser was offered the Securities, it was, and at the date hereof it is, either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such Purchaser is not registered as, or required to be registered as, a broker-dealer under Section 15 of the Exchange Act. Such Purchaser was not organized for the purpose of purchasing the Securities.                (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 Securities, 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 Securities and, at the present time, is able to afford a complete loss of such investment.                (e)     GENERAL SOLICITATION. Such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.                (f)     SHORT SALES. Such Purchaser has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any Short Sales in the securities of the Company (including, without limitations, any Short Sales involving the Company’s securities) since May 17, 2006 which was the earliest time that any Purchaser was first contacted regarding an investment in the Company (“DISCUSSION TIME”). 15 --------------------------------------------------------------------------------                (g)     NO TAX, LEGAL, ETC. ADVICE. In evaluating the merits of an investment in the Shares, Purchaser is not relying on the Company, the Placement Agents or their respective counsel for an evaluation of the business, tax, legal or other consequences of such an investment.                (h)     ECONOMIC RISK. Purchaser understands that Purchaser must bear the economic risk of investment for an indefinite period of time because the sale of the Shares has not been registered under the Securities Act pursuant to the exemption provided by Section 4(2) and Rule 506 thereunder, nor under any applicable state securities laws, and the Shares or any participation therein may not be sold or transferred in the absence of evidence satisfactory to the Company of compliance with applicable laws, including an opinion of counsel satisfactory to the Company that, among other things, the Shares have been registered under the Act and all applicable state securities laws or that such registrations are not required. The Company has made no agreement whatsoever to repurchase the Shares or, except as expressly provided in the Registration Agreement, to register the transfer of any portion of them under the Securities Act or under any state securities law.                (i)     ACCESS TO INFORMATION. Purchaser and its advisors were afforded full and complete access to all information with respect to the Company, its operations and the Shares that Purchaser and such advisors deemed necessary to evaluate the merits and risks of an investment in the Shares, including the PPM and the SEC Reports, and Purchaser has had the opportunity to ask questions of and receive answers from the Company concerning this investment. Neither the Company nor the Agents have made any representations about the value or performance of the Company or the Shares.                (j)     RULE 144. Purchaser is aware of the provisions of Rule 144 under the Securities Act which permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, which may include, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale occurring not less than one year after a party has purchased and paid for the security to be sold, the sale being effected through a “broker’s transaction” or in transactions directly with a “market maker” and the number of shares being sold during any three-month period not exceeding specified limitations.                (k)     FORWARD LOOKING STATEMENTS. Purchaser acknowledges that information Purchaser has received concerning the Company, including SEC Reports and oral statements, include forward-looking statements about the Company’s current and future business operations, financial projections and other matters. These statements speak only as of the date made, are not guarantees of future performance, and involve known and unknown risks and other factors that could cause actual results to be materially different from any future results expressed or implied by them.                (l)     PLACEMENT AGENT FEES. Purchaser acknowledges that the Placement Agents will receive a placement fee of 6% of the Share Purchase Prices, and reimbursement of certain expenses up to $50,000, all payable by the Company and that the Company has agreed to indemnify the Placement Agents against certain liabilities, including liabilities in connection with the offering of the Shares. 16 -------------------------------------------------------------------------------- ARTICLE IV. OTHER AGREEMENTS OF THE PARTIES   4.1   TRANSFER RESTRICTIONS.                (a)     The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144 or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement.                (b)     The Purchasers agree to the imprinting, so long as is required by this Section 4.1(b), of a legend on any of the Securities in the following form:   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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.   17 --------------------------------------------------------------------------------                The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities 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 legal counsel 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 reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities.                (c)     Certificates evidencing the Shares shall not contain any legend (including the legend set forth in Section 4.1(b)), (i) while a registration statement covering the resale of such security 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) and such lack of requirement is confirmed by a legal opinion satisfactory to the Company; PROVIDED, HOWEVER, in connection with the sale of the Shares under the Registration Statement, each Purchaser, severally and not jointly with the other Purchasers, hereby agrees to adhere to and abide by all prospectus delivery requirements under the Securities Act and rules and regulations of the Commission. The Company shall cause its counsel to issue a legal opinion to the Company’s transfer agent promptly after the Effective Date if required by the Company’s transfer agent to effect the removal of the legend hereunder. The Company agrees that following the Effective Date or at such time as such legend is no longer required under this Section 4.1(c), it will, no later than three Trading Days following the delivery by a Purchaser to the Company or the Company’s transfer agent of a certificate representing Shares issued with a restrictive legend (such date, the “LEGEND REMOVAL DATE”), deliver or cause to be delivered to such Purchaser a certificate representing such Securities that is free from all restrictive and other legends. 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. Certificates for Securities subject to legend removal hereunder shall be transmitted by the transfer agent of the Company to the Purchasers by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System.                (d)     In addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of Shares (based on the closing price of the Common Stock on the date such Securities are submitted to the Company’s transfer agent) subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five Trading Days after such damages have begun to accrue) for each Trading Day after the 10th Trading Day after the Legend Removal Date until such certificate is delivered. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Company’s failure to deliver certificates representing any Securities as required by the Transaction Documents, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.                (e)     Each Purchaser, severally and not jointly with the other Purchasers, agrees that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance that the Purchaser will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom. 18 --------------------------------------------------------------------------------   4.2  FURNISHING OF INFORMATION.  As long as any Purchaser owns Securities, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. As long as any Purchaser owns Securities, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Securities under Rule 144. The Company further covenants that it will take such further action as any holder of Securities may reasonably request, all to the extent required from time to time to enable such Person to sell such Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144.   4.3  INTEGRATION.   The Company shall not 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 Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Purchasers or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.   4.4  SECURITIES LAWS DISCLOSURE; PUBLICITY.   The Company shall, by 8:30 a.m. Eastern time on the Trading Day following the date hereof, issue a Current Report on Form 8-K, reasonably acceptable to the Placement Agents disclosing the material terms of the transactions contemplated hereby, and shall attach the Transaction Documents thereto. The Company and each Purchaser shall consult with each other in issuing any other press release with respect to the transactions contemplated hereby, if such release names or otherwise identifies the other of them. 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 written consent of such Purchaser, except (i) as required by federal securities law in connection with a Registration Statement and (ii) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under subclause (ii).   4.5  SHAREHOLDER RIGHTS PLAN.   No claim will be made or enforced by the Company or, to the knowledge of the Company, any other Person that any Purchaser is an “Acquiring Person” under any shareholder rights plan or similar plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, solely by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers. The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act. 19 --------------------------------------------------------------------------------   4.6  NON-PUBLIC INFORMATION.   The Company covenants and agrees that neither it nor any other Person acting on its behalf will provide any Purchaser, or its agents or counsel, with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that each Purchaser shall be relying on the foregoing representations in effecting transactions in securities of the Company. The foregoing shall not apply to Purchasers who are directors, employees or current shareholders of the Company holding 5% or more of its capital stock.   4.7  USE OF PROCEEDS.   The Company shall use the net proceeds from the sale of the Securities hereunder for capital expenditures related to drilling and development of oil and gas properties, and for other general corporate purposes.   4.8  SHORT SALES.   Each Purchaser covenants that neither it nor any affiliates acting on its behalf or pursuant to any understanding with it will execute any Short Sales during the period commencing from the Discussion Time until the effective date of the Registration Statement unless such Short Sale complies with applicable law and does not cause any exemption from registration relied upon by the Company in issuing the Shares to be jeopardized or lost. Each Purchaser is aware that the Commission’s staff is of the view that covering a short position established prior to the effective date of a resale registration statement with shares included in such registration statement would violate Section 5 of the Securities Act, which view is expressed in Item 65, pertaining to Section 5, under Section A of the Manual of Publicly Available Telephone Interpretations, compiled by the Office of Chief Counsel, Division of Corporation Finance. Such Purchaser will not engage in any Short Sales that result in any disposition of such Purchaser’s Shares or any interest therein, except in compliance with the Securities Act, the rules and regulations thereunder, and applicable state securities laws.   4.9  INDEMNIFICATION OF PURCHASERS.   Subject to the provisions of this Section 4.9, the Company will indemnify and hold the Purchasers and their directors, officers, shareholders, partners, employees and agents (each, a “PURCHASER PARTY”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation (collectively, “LOSSES”) that any such Purchaser Party may suffer or incur as a result of or relating to any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents. If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of such separate counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party. The Company will not be liable to any Purchaser Party under this Section or otherwise under this Agreement to the extent that Losses for which the Company would otherwise be liable are attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by the Purchasers in this Agreement or in the other Transaction Documents. 20 --------------------------------------------------------------------------------   4.10  RESERVATION OF COMMON STOCK.   As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue Shares pursuant to this Agreement.   4.11  LISTING OF COMMON STOCK.   The Company hereby agrees to use best efforts to maintain the listing of the Common Stock on a Trading Market, and as soon as reasonably practicable following the Closing (but not later than the earlier of the Effective Date and the first anniversary of the Closing Date) to list all of the Shares on such Trading Market. The Company further agrees, if the Company applies to have the Common Stock traded on any other Trading Market, it will include in such application all of the Shares, and will take such other action as is necessary to cause all of the Shares to be listed on such other Trading Market as promptly as possible. The Company will take all action reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market.   4.12  EQUAL TREATMENT OF PURCHASERS.   No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.   4.13  DELIVERY OF SECURITIES AFTER CLOSING.   The Company shall deliver, or cause to be delivered, the respective Shares purchased by each Purchaser to such Purchaser within 3 Trading Days of the Closing Date.   4.14  LIMITATION OF LIABILITY.   Notwithstanding anything herein to the contrary, the Company acknowledges and agrees that the liability of the Purchaser arising directly or indirectly, under this Agreement or the Registration Agreement of any and every nature whatsoever shall be satisfied solely out of the assets of the Purchaser, and that no trustee, officer, other investment vehicle or any other affiliate of the Purchaser or any subscriber, shareholder or holder of shares of beneficial interest of the Purchaser shall be personally liable for any liabilities of the Purchaser; provided, however, that such limitation of liability shall not apply to acts of fraud by such trustee, officer, affiliate, subscriber, shareholder or holder of beneficial interests of the Purchaser. 21 -------------------------------------------------------------------------------- ARTICLE V. MISCELLANEOUS   5.1  TERMINATION.   This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before June 6, 2006; PROVIDED, HOWEVER, that no such termination will affect the right of any party to sue for any breach by the other party (or parties).   5.2  FEES AND EXPENSES.   Except as otherwise set forth in this Agreement, 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 stamp and other taxes and duties levied in connection with the delivery of the Securities.   5.3  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.   5.4  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 set forth on the signature pages attached hereto prior to 5:30 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 set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second 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 address for such notices and communications shall be as set forth on the signature pages hereto.   5.5  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 each Purchaser 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.   5.6  HEADINGS.   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. 22 --------------------------------------------------------------------------------   5.7  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 each Purchaser, not to be unreasonably withheld or delayed. Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the “Purchasers”, including the representations and warranties of Section 3.2, to the extent reasonably required by the Company.   5.8  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 as otherwise set forth in Section 4.9.   5.9  GOVERNING LAW.   All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. The parties hereby waive all rights to a trial by jury. If any party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.   5.10  SURVIVAL.   The representations and warranties herein shall survive the Closing and delivery of the Shares.   5.11  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.   5.12  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. 23 --------------------------------------------------------------------------------   5.13  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 the Transaction Documents 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.   5.14  REPLACEMENT OF SECURITIES.   If any certificate or instrument evidencing any Securities 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 Securities.   5.15  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.   5.16  PAYMENT SET ASIDE.   To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights 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, 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.   5.17  INDEPENDENT NATURE OF PURCHASERS’ OBLIGATIONS AND RIGHTS.   The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in their review and negotiation of the Transaction Documents. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by the Purchasers. 24 --------------------------------------------------------------------------------   5.18  LIQUIDATED DAMAGES.   The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.   5.19  CONSTRUCTION.   The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, 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 the Transaction Documents or any amendments hereto. (SIGNATURE PAGE FOLLOWS) 25 --------------------------------------------------------------------------------                IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. ARENA RESOURCES, INC.     By: --------------------------------------------------------------------------------           Name: --------------------------------------------------------------------------------           Title: -------------------------------------------------------------------------------- Address for Notice: Arena Resources, Inc. 4920 South Lewis Avenue Suite 107 Tulsa, Oklahoma 74105 Attention: Mr. Lloyd T. Rochford,                  President and Chief Executive Officer Fax: __________________________ With a copy to (which shall not constitute notice): Johnson, Jones, Dornblaser, Coffman & Shorb 2200 Bank of America Center 15 W. 6th Street Tulsa, Oklahoma 74119 Attn: Kenneth E. Dornblaser Fax: (918) 584-6645 [SIGNATURE PAGES FOR PURCHASERS FOLLOW] 26 -------------------------------------------------------------------------------- [PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]                IN WITNESS WHEREOF, the undersigned has caused this Securities Purchase Agreement to be duly executed by its authorized signatory as of the date first indicated above. Name of Purchaser: _________________________ By: ______________________________________           Name: ______________________________           Title: _______________________________ Address for Notice to Purchaser: ______________________________ ______________________________ ______________________________ Fax: __________________________ Address for Delivery of Securities for Purchaser (if not same as above): ______________________________ ______________________________ ______________________________ Subscription Amount:$_________________ Shares: ___________                Purchaser is one or more of the following (check all that apply):     (i)   a bank or savings and loan association.      (ii)   an insurance company.      (iii)   an investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act.      (iv)   a Small Business Investment Company licensed by the U.S. Small Business Administration.  27 --------------------------------------------------------------------------------     (v)   a plan established and maintained by a state or, its political subdivisions for the benefit of its employees, with total assets over $5,000,000.      (vi)   an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (A) the investment decisions for which are made by a plan fiduciary, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or (B) which has total assets over $5,000,000, or (C) if a self-directed plan, the investment decisions for which are made solely by persons that are described in subsections (g)(i) through (vi) and (g)(viii) through (g)(xv).      (vii)   a private business development company as defined in the Investment Advisers Act of 1940.      (viii)   an organization described in section 501(c)(3) of the Internal Revenue Code, a corporation, Massachusetts or similar business trust, or a partnership, not formed for the specific purpose of acquiring the Shares, with total assets over $5,000,000.      (ix)   a trust, with total assets over $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person.      (x)   a director or executive officer of the Company.      (xi)   a natural person whose individual net worth, or joint net worth with such person’s spouse, exceeds $1,000,000.      (xii)   a natural person who had an individual income over $200,000 in each of 2004 and 2005 or joint income with such person’s spouse in excess of $300,000 in each of those years and who has a reasonable expectation of reaching the same income level in 2005.      (xiii)   an entity in which all of the equity owners are persons or entities in the above categories and which has not been organized for the specific purpose of making an investment in the Shares.      (xiv)   none of the above.  Purchaser’s EIN Number is: _________________ 28 -------------------------------------------------------------------------------- Exhibit A CONTENT OF OPINION OF COUNSEL TO THE COMPANY                (i)        Each of the Company and its Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the State of its incorporation. To our knowledge, the only entity in which the Company holds a direct or indirect interest is Arena Drilling Co., a Texas corporation (the “Subsidiary”). Each of the Company and the Subsidiary is duly qualified to do business as a foreign corporation and is in good standing in each other state in which the nature of its activities or of its properties owned or leased makes such qualification necessary, except to the extent that failure to so qualify would not have a material adverse effect on the Company and its consolidated subsidiaries (taken as a whole).                (ii)        The Company and each of its Subsidiaries has the corporate power and authority to own its properties and assets, and to carry on its business as presently conducted.                (iii)        The Company has the corporate power to enter into the Securities Purchase Agreement and the Registration Agreement (collectively, the “Transaction Documents”) and perform its obligations thereunder.                (iv)        The Transaction Documents have been duly authorized by all necessary corporate action on the part of the Company, have been duly executed and delivered by the Company and constitute legal, valid and binding agreements of the Company enforceable against the Company in accordance with their terms, except as rights to indemnity and contribution may be limited by state or federal securities laws or the public policy underlying such laws, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).                (v)        The shares of Common Stock to be issued to the Purchasers at the Closing under the Securities Purchase Agreement have been duly authorized and, when issued and paid for in accordance with the terms of the Securities Purchase Agreement, will be validly issued, fully paid and nonassessable.                (vi)        The execution and delivery of the Transaction Documents and the performance by the Company of its obligations thereunder (a) will not breach or result in a violation of the Company’s Charter, Bylaws, or any judgment, order or decree of any domestic court or arbitrator, known to us, to which the Company is a party or subject and (b) will not constitute a material breach of the terms, conditions or provisions of, or constitute a default under, any material contract, undertaking, indenture or other agreement or instrument identified in the Form 10-K or the Company’s quarterly reports on Form 10-Q or current reports on Form 8-K filed since the date of the Form 10-K. 29 --------------------------------------------------------------------------------                (vii)        No consent, approval or authorization of, or designation, declaration or filing with, any governmental authority is required in connection with the valid execution, delivery and performance by the Company of the Transaction Documents, other than such consents, approvals, authorizations, designations, declarations or filings as have been made or obtained on or before the date hereof or which are not required to be made or obtained until after the date hereof.                (viii)        Except as disclosed in the SEC Reports or PPM or Securities Purchase Agreement, there is, to our current actual knowledge, no action, suit or proceeding pending against the Company or its properties in any court or before any governmental authority or agency, or arbitration board or tribunal (a) which seeks to restrain, enjoin, prevent the consummation of, or otherwise challenge the Transaction Documents or any of the transactions contemplated thereby, or (b) which, if adversely determined, could reasonably be expected to have a material adverse effect on the Company or its business or properties (taken as a whole).                (ix)        Based upon the representations of each Purchaser and the Company contained in the Transaction Documents, the offer, sale, issuance and delivery of the shares of Common Stock under the circumstances contemplated by the Securities Purchase Agreement are exempt from the registration requirements of the Securities Act.                (x)        To our knowledge, no stockholder of the Company has any right to require the Company to register the sale of any shares owned by such stockholder under the Securities Act in the Registration Statement that will be filed under the Registration Agreement. 30 --------------------------------------------------------------------------------

Exhibit 10.7   POGO PRODUCING COMPANY   INDEMNIFICATION AGREEMENT   This Indemnification Agreement (this “Agreement”), made and entered into as of the 25th day of April, 2006, by and between Pogo Producing Company, a Delaware corporation (the “Company”), and Carroll W. Suggs (“Indemnitee”).   W I T N E S S E T H:   WHEREAS, Indemnitee is currently serving or is about to begin serving as a director and/or officer of the Company and/or in another Corporate Status, and Indemnitee is willing, subject to, among other things, the Company’s execution and performance of this Agreement, to continue in or assume such capacity or capacities; and   WHEREAS, the By-Laws of the Company provide that the Company shall indemnify and advance expenses to all directors and officers of the Company in the manner set forth therein and to the fullest extent permitted by applicable law, and the Company’s Restated Certificate of Incorporation provides for limitation of liability for directors; and   WHEREAS, in order to induce Indemnitee to provide services as contemplated hereby, the Company has deemed it to be in its best interests and the best interests of its stockholders to enter into this Agreement with Indemnitee;   NOW, THEREFORE, in consideration of Indemnitee’s agreement to provide services to the Company and/or certain of its affiliates as contemplated hereby, the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto stipulate and agree as follows:   ARTICLE I   Certain Definitions   As used herein, the following words and terms shall have the following respective meanings (whether singular or plural):   “Change of Control” means a change in control of the Company after the date Indemnitee acquired his Corporate Status, which shall be deemed to have occurred upon the occurrence of any of the following events:   (A)           THE ACQUISITION BY ANY PERSON OF BENEFICIAL OWNERSHIP OF OUTSTANDING COMPANY VOTING SECURITIES (INCLUDING ANY SUCH ACQUISITION OF BENEFICIAL OWNERSHIP DEEMED TO HAVE OCCURRED PURSUANT TO RULE 13D-5 UNDER THE EXCHANGE ACT) IF, IMMEDIATELY THEREAFTER, SUCH PERSON IS THE BENEFICIAL OWNER OF 20% OR MORE OF EITHER (I) THE THEN OUTSTANDING COMPANY COMMON STOCK OR (II) THE THEN OUTSTANDING COMPANY VOTING SECURITIES, UNLESS SUCH ACQUISITION   --------------------------------------------------------------------------------   IS MADE (A) DIRECTLY FROM THE COMPANY IN A TRANSACTION APPROVED BY A MAJORITY OF THE MEMBERS OF THE INCUMBENT BOARD, (B) BY ANY EMPLOYEE BENEFIT PLAN (OR RELATED TRUST) SPONSORED OR MAINTAINED BY THE COMPANY OR ANY CORPORATION CONTROLLED BY THE COMPANY, OR (C) BY A PARENT CORPORATION RESULTING FROM A BUSINESS COMBINATION IF, FOLLOWING SUCH BUSINESS COMBINATION, THE CONDITIONS SPECIFIED IN CLAUSES (I), (II) AND (III) OF SUBSECTION (C) OF THIS DEFINITION ARE SATISFIED; OR   (B)           INDIVIDUALS WHO, AS OF THE DATE OF THIS AGREEMENT, CONSTITUTED THE BOARD (THE “INCUMBENT BOARD”) CEASE FOR ANY REASON TO CONSTITUTE AT LEAST A MAJORITY OF THE BOARD; PROVIDED, HOWEVER, THAT ANY INDIVIDUAL BECOMING A DIRECTOR SUBSEQUENT TO THE DATE OF THIS AGREEMENT WHOSE ELECTION, OR NOMINATION FOR ELECTION BY THE COMPANY’S SHAREHOLDERS, 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 WERE A MEMBER OF THE INCUMBENT BOARD, EXCEPT THAT ANY SUCH INDIVIDUAL SHALL NOT BE CONSIDERED A MEMBER OF THE INCUMBENT BOARD IF HIS OR HER INITIAL ASSUMPTION OF OFFICE OCCURS AS A RESULT OF AN ACTUAL OR THREATENED ELECTION CONTEST OR OTHER ACTUAL OR THREATENED SOLICITATION OF PROXIES OR CONSENTS BY OR ON BEHALF OF A PERSON OTHER THAN THE BOARD; OR   (C)           APPROVAL BY THE SHAREHOLDERS OF THE COMPANY OF A BUSINESS COMBINATION (OR IF THERE IS NO SUCH APPROVAL BY SHAREHOLDERS, CONSUMMATION OF SUCH BUSINESS COMBINATION) UNLESS, IMMEDIATELY FOLLOWING SUCH BUSINESS COMBINATION, (I) MORE THAN 60% OF, RESPECTIVELY, THE THEN OUTSTANDING SHARES OF COMMON STOCK OF THE PARENT CORPORATION RESULTING FROM SUCH BUSINESS COMBINATION AND THE COMBINED VOTING POWER OF THE THEN OUTSTANDING VOTING SECURITIES OF SUCH PARENT CORPORATION ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS WILL BE (OR IS) THEN BENEFICIALLY OWNED, DIRECTLY OR INDIRECTLY, BY ALL OR SUBSTANTIALLY ALL OF THE INDIVIDUALS AND ENTITIES WHO WERE THE BENEFICIAL OWNERS, RESPECTIVELY, OF THE OUTSTANDING COMPANY COMMON STOCK AND OUTSTANDING COMPANY VOTING SECURITIES IMMEDIATELY PRIOR TO SUCH BUSINESS COMBINATION IN SUBSTANTIALLY THE SAME PROPORTIONS AS THEIR OWNERSHIP IMMEDIATELY PRIOR TO SUCH BUSINESS COMBINATION OF THE OUTSTANDING COMPANY COMMON STOCK AND OUTSTANDING COMPANY VOTING SECURITIES, AS THE CASE MAY BE, (II) NO PERSON (OTHER THAN ANY EMPLOYEE BENEFIT PLAN (OR RELATED TRUST) OF THE COMPANY OR ANY PARENT CORPORATION RESULTING FROM SUCH BUSINESS COMBINATION) BENEFICIALLY OWNS, DIRECTLY OR INDIRECTLY, 20% OR MORE, RESPECTIVELY, OF THE THEN OUTSTANDING SHARES OF COMMON STOCK OF THE PARENT CORPORATION RESULTING FROM SUCH BUSINESS COMBINATION OR THE COMBINED VOTING POWER OF THE THEN OUTSTANDING VOTING SECURITIES OF SUCH CORPORATION ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS AND (III) AT LEAST A MAJORITY OF THE MEMBERS OF THE BOARD OF DIRECTORS OF THE PARENT CORPORATION RESULTING FROM SUCH BUSINESS COMBINATION WERE MEMBERS OF THE INCUMBENT BOARD IMMEDIATELY PRIOR TO THE CONSUMMATION OF SUCH BUSINESS COMBINATION; OR   (D)           APPROVAL BY THE SHAREHOLDERS OF THE COMPANY OF (I) A COMPLETE LIQUIDATION OR DISSOLUTION OF THE COMPANY OR (II) A MAJOR ASSET DISPOSITION (OR IF THERE IS NO SUCH APPROVAL BY SHAREHOLDERS, CONSUMMATION OF SUCH MAJOR ASSET DISPOSITION) UNLESS, IMMEDIATELY FOLLOWING SUCH MAJOR ASSET DISPOSITION, (A) INDIVIDUALS AND ENTITIES THAT WERE BENEFICIAL OWNERS OF THE OUTSTANDING COMPANY COMMON STOCK AND THE OUTSTANDING COMPANY VOTING SECURITIES IMMEDIATELY PRIOR TO SUCH MAJOR ASSET DISPOSITION BENEFICIALLY OWN, DIRECTLY OR INDIRECTLY, MORE THAN 60% OF, RESPECTIVELY, THE THEN OUTSTANDING SHARES OF COMMON STOCK AND THE COMBINED VOTING POWER OF THE THEN OUTSTANDING SHARES OF VOTING STOCK OF THE COMPANY (IF IT CONTINUES TO EXIST) AND OF THE ACQUIRING ENTITY; (B) NO PERSON, OTHER THAN ANY EMPLOYEE BENEFIT PLAN (OR RELATED TRUST) OF   2 --------------------------------------------------------------------------------   THE COMPANY OR SUCH ENTITY BENEFICIALLY OWNS, DIRECTLY OR INDIRECTLY, 20% OR MORE OF, RESPECTIVELY, THE THEN OUTSTANDING SHARES OF COMMON STOCK AND THE COMBINED VOTING POWER OF THE THEN OUTSTANDING VOTING SECURITIES OF THE COMPANY (IF IT CONTINUES TO EXIST) AND OF THE ACQUIRING ENTITY AND (C) AT LEAST A MAJORITY OF THE MEMBERS OF THE BOARD OF DIRECTORS OF THE COMPANY (IF IT CONTINUES TO EXIST) AND OF THE ACQUIRING ENTITY WERE MEMBERS OF THE INCUMBENT BOARD AT THE TIME OF THE EXECUTION OF THE INITIAL AGREEMENT OR ACTION OF THE BOARD PROVIDING FOR SUCH MAJOR ASSET DISPOSITION.   For purposes of this definition of Change of Control,   A                  THE TERM “PERSON” MEANS AN INDIVIDUAL, ENTITY OR GROUP;   B                 THE TERM “GROUP” IS USED AS IT IS DEFINED FOR PURPOSES OF SECTION 13(D)(3) OF THE SECURITIES EXCHANGE ACT OF 1934 (THE “EXCHANGE ACT”);   C                  THE TERMS “BENEFICIAL OWNER”, “BENEFICIALLY OWNERSHIP” AND “BENEFICIALLY OWN” ARE USED AS DEFINED FOR PURPOSES OF RULE 13D-3 UNDER THE EXCHANGE ACT;   D                 THE TERM “BUSINESS COMBINATION” MEANS (X) A MERGER OR CONSOLIDATION INVOLVING THE COMPANY OR ITS STOCK OR (Y) AN ACQUISITION BY THE COMPANY, DIRECTLY OR THROUGH ONE OR MORE SUBSIDIARIES, OF ANOTHER ENTITY OR ITS STOCK OR ASSETS;   E                  THE TERM “OUTSTANDING COMPANY COMMON STOCK” SHALL MEAN THE OUTSTANDING SHARES OF COMMON STOCK, PAR VALUE $1 PER SHARE, OF THE COMPANY;   F                    THE TERM “OUTSTANDING COMPANY VOTING SECURITIES” MEANS OUTSTANDING VOTING SECURITIES OF THE COMPANY ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS; AND ANY SPECIFIED PERCENTAGE OR PORTION OF THE OUTSTANDING COMPANY VOTING SECURITIES (OR OF OTHER VOTING STOCK OR VOTING SECURITIES) SHALL BE DETERMINED BASED ON THE RELATIVE COMBINED VOTING POWER OF SUCH SECURITIES;   G                 THE TERM “PARENT CORPORATION RESULTING FROM A BUSINESS COMBINATION” MEANS THE COMPANY IF ITS STOCK IS NOT ACQUIRED OR CONVERTED IN THE BUSINESS COMBINATION AND OTHERWISE MEANS THE ENTITY WHICH AS A RESULT OF SUCH BUSINESS COMBINATION OWNS THE COMPANY OR ALL OR SUBSTANTIALLY ALL OF THE COMPANY’S ASSETS EITHER DIRECTLY OR THROUGH ONE OR MORE SUBSIDIARIES;   H                 THE TERM “MAJOR ASSET DISPOSITION” MEANS THE SALE OR OTHER DISPOSITION IN ONE TRANSACTION OR A SERIES OF RELATED TRANSACTIONS OF 60% OR MORE OF THE ASSETS OF THE COMPANY AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS; AND ANY SPECIFIED PERCENTAGE OR PORTION OF THE ASSETS OF THE COMPANY SHALL BE BASED ON FAIR MARKET VALUE, AS DETERMINED BY A MAJORITY OF THE MEMBERS OF THE INCUMBENT BOARD; AND   I                     “ACQUIRING ENTITY” MEANS THE ENTITY THAT ACQUIRES THE LARGEST PORTION OF THE ASSETS SOLD OR OTHERWISE DISPOSED OF IN A MAJOR ASSET DISPOSITION (OR THE ENTITY, IF ANY, THAT OWNS A MAJORITY OF THE OUTSTANDING VOTING STOCK OF SUCH   3 --------------------------------------------------------------------------------   ACQUIRING ENTITY ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS OR MEMBERS OF A COMPARABLE GOVERNING BODY).   “Corporate Status” describes the status of Indemnitee as a director, officer,  employee, agent or fiduciary of the Company or of any other company, partnership, limited liability company, association, joint venture, trust, employee benefit plan or other enterprise that Indemnitee is or was serving at the request of the Company.   “Court” means the Court of Chancery of the State of Delaware or any other court of competent jurisdiction.   “DGCL” means the Delaware General Corporation Law.   “Expenses” shall include all 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, 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.   “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporate law and neither currently is, nor in the five years previous to its selection or appointment has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the rights of Indemnitee under this Agreement or of other indemnitees under similar indemnification agreements) or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.   “Matter” is a claim, a material issue or a substantial request for relief.   “Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil (including intentional and unintentional tort claims), criminal, administrative or investigative and whether instituted by or on behalf of the Company or any other party, or any inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit or other proceedings hereinabove listed, except such as is initiated by Indemnitee pursuant to Section 6.1 of this Agreement to enforce his rights under this Agreement.   ARTICLE II   Services by Indemnitee   SECTION 2.1. SERVICES BY INDEMNITEE. INDEMNITEE AGREES TO SERVE OR CONTINUE TO SERVE IN HIS CURRENT CAPACITY OR CAPACITIES AS A DIRECTOR, OFFICER, EMPLOYEE, AGENT OR FIDUCIARY OF THE COMPANY. INDEMNITEE MAY ALSO AGREE TO SERVE (THE AGREEMENT SO TO SERVE BEING IN THE SOLE DISCRETION OF INDEMNITEE), AS THE COMPANY MAY REQUEST FROM TIME TO TIME, AS A DIRECTOR, OFFICER, EMPLOYEE, AGENT OR FIDUCIARY OF ANY OTHER COMPANY, PARTNERSHIP, LIMITED LIABILITY COMPANY, ASSOCIATION, JOINT VENTURE, TRUST OR OTHER ENTERPRISE IN WHICH THE COMPANY HAS AN INTEREST.   4 --------------------------------------------------------------------------------   INDEMNITEE AND THE COMPANY EACH ACKNOWLEDGE THAT THEY HAVE ENTERED INTO THIS AGREEMENT AS A MEANS OF INDUCING INDEMNITEE TO SERVE THE COMPANY IN SUCH CAPACITIES. INDEMNITEE MAY AT ANY TIME AND FOR ANY REASON RESIGN FROM SUCH POSITION OR POSITIONS (SUBJECT TO ANY OTHER CONTRACTUAL OBLIGATION OR ANY OBLIGATION IMPOSED BY OPERATION OF LAW). THE COMPANY SHALL HAVE NO OBLIGATION UNDER THIS AGREEMENT TO CONTINUE INDEMNITEE IN ANY SUCH POSITION FOR ANY PERIOD OF TIME AND SHALL NOT BE PRECLUDED BY THE PROVISIONS OF THIS AGREEMENT FROM REMOVING INDEMNITEE FROM ANY SUCH POSITION AT ANY TIME.   ARTICLE III   Indemnification   SECTION 3.1. GENERAL. IF INDEMNITEE WAS OR IS A PARTY OR IS THREATENED TO BE MADE A PARTY TO ANY PROCEEDING, THE COMPANY SHALL, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW IN EFFECT ON THE DATE HEREOF, AND TO SUCH GREATER EXTENT AS APPLICABLE LAW MAY THEREAFTER PERMIT, WITHIN 30 DAYS AFTER WRITTEN DEMAND IS PRESENTED TO THE COMPANY, INDEMNIFY AND HOLD INDEMNITEE HARMLESS FROM AND AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, JUDGMENTS, FINES, PENALTIES, AMOUNTS PAID IN SETTLEMENT (SUBJECT TO SECTION 7.2) AND EXPENSES (INCLUDING ALL INTEREST, ASSESSMENTS AND OTHER CHARGES PAID OR PAYABLE IN CONNECTION WITH OR IN RESPECT OF SUCH LISTED ITEMS), WHATSOEVER (I) ARISING OUT OF ANY EVENT OR OCCURRENCE RELATED TO THE FACT THAT INDEMNITEE IS OR WAS A DIRECTOR OR OFFICER OF THE COMPANY, IS OR WAS SERVING IN ANOTHER CORPORATE STATUS, CONSENTED TO BE NAMED AS A PERSON TO BE ELECTED AS A DIRECTOR OF THE COMPANY, OR BY REASON OF ANYTHING DONE OR NOT DONE BY INDEMNITEE IN ANY SUCH CAPACITY AND (II) INCURRED IN CONNECTION WITH SUCH PROCEEDING.   SECTION 3.2. SUCCESSFUL PROCEEDING. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH HEREIN (OTHER THAN SECTION 3.3), IF INDEMNITEE IS, BY REASON OF HIS CORPORATE STATUS, A PARTY TO AND IS SUCCESSFUL, ON THE MERITS OR OTHERWISE, IN ANY PROCEEDING, HE SHALL BE INDEMNIFIED AGAINST ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, JUDGMENTS, FINES, PENALTIES, AMOUNTS PAID IN SETTLEMENT (SUBJECT TO SECTION 7.2) AND EXPENSES (INCLUDING ALL INTEREST, ASSESSMENTS AND OTHER CHARGES PAID OR PAYABLE IN CONNECTION WITH OR IN RESPECT OF SUCH LISTED ITEMS), ACTUALLY AND REASONABLY INCURRED BY HIM OR ON HIS BEHALF IN CONNECTION THEREWITH. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH HEREIN (OTHER THAN SECTION 3.3), IF INDEMNITEE IS NOT WHOLLY SUCCESSFUL IN SUCH PROCEEDING BUT IS SUCCESSFUL, ON THE MERITS OR OTHERWISE, AS TO ANY MATTER IN SUCH PROCEEDING, THE COMPANY SHALL INDEMNIFY INDEMNITEE AGAINST ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, JUDGMENTS, FINES, PENALTIES, AMOUNTS PAID IN SETTLEMENT (SUBJECT TO SECTION 7.2) AND EXPENSES (INCLUDING ALL INTEREST, ASSESSMENTS AND OTHER CHARGES PAID OR PAYABLE IN CONNECTION WITH OR IN RESPECT OF SUCH LISTED ITEMS), ACTUALLY AND REASONABLY INCURRED BY HIM OR ON HIS BEHALF RELATING TO SUCH MATTER. THE TERMINATION OF ANY MATTER IN SUCH A PROCEEDING BY DISMISSAL, WITH OR WITHOUT PREJUDICE, SHALL BE DEEMED TO BE A SUCCESSFUL RESULT AS TO SUCH MATTER. TO THE EXTENT THAT THE INDEMNITEE IS, BY REASON OF HIS CORPORATE STATUS, A WITNESS IN ANY PROCEEDING IN WHICH THE INDEMNITEE IS NOT A PARTY OR THREATENED TO BE MADE A PARTY, HE SHALL BE INDEMNIFIED AGAINST ALL EXPENSES ACTUALLY AND REASONABLY INCURRED BY HIM OR ON HIS BEHALF IN CONNECTION THEREWITH.   SECTION 3.3. CLAIMS INITIATED BY INDEMNITEE. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH HEREIN, PRIOR TO A CHANGE OF CONTROL, INDEMNITEE SHALL NOT BE ENTITLED TO INDEMNIFICATION (INCLUDING ANY ADVANCEMENT OF EXPENSES) PURSUANT TO THIS AGREEMENT IN   5 --------------------------------------------------------------------------------   CONNECTION WITH ANY PROCEEDING INITIATED OR CLAIM MADE BY INDEMNITEE, UNLESS EITHER (I) THE BOARD OF DIRECTORS HAS AUTHORIZED OR CONSENTED TO THE INITIATION OF SUCH PROCEEDING OR THE MAKING OF SUCH CLAIM OR (II) SUCH PROCEEDING OR CLAIM SEEKS TO ENFORCE INDEMNITEE’S RIGHTS UNDER THIS AGREEMENT.   ARTICLE IV   Advancement of Expenses   SECTION 4.1. ADVANCES. IN THE EVENT OF ANY THREATENED OR PENDING PROCEEDING IN WHICH INDEMNITEE IS A PARTY OR IS INVOLVED AND THAT MAY GIVE RISE TO A RIGHT OF INDEMNIFICATION UNDER THIS AGREEMENT, FOLLOWING WRITTEN REQUEST TO THE COMPANY BY INDEMNITEE, THE COMPANY SHALL PAY TO INDEMNITEE, WITHIN 10 DAYS OF SUCH REQUEST, AMOUNTS TO COVER EXPENSES INCURRED BY INDEMNITEE IN SUCH PROCEEDING IN ADVANCE OF ITS FINAL DISPOSITION UPON THE RECEIPT BY THE COMPANY OF (I) A WRITTEN UNDERTAKING EXECUTED BY OR ON BEHALF OF INDEMNITEE PROVIDING THAT INDEMNITEE WILL REPAY THE ADVANCE IF IT SHALL ULTIMATELY BE DETERMINED THAT INDEMNITEE IS NOT ENTITLED TO BE INDEMNIFIED BY THE COMPANY AS PROVIDED IN THIS AGREEMENT AND (II) EVIDENCE AS TO THE AMOUNT OF SUCH EXPENSES.   SECTION 4.2. REPAYMENT OF ADVANCES OR OTHER EXPENSES. INDEMNITEE AGREES THAT INDEMNITEE SHALL REIMBURSE THE COMPANY FOR ALL EXPENSES ADVANCED BY THE COMPANY PURSUANT TO SECTION 4.1 IN THE EVENT AND ONLY TO THE EXTENT THAT IT SHALL BE DETERMINED PURSUANT TO THE PROVISIONS OF THIS AGREEMENT OR BY FINAL JUDGMENT OR OTHER FINAL ADJUDICATION UNDER THE PROVISIONS OF ANY APPLICABLE LAW (AS TO WHICH ALL RIGHTS OF APPEAL THEREFROM HAVE BEEN EXHAUSTED OR LAPSED) THAT INDEMNITEE IS NOT ENTITLED TO BE INDEMNIFIED BY THE COMPANY FOR SUCH EXPENSES.   ARTICLE V   Procedure for Determination of Entitlement to Indemnification   SECTION 5.1. REQUEST FOR INDEMNIFICATION. TO OBTAIN INDEMNIFICATION, INDEMNITEE SHALL SUBMIT TO THE SECRETARY OF THE COMPANY A WRITTEN CLAIM OR REQUEST. SUCH WRITTEN CLAIM OR REQUEST SHALL CONTAIN SUFFICIENT INFORMATION REASONABLY TO INFORM THE COMPANY ABOUT THE NATURE AND EXTENT OF THE INDEMNIFICATION OR ADVANCE SOUGHT BY INDEMNITEE. THE SECRETARY OF THE COMPANY SHALL PROMPTLY ADVISE THE BOARD OF DIRECTORS OF SUCH REQUEST.   SECTION 5.2. DETERMINATION OF ENTITLEMENT; NO CHANGE OF CONTROL. IF THERE HAS BEEN NO CHANGE OF CONTROL AT THE TIME THE REQUEST FOR INDEMNIFICATION IS SUBMITTED, INDEMNITEE’S ENTITLEMENT TO INDEMNIFICATION SHALL BE DETERMINED IN ACCORDANCE WITH SECTION 145(D) OF THE DGCL. IF ENTITLEMENT TO INDEMNIFICATION IS TO BE DETERMINED BY INDEPENDENT COUNSEL PURSUANT TO SECTION 145(D) OF THE DGCL, THE COMPANY SHALL FURNISH WRITTEN NOTICE TO INDEMNITEE WITHIN 10 DAYS AFTER RECEIPT OF THE REQUEST FOR INDEMNIFICATION, SPECIFYING THE IDENTITY AND ADDRESS OF INDEPENDENT COUNSEL. THE INDEMNITEE MAY, WITHIN 10 DAYS AFTER SUCH WRITTEN NOTICE OF SELECTION SHALL HAVE BEEN GIVEN, DELIVER TO THE COMPANY A WRITTEN OBJECTION TO SUCH SELECTION; PROVIDED, HOWEVER, THAT SUCH OBJECTION MAY BE ASSERTED ONLY ON THE GROUND THAT THE INDEPENDENT COUNSEL SO SELECTED DOES NOT MEET THE REQUIREMENTS OF “INDEPENDENT COUNSEL” AS DEFINED IN ARTICLE I, AND   6 --------------------------------------------------------------------------------   THE OBJECTION SHALL SET FORTH WITH PARTICULARITY THE FACTUAL BASIS OF SUCH ASSERTION. IF SUCH WRITTEN OBJECTION IS SO MADE AND SUBSTANTIATED, THE INDEPENDENT COUNSEL SO SELECTED MAY NOT SERVE AS INDEPENDENT COUNSEL UNLESS AND UNTIL SUCH OBJECTION IS WITHDRAWN OR A COURT HAS DETERMINED THAT SUCH OBJECTION IS WITHOUT MERIT. IF (I) THE DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION IS TO BE MADE BY INDEPENDENT COUNSEL PURSUANT TO THIS SECTION  AND (II) WITHIN 20 DAYS AFTER SUBMISSION BY INDEMNITEE OF A WRITTEN REQUEST FOR INDEMNIFICATION PURSUANT TO SECTION 5.1, NO INDEPENDENT COUNSEL SHALL HAVE BEEN SELECTED AND NOT OBJECTED TO, THE COMPANY OR INDEMNITEE MAY PETITION THE COURT OF CHANCERY OR OTHER COURT OF COMPETENT JURISDICTION FOR RESOLUTION OF ANY OBJECTION WHICH SHALL HAVE BEEN MADE BY INDEMNITEE TO THE COMPANY’S SELECTION OF INDEPENDENT COUNSEL AND/OR FOR THE APPOINTMENT AS INDEPENDENT COUNSEL OF A PERSON SELECTED BY THE PETITIONED COURT OR BY SUCH OTHER PERSON AS THE PETITIONED COURT SHALL DESIGNATE, AND THE PERSON WITH RESPECT TO WHOM ALL OBJECTIONS ARE SO RESOLVED OR THE PERSON SO APPOINTED SHALL ACT AS INDEPENDENT COUNSEL UNDER THIS SECTION. IF (I) INDEPENDENT COUNSEL DOES NOT MAKE ANY DETERMINATION RESPECTING INDEMNITEE’S ENTITLEMENT TO INDEMNIFICATION HEREUNDER WITHIN 90 DAYS AFTER RECEIPT BY THE COMPANY OF A WRITTEN REQUEST THEREFOR AND (II) ANY JUDICIAL PROCEEDING PURSUANT TO SECTION 6.1 IS THEN COMMENCED, INDEPENDENT COUNSEL SHALL BE DISCHARGED AND RELIEVED OF ANY FURTHER RESPONSIBILITY IN SUCH CAPACITY (SUBJECT TO THE APPLICABLE STANDARDS OF PROFESSIONAL CONDUCT THEN PREVAILING).   SECTION 5.3. DETERMINATION OF ENTITLEMENT; CHANGE OF CONTROL. IF THERE HAS BEEN A CHANGE OF CONTROL AT THE TIME THE REQUEST FOR INDEMNIFICATION IS SUBMITTED, INDEMNITEE’S ENTITLEMENT TO INDEMNIFICATION SHALL BE DETERMINED IN A WRITTEN OPINION BY INDEPENDENT COUNSEL SELECTED BY INDEMNITEE. INDEMNITEE SHALL GIVE THE COMPANY WRITTEN NOTICE ADVISING OF THE IDENTITY AND ADDRESS OF THE INDEPENDENT COUNSEL SO SELECTED. THE COMPANY MAY, WITHIN 10 DAYS AFTER SUCH WRITTEN NOTICE OF SELECTION SHALL HAVE BEEN GIVEN, DELIVER TO THE INDEMNITEE A WRITTEN OBJECTION TO SUCH SELECTION; PROVIDED, HOWEVER, THAT SUCH OBJECTION MAY BE ASSERTED ONLY ON THE GROUND THAT THE INDEPENDENT COUNSEL SO SELECTED DOES NOT MEET THE REQUIREMENTS OF “INDEPENDENT COUNSEL” AS DEFINED IN ARTICLE I, AND THE OBJECTION SHALL SET FORTH WITH PARTICULARITY THE FACTUAL BASIS OF SUCH ASSERTION. IF SUCH WRITTEN OBJECTION IS SO MADE AND SUBSTANTIATED, THE INDEPENDENT COUNSEL SO SELECTED MAY NOT SERVE AS INDEPENDENT COUNSEL UNLESS AND UNTIL SUCH OBJECTION IS WITHDRAWN OR A COURT HAS DETERMINED THAT SUCH OBJECTION IS WITHOUT MERIT. IF (I) THE DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION IS TO BE MADE BY INDEPENDENT COUNSEL PURSUANT TO THIS SECTION AND (II) WITHIN 20 DAYS AFTER SUBMISSION BY INDEMNITEE OF A WRITTEN REQUEST FOR INDEMNIFICATION PURSUANT TO SECTION 5.1, NO INDEPENDENT COUNSEL SHALL HAVE BEEN SELECTED AND NOT OBJECTED TO, THE COMPANY OR THE INDEMNITEE MAY PETITION THE COURT OF CHANCERY OR OTHER COURT OF COMPETENT JURISDICTION FOR RESOLUTION OF ANY OBJECTION WHICH SHALL HAVE BEEN MADE BY THE COMPANY TO INDEMNITEE’S SELECTION OF INDEPENDENT COUNSEL AND/OR FOR THE APPOINTMENT AS INDEPENDENT COUNSEL OF A PERSON SELECTED BY THE PETITIONED COURT OR BY SUCH OTHER PERSON AS THE PETITIONED COURT SHALL DESIGNATE, AND THE PERSON WITH RESPECT TO WHOM ALL OBJECTIONS ARE SO RESOLVED OR THE PERSON SO APPOINTED SHALL ACT AS INDEPENDENT COUNSEL UNDER THIS SECTION. IF (I) INDEPENDENT COUNSEL DOES NOT MAKE ANY DETERMINATION RESPECTING INDEMNITEE’S ENTITLEMENT TO INDEMNIFICATION HEREUNDER WITHIN 90 DAYS AFTER RECEIPT BY THE COMPANY OF A WRITTEN REQUEST THEREFOR AND (II) ANY JUDICIAL PROCEEDING OR ARBITRATION PURSUANT TO SECTION 6.1 IS THEN COMMENCED, INDEPENDENT COUNSEL SHALL BE DISCHARGED AND RELIEVED OF ANY FURTHER RESPONSIBILITY IN SUCH CAPACITY (SUBJECT TO THE APPLICABLE STANDARDS OF PROFESSIONAL CONDUCT THEN PREVAILING).   7 --------------------------------------------------------------------------------   SECTION 5.4. PRESUMPTIONS AND BURDEN OF PROOF; PROCEDURES OF INDEPENDENT COUNSEL. IN MAKING A DETERMINATION WITH RESPECT TO ENTITLEMENT TO INDEMNIFICATION HEREUNDER, THE PERSON, PERSONS OR ENTITY MAKING SUCH DETERMINATION SHALL PRESUME THAT INDEMNITEE IS ENTITLED TO INDEMNIFICATION UNDER THIS AGREEMENT, AND THE COMPANY SHALL HAVE THE BURDEN OF PROOF TO OVERCOME THAT PRESUMPTION IN CONNECTION WITH THE MAKING BY ANY PERSON, PERSONS OR ENTITY OF ANY DETERMINATION CONTRARY TO THAT PRESUMPTION.   Except in the event that the determination of entitlement to indemnification is to be made by Independent Counsel, if the person or persons empowered under Section 5.2 to determine entitlement to indemnification shall not have made and furnished to Indemnitee in writing a determination within 60 days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification. The termination of any Proceeding or of any Matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner that he reasonably believed to be in or not opposed to the best interests of the Company, or with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful. A person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan of the Company shall be deemed to have acted in a manner not opposed to the best interests of the Company.   For purposes of any determination hereunder, a person shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, or, with respect to any criminal action or Proceeding, to have had no reasonable cause to believe his conduct was unlawful, if his action is based on good faith reliance on the records or books of account of the Company or another enterprise or on information supplied to him by the officers of the Company or another enterprise in the course of their duties or on the advice of legal counsel for the Company or another enterprise or on information or records given or reports made to the Company or another enterprise by an independent accountant or by an appraiser or other expert selected with reasonable care by the Company or another enterprise. The term “another enterprise” as used in this Section shall mean any other corporation or any partnership, limited liability company, association, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Company as a director, officer, employee or agent. The provisions of this paragraph shall not be deemed to be exclusive or to limit in any way the circumstances in which an Indemnitee may be deemed to have met the applicable standards of conduct for determining entitlement to rights under this Agreement.   SECTION 5.5. INDEPENDENT COUNSEL EXPENSES. THE COMPANY SHALL PAY ANY AND ALL REASONABLE FEES AND EXPENSES OF INDEPENDENT COUNSEL INCURRED ACTING PURSUANT TO THIS ARTICLE AND IN ANY PROCEEDING TO WHICH IT IS A PARTY OR WITNESS IN RESPECT OF ITS INVESTIGATION AND WRITTEN REPORT AND SHALL PAY ALL REASONABLE FEES AND EXPENSES INCIDENT TO THE PROCEDURES IN WHICH SUCH INDEPENDENT COUNSEL WAS SELECTED OR APPOINTED. NO INDEPENDENT COUNSEL MAY SERVE IF A TIMELY OBJECTION HAS BEEN MADE TO HIS SELECTION UNTIL A COURT HAS DETERMINED THAT SUCH OBJECTION IS WITHOUT A REASONABLE BASIS.   8 --------------------------------------------------------------------------------   ARTICLE VI   Certain Remedies of Indemnitee   SECTION 6.1. ADJUDICATION. IN THE EVENT THAT (I) A DETERMINATION IS MADE PURSUANT TO SECTION 5.2 OR 5.3 THAT INDEMNITEE IS NOT ENTITLED TO INDEMNIFICATION UNDER THIS AGREEMENT; (II) ADVANCEMENT OF EXPENSES IS NOT TIMELY MADE PURSUANT TO SECTION 4.1; (III) INDEPENDENT COUNSEL IS TO DETERMINE INDEMNITEE’S ENTITLEMENT TO INDEMNIFICATION HEREUNDER, BUT DOES NOT MAKE THAT DETERMINATION WITHIN 90 DAYS AFTER RECEIPT BY THE COMPANY OF THE REQUEST FOR THAT INDEMNIFICATION; OR (IV) PAYMENT OF INDEMNIFICATION IS NOT MADE WITHIN 10 DAYS AFTER A DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION HAS BEEN MADE OR DEEMED TO HAVE BEEN MADE PURSUANT TO SECTION 5.2, 5.3 OR 5.4, INDEMNITEE SHALL BE ENTITLED TO AN ADJUDICATION IN AN APPROPRIATE COURT OF THE STATE OF DELAWARE, OR IN ANY OTHER COURT OF COMPETENT JURISDICTION, OF HIS ENTITLEMENT TO SUCH INDEMNIFICATION OR ADVANCEMENT OF EXPENSES. IN THE EVENT THAT A DETERMINATION SHALL HAVE BEEN MADE THAT INDEMNITEE IS NOT ENTITLED TO INDEMNIFICATION, ANY JUDICIAL PROCEEDING COMMENCED PURSUANT TO THIS SECTION 6.1 SHALL BE CONDUCTED IN ALL RESPECTS AS A DE NOVO TRIAL ON THE MERITS AND INDEMNITEE SHALL NOT BE PREJUDICED BY REASON OF THAT ADVERSE DETERMINATION. IN ANY JUDICIAL PROCEEDING COMMENCED PURSUANT TO THIS SECTION 6.1, THE COMPANY SHALL HAVE THE BURDEN OF PROVING THAT INDEMNITEE IS NOT ENTITLED TO INDEMNIFICATION OR ADVANCEMENT OF EXPENSES, AS THE CASE MAY BE. IF A DETERMINATION SHALL HAVE BEEN MADE OR DEEMED TO HAVE BEEN MADE THAT INDEMNITEE IS ENTITLED TO INDEMNIFICATION, THE COMPANY SHALL BE BOUND BY SUCH DETERMINATION IN ANY JUDICIAL PROCEEDING COMMENCED PURSUANT TO THIS SECTION 6.1, OR OTHERWISE.   The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 6.1 that the procedures and presumptions of this Agreement are not valid, binding and enforceable, and shall stipulate in any such proceeding that the Company is bound by all provisions of this Agreement. In the event that Indemnitee, pursuant to this Section 6.1, seeks a judicial adjudication to enforce his rights under, or to recover damages for breach of, this Agreement, (i) Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all Expenses actually and reasonably incurred by him in such judicial adjudication, regardless of whether he prevails therein, and (ii) any determination made pursuant to Section 5.2 or 5.3 that Indemnitee is not entitled to indemnification under this Agreement shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expenses advanced pursuant to Section 4.1 until it shall be determined by final judgment or other final adjudication under the provisions of any applicable law (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee is not entitled to be indemnified by the Company for such Expenses.   ARTICLE VII   Participation by the Company   SECTION 7.1. PARTICIPATION BY THE COMPANY. WITH RESPECT TO ANY SUCH PROCEEDING AS TO WHICH INDEMNITEE NOTIFIES THE COMPANY OF THE COMMENCEMENT THEREOF, THE COMPANY WILL BE ENTITLED TO PARTICIPATE THEREIN AT ITS OWN EXPENSE AND, EXCEPT AS OTHERWISE PROVIDED BELOW, TO THE EXTENT THAT IT MAY WISH, THE COMPANY (JOINTLY WITH ANY OTHER INDEMNIFYING PARTY SIMILARLY   9 --------------------------------------------------------------------------------   NOTIFIED) WILL BE ENTITLED TO ASSUME THE DEFENSE THEREOF, WITH COUNSEL REASONABLY SATISFACTORY TO INDEMNITEE. AFTER RECEIPT OF NOTICE FROM THE COMPANY TO INDEMNITEE OF THE COMPANY’S ELECTION SO TO ASSUME THE DEFENSE THEREOF, THE COMPANY WILL NOT BE LIABLE TO INDEMNITEE UNDER THIS AGREEMENT FOR ANY LEGAL OR OTHER EXPENSES SUBSEQUENTLY INCURRED BY INDEMNITEE IN CONNECTION WITH THE DEFENSE THEREOF OTHER THAN REASONABLE COSTS OF INVESTIGATION, EXPENSES INCURRED IN BEING OR PREPARING TO BE A WITNESS OR IN ASSISTING, AT THE REQUEST OF THE COMPANY, WITH THE DEFENSE, AND AS OTHERWISE PROVIDED BELOW. AT THE REQUEST OF THE COMPANY, INDEMNITEE AGREES TO USE HIS REASONABLE EFFORTS TO ASSIST IN SUCH DEFENSE. INDEMNITEE SHALL HAVE THE RIGHT TO EMPLOY HIS OWN COUNSEL IN SUCH PROCEEDING BUT THE FEES AND EXPENSES OF SUCH COUNSEL INCURRED AFTER NOTICE FROM THE COMPANY OF ITS ASSUMPTION OF THE DEFENSE THEREOF SHALL BE AT THE EXPENSE OF INDEMNITEE UNLESS (I) THE EMPLOYMENT OF COUNSEL BY INDEMNITEE HAS BEEN AUTHORIZED BY THE COMPANY, (II) INDEMNITEE SHALL HAVE REASONABLY CONCLUDED THAT THERE IS A CONFLICT OF INTEREST BETWEEN THE COMPANY AND INDEMNITEE IN THE CONDUCT OF THE DEFENSE OF SUCH ACTION OR (III) THE COMPANY SHALL NOT IN FACT HAVE EMPLOYED COUNSEL TO ASSUME THE DEFENSE OF SUCH ACTION, IN EACH OF WHICH CASES THE FEES AND EXPENSES OF COUNSEL EMPLOYED BY INDEMNITEE SHALL BE SUBJECT TO INDEMNIFICATION PURSUANT TO THE TERMS OF THIS AGREEMENT. THE COMPANY SHALL NOT BE ENTITLED TO ASSUME THE DEFENSE OF ANY PROCEEDING BROUGHT IN THE NAME OF OR ON BEHALF OF THE COMPANY OR AS TO WHICH INDEMNITEE SHALL HAVE MADE THE CONCLUSION PROVIDED FOR IN (II) ABOVE.   SECTION 7.2. SETTLEMENTS. THE COMPANY SHALL NOT BE LIABLE TO INDEMNIFY INDEMNITEE UNDER THIS AGREEMENT FOR ANY AMOUNTS PAID IN SETTLEMENT OF ANY ACTION OR CLAIM EFFECTED WITHOUT ITS WRITTEN CONSENT, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD. THE COMPANY SHALL NOT SETTLE ANY ACTION OR CLAIM IN ANY MANNER THAT WOULD IMPOSE ANY LIMITATION OR UNINDEMNIFIED PENALTY ON INDEMNITEE WITHOUT INDEMNITEE’S WRITTEN CONSENT, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD.   ARTICLE VIII   Miscellaneous   SECTION 8.1. NONEXCLUSIVITY OF RIGHTS. THE RIGHTS OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES AS PROVIDED BY THIS AGREEMENT SHALL NOT BE DEEMED EXCLUSIVE OF ANY OTHER RIGHTS TO WHICH INDEMNITEE MAY AT ANY TIME BE ENTITLED TO UNDER APPLICABLE LAW, THE COMPANY’S CERTIFICATE OF INCORPORATION, THE COMPANY’S BYLAWS, ANY AGREEMENT, A VOTE OF STOCKHOLDERS OR A RESOLUTION OF DIRECTORS, OR OTHERWISE. NO AMENDMENT, ALTERATION OR REPEAL OF THIS AGREEMENT OR ANY PROVISION HEREOF SHALL BE EFFECTIVE AS TO ANY INDEMNITEE FOR ACTS, EVENTS AND CIRCUMSTANCES THAT OCCURRED, IN WHOLE OR IN PART, BEFORE SUCH AMENDMENT, ALTERATION OR REPEAL. THE PROVISIONS OF THIS AGREEMENT SHALL CONTINUE IN EFFECT AS TO AN INDEMNITEE WHOSE CORPORATE STATUS HAS CEASED FOR ANY REASON.   SECTION 8.2. INSURANCE AND SUBROGATION. THE COMPANY SHALL NOT BE LIABLE UNDER THIS AGREEMENT TO MAKE ANY PAYMENT OF AMOUNTS OTHERWISE INDEMNIFIABLE HEREUNDER IF, BUT ONLY TO THE EXTENT THAT, INDEMNITEE HAS OTHERWISE ACTUALLY RECEIVED SUCH PAYMENT UNDER ANY INSURANCE POLICY, CONTRACT, AGREEMENT OR OTHERWISE.   In the event of any payment hereunder, the Company shall be subrogated to the extent of such payment to all the rights of recovery of Indemnitee, who shall execute all papers   10 --------------------------------------------------------------------------------   required and take all action reasonably requested by the Company to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.   SECTION 8.3. ACKNOWLEDGMENT OF CERTAIN MATTERS. BOTH THE COMPANY AND INDEMNITEE ACKNOWLEDGE THAT IN CERTAIN INSTANCES, APPLICABLE LAW OR PUBLIC POLICY MAY PROHIBIT INDEMNIFICATION OF INDEMNITEE BY THE COMPANY UNDER THIS AGREEMENT OR OTHERWISE. INDEMNITEE UNDERSTANDS AND ACKNOWLEDGES THAT THE COMPANY HAS UNDERTAKEN OR MAY BE REQUIRED IN THE FUTURE TO UNDERTAKE, BY THE SECURITIES AND EXCHANGE COMMISSION, TO SUBMIT THE QUESTION OF INDEMNIFICATION TO A COURT IN CERTAIN CIRCUMSTANCES FOR A DETERMINATION OF THE COMPANY’S RIGHT UNDER PUBLIC POLICY TO INDEMNIFY INDEMNITEE.   SECTION 8.4. AMENDMENT. THIS AGREEMENT MAY NOT BE MODIFIED OR AMENDED EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY OR ON BEHALF OF EACH OF THE PARTIES HERETO.   SECTION 8.5. WAIVERS. THE OBSERVANCE OF ANY TERM OF THIS AGREEMENT MAY BE WAIVED (EITHER GENERALLY OR IN A PARTICULAR INSTANCE AND EITHER RETROACTIVELY OR PROSPECTIVELY) BY THE PARTY ENTITLED TO ENFORCE SUCH TERM ONLY BY A WRITING SIGNED BY THE PARTY AGAINST WHICH SUCH WAIVER IS TO BE ASSERTED. UNLESS OTHERWISE EXPRESSLY PROVIDED HEREIN, NO DELAY ON THE PART OF ANY PARTY HERETO IN EXERCISING ANY RIGHT, POWER OR PRIVILEGE HEREUNDER SHALL OPERATE AS A WAIVER THEREOF, NOR SHALL ANY WAIVER ON THE PART OF ANY PARTY HERETO OF ANY RIGHT, POWER OR PRIVILEGE HEREUNDER OPERATE AS A WAIVER OF ANY OTHER RIGHT, POWER OR PRIVILEGE HEREUNDER NOR SHALL ANY SINGLE OR PARTIAL EXERCISE OF ANY RIGHT, POWER OR PRIVILEGE HEREUNDER PRECLUDE ANY OTHER OR FURTHER EXERCISE THEREOF OR THE EXERCISE OF ANY OTHER RIGHT, POWER OR PRIVILEGE HEREUNDER.   SECTION 8.6. ENTIRE AGREEMENT. THIS AGREEMENT AND THE DOCUMENTS REFERRED TO HEREIN CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE MATTERS COVERED HEREBY, AND ANY OTHER PRIOR OR CONTEMPORANEOUS ORAL OR WRITTEN UNDERSTANDINGS OR AGREEMENTS WITH RESPECT TO THE MATTERS COVERED HEREBY ARE SUPERSEDED BY THIS AGREEMENT.   SECTION 8.7. SEVERABILITY. IF ANY PROVISION OR PROVISIONS OF THIS AGREEMENT SHALL BE HELD TO BE INVALID, ILLEGAL OR UNENFORCEABLE FOR ANY REASON WHATSOEVER, THE VALIDITY, LEGALITY AND ENFORCEABILITY OF THE REMAINING PROVISIONS SHALL NOT IN ANY WAY BE AFFECTED OR IMPAIRED THEREBY; AND, TO THE FULLEST EXTENT POSSIBLE, THE PROVISIONS OF THIS AGREEMENT SHALL BE CONSTRUED SO AS TO GIVE EFFECT TO THE INTENT MANIFESTED BY THE PROVISION HELD INVALID, ILLEGAL OR UNENFORCEABLE.   SECTION 8.8. NOTICES. PROMPTLY AFTER RECEIPT BY INDEMNITEE OF NOTICE OF THE COMMENCEMENT OF ANY ACTION, SUIT OR PROCEEDING, INDEMNITEE SHALL, IF HE ANTICIPATES OR CONTEMPLATES MAKING A CLAIM FOR EXPENSES OR AN ADVANCE PURSUANT TO THE TERMS OF THIS AGREEMENT, NOTIFY THE COMPANY OF THE COMMENCEMENT OF SUCH ACTION, SUIT OR PROCEEDING; PROVIDED, HOWEVER, THAT ANY DELAY IN SO NOTIFYING THE COMPANY SHALL NOT CONSTITUTE A WAIVER OR RELEASE BY INDEMNITEE OF RIGHTS HEREUNDER AND THAT ANY OMISSION BY INDEMNITEE SO TO NOTIFY THE COMPANY SHALL NOT RELIEVE THE COMPANY FROM ANY LIABILITY THAT IT MAY HAVE TO INDEMNITEE OTHERWISE THAN UNDER THIS AGREEMENT. ANY COMMUNICATION REQUIRED OR PERMITTED TO THE COMPANY SHALL BE ADDRESSED TO THE SECRETARY OF THE COMPANY AND ANY SUCH COMMUNICATION TO INDEMNITEE SHALL BE ADDRESSED TO INDEMNITEE’S ADDRESS AS SHOWN ON THE COMPANY’S RECORDS UNLESS   11 --------------------------------------------------------------------------------   INDEMNITEE SPECIFIES OTHERWISE AND SHALL BE PERSONALLY DELIVERED OR DELIVERED BY OVERNIGHT MAIL DELIVERY. ANY SUCH NOTICE SHALL BE EFFECTIVE UPON RECEIPT.   SECTION 8.9. BINDING EFFECT. THE PROVISIONS OF THIS AGREEMENT SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE HEIRS, LEGAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS.   SECTION 8.10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICT OF LAWS THAT, IF APPLIED, MIGHT PERMIT OR REQUIRE THE APPLICATION OF THE LAWS OF A DIFFERENT JURISDICTION.   SECTION 8.11. HEADINGS. THE ARTICLE AND SECTION HEADINGS IN THIS AGREEMENT ARE FOR CONVENIENCE OF REFERENCE ONLY, AND SHALL NOT BE DEEMED TO ALTER OR AFFECT THE MEANING OR INTERPRETATION OF ANY PROVISIONS HEREOF.   SECTION 8.12. COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED TO BE AN ORIGINAL AND ALL OF WHICH TOGETHER SHALL BE DEEMED TO BE ONE AND THE SAME INSTRUMENT.   SECTION 8.13. USE OF CERTAIN TERMS. AS USED IN THIS AGREEMENT, THE WORDS “HEREIN,” “HEREOF,” AND “HEREUNDER” AND OTHER WORDS OF SIMILAR IMPORT REFER TO THIS AGREEMENT AS A WHOLE AND NOT TO ANY PARTICULAR PARAGRAPH, SUBPARAGRAPH, SECTION, SUBSECTION, OR OTHER SUBDIVISION. WHENEVER THE CONTEXT MAY REQUIRE, ANY PRONOUN USED IN THIS AGREEMENT SHALL INCLUDE THE CORRESPONDING MASCULINE, FEMININE OR NEUTER FORMS, AND THE SINGULAR FORM OF NOUNS, PRONOUNS AND VERBS SHALL INCLUDE THE PLURAL AND VICE VERSA.   IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to be effective as of the date first above written.     POGO PRODUCING COMPANY           By: /s/ Michael J. Killelea       Name: Michael J. Killelea     Title: Senior Vice President, General Counsel     and Corporate Secretary           INDEMNITEE           By: /s/ Carroll W. Suggs       Carroll W. Suggs   12 --------------------------------------------------------------------------------

Exhibit 10.1 VALLEY NATIONAL BENEFIT EQUALIZATION PLAN PLAN DOCUMENT 12/19/94 -------------------------------------------------------------------------------- VALLEY NATIONAL BANCORP BENEFIT EQUALIZATION PLAN Valley National Bancorp hereby adopts and restates the Valley National Bancorp Benefit Equalization Plan (the “Plan”) in its entirety effective January 1, 1989. The terms of this Plan are applicable only to Participants who are in the employ of Valley National Bancorp or Valley National Bank on or after January 1, 1989. The purpose of this Plan is to attract and retain certain key officers by permitting them to enter into agreements with the Valley National Bancorp or Valley National Bank which will provide for the payment of a supplemental benefit on retirement, disability or death. The Plan is intended to constitute an excess benefit plan under Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) with respect to that portion of the Plan which provides benefits in excess of Section 415 of the Internal Revenue Code of 1986, as amended (the “Code”) and an unfunded pension plan maintained primarily for a select group of management or highly compensated employees with respect to all other benefits provided hereunder. The Plan makes-up the amount of the accrued benefits which cannot be provided under the Valley National Bank Pension Plan (the “Pension Plan”) as a result of the limitations under Section 401(a) (17) of the Code on the amount of compensation which can be taken into account under a qualified plan   -1- -------------------------------------------------------------------------------- and the limitation under Section 415 of the Code on the amount of benefits which can be paid from a qualified plan. The Plan also restores the amount of the accrued benefits which would have been payable under the terms of the Pension Plan effective December 31, 1988. The Plan is not a qualified plan under the Code and benefits are paid directly by Valley National Bancorp or Valley National Bank out of their general assets.   -2- -------------------------------------------------------------------------------- ARTICLE I Definitions 1.1 “Actuarial Equivalent” means an amount or benefit of equal value based on a 5% interest rate and the 1951 Group Annuity Table projected to 1967 with Scale C. 1.2 “Average Annual Compensation” shall mean the Participant’s highest average Annual Compensation averaged over the five (5) highest consecutive calendar year with the Employer after 1965 and preceding the calendar year in which the participant terminates his employment or the total period of service if less than five (5) years. 1.3 “Average Social Security Limit” shall mean one-twelfth of the average annual amount of wages covered under the Federal Insurance Contribution Act during the period of calendar years ending with the first year preceding such date and starting with the later of the 35th year preceding such date or the year 1959. 1.4 “Board of Directors” means the Board of Directors of Valley National Bancorp. 1.5 “Company” means Valley National Bancorp, Valley National Bank, any successors thereto, and any of the Companys’ subsidiaries which adopts the Plan with the consent of the Board of Directors. 1.6 “Compensation” shall mean a Participant’s annual rate of base earnings (excluding overtime, bonuses and any other forms of additional compensation) paid to him for each calendar year effective as of each January 1. 1.7 “Compensation Committee” means the Compensation Committee of the Board of Directors. 1.8 “Effective Date” shall mean January 1, 1989.   -3- -------------------------------------------------------------------------------- 1.9 “Eligible Employee” means an officer employed by the Company who is a participant in the Pension Plan, whose Compensation exceeds the limit on compensation under Section 401(a) (17) of the Code and who has completed ten (10) Years of Continuous Service with the Company, excluding any past service credit granted under the terms of the Pension Plan for employment with an entity that was not a member of the controlled group of corporations that includes Valley National Bancorp at the time the service was rendered. 1.10 “Normal Retirement Date” means the Normal Retirement Date as defined in the Pension Plan. 1.11 “Participant” means an Eligible Employee who becomes a Participant pursuant to Article II. 1.12 “Participation Agreement” means the written agreement between the Company and the Participant setting forth certain provisions related to the Plan, incorporating the terms and conditions of the Plan and authorizing an Eligible Employee’s participation in the Plan. 1.13 “Pension Plan” means the Valley National Bank Pension Plan. 1.14 “Pension Plan Benefit” means the annual retirement benefit payable to or on account of a Participant from the Pension Plan. 1.15 “Plan” means this Valley National Bancorp Benefit Equalization Plan, as set forth herein, as amended from time to time. 1.16 “Plan Administrator” means the Valley National Bancorp or any committee designated by the Board of Directors. 1.17 “Plan Year” means each twelve (12) consecutive month period commencing each January 1 and ending on the following December 31.   -4- -------------------------------------------------------------------------------- 1.18 “Social Security” shall mean the Participant’s estimated monthly primary insurance amount under Title II of the Social Security Act, as in effect at the time his employment is terminated, to which the Participant would be entitled upon proper application at age 65, assuming he continued to receive wages in all future years at his rate of annual Compensation in the year of termination, and irrespective of any voluntary act of the Participant which disqualifies him from receiving such amount. 1.19 “SERP Benefit” means the annual retirement benefit payable pursuant to the terms of this Plan. 1.20 “Years of Credited Service” means years of Credited Service as defined in the Pension Plan. 1.21 “Years of Continuous Service” means years of Continuous Service as defined under the Pension Plan. 1.22 Any defined term which is not set forth in Article I of this Plan, shall be defined pursuant to the terms of the Pension Plan. 1.23 For purposes of this Plan, unless the context requires otherwise, the masculine includes the feminine, the singular the plural, and vice-versa. Any reference to a “Section” or “Article” shall mean the indicated section or article of this Plan unless otherwise specified.   -5- -------------------------------------------------------------------------------- ARTICLE II Participation Any Eligible Employee who was a Participant in this Plan on the day prior to the date the Board of Directors adopts this restatement shall remain a Participant herein. Each other Eligible Employee shall become a Participant on the first day of the month following appointment to the Plan by the Compensation Committee and execution of a Participation Agreement. The Compensation Committee shall, in its sole and absolute discretion, select which Eligible Employees shall be appointed as Participants. The decision of the Compensation Committee shall be conclusive and binding on all persons. A Participant shall remain a Participant hereunder until the later of his termination of employment with the Company or the date he is no longer entitled to benefits under the Plan. ARTICLE III SERP Benefit 3.1 Amount of SERP Benefit. Each Participant who qualifies for a Normal, Early, Disability or Deferred Pension Plan Benefit shall be entitled to a SERP Benefit equal to (a) minus (b) as follows:     (a) The sum of: (i) .75% of the Participant’s Average Annual Compensation not in excess of his Average Social Security Limit multiplied by his Years of Credited Service up to 40; plus   -6- -------------------------------------------------------------------------------- (ii) 1.25% of the Participant’s Average Annual Compensation in excess of his Average Social Security Limit multiplied by his Years of Credited Service up to 40, expressed as a straight life annuity with no ancillary benefits; minus     (b) the Participant’s Pension Plan Benefit expressed as a straight life annuity with no ancillary benefits. The amount calculated pursuant to Section 3.1(a) shall be adjusted as set forth in the Pension Plan for any Participant who is entitled to an Early or Disability Pension Plan Benefit and for the form of benefit selected by the Participant under the Pension Plan. 3.2 Benefits Upon Reemployment. If a Participant is rehired after he is entitled to a SERP Benefit his SERP Benefit shall not be paid during such period of reemployment prior to Normal Retirement Date, but shall commence or resume not sooner than the first day of the month following his subsequent retirement or separation. The SERP Benefit payable after his subsequent retirement or separation shall be the benefits earlier applicable, plus any additional benefits computed in accordance with Section 3.1 insofar as additional employment entitled him to additional benefits. ARTICLE IV Vesting A Participant shall be fully vested in his SERP Benefit; provided, however, that the Participant’s rights to benefits under this Plan shall be forfeited if a Participant is discharged on account of an act of fraud, larceny, misappropriation or embezzlement committed against the Company.   -7- -------------------------------------------------------------------------------- ARTICLE V Death Benefits A death benefit shall be payable under this Plan if a vested Participant dies and at such time his spouse is entitled to a Preretirement Survivor Annuity under the Pension Plan. The death benefit payable to the Participant’s surviving spouse shall be an annuity payable for the spouse’s life equal to 66 2/3% of the benefit calculated pursuant to Section 3.1 hereof, adjusted for payment in the form of a qualified joint and 2/3 survivor annuity, based on the factors used for the Pension Plan. A death benefit payable to a surviving spouse under this Plan will cease at the same time the survivor benefit is terminated under the Pension Plan. ARTICLE VI Form of Payment A Participant’s SERP Benefit payable under Article III of this Plan will be paid in the same form and beginning at the same time as the Participant’s Pension Plan Benefit under the Pension Plan. A Participant’s designation of a joint annuitant and/or beneficiary under the Pension Plan will also apply to his SERP Benefit. ARTICLE VII Administration 7.1 Plan Administrator. The Plan Administrator shall supervise the daily management and administration of the Plan. The Plan Administrator shall serve without compensation.   -8- -------------------------------------------------------------------------------- 7.2 Responsibilities and Powers of the Plan Administrator. The Plan Administrator shall have the responsibility: (a) To administer the Plan in accordance with the terms hereof, and to exercise all powers specifically conferred upon the Plan Administrator hereby or necessary to carry out the provisions thereof. (b) To construe this Plan, which construction shall be conclusive, correct any defects, supply omissions, and reconcile inconsistencies to the extent necessary to effectuate the Plan. (c) To keep all records relating to Participants of the Plan and such other records as are necessary for proper operation of the Plan. 7.3 Operation of the Plan Administrator. In carrying out the Plan Administrator’s functions hereunder: (a) The Plan Administrator may adopt rules and regulations necessary for the administration of the Plan and which are consistent with the provisions hereof. (b) If the Plan Administrator is a committee, all acts and decisions of the Plan Administrator shall be approved by a majority of the members of the committee. All decisions shall apply uniformly to all Participants in like circumstances. Written records shall be kept of all acts and decisions. (c) If the Plan Administrator is a committee, the Plan Administrator may authorize one or more of its members to act on its behalf. The Plan Administrator may also delegate, in writing, any of its responsibilities and powers to an individual(s) who is not a member of the committee. (d) The Plan Administrator shall have the right to hire, at the expense of the Company, such professional assistants and consultants as it, in its sole discretion, deems necessary or advisable, including, but not limited to, accountants, actuaries, consultants, counsel and such clerical assistance as is necessary for proper discharge of its duties.   -9- -------------------------------------------------------------------------------- 7.4 Indemnification. In addition to any other indemnification that a fiduciary, including but not limited to a member of the Plan Administrator or Compensation Committee, is entitled to, the Company shall indemnify such fiduciary from all claims for liability, loss or damage (including payment of expenses in connection with defense against such claim) arising from any act or failure to act which constitutes a breach of such individual’s fiduciary responsibilities with respect to this Plan. ARTICLE VIII Miscellaneous 8.1 Benefits Payable by the Company. All benefits payable under this Plan constitute an unfunded obligation of the Company. Payments shall be made, as due, from the general funds of the Company. The Company, at its option, may maintain one or more bookkeeping reserve accounts to reflect its obligations under the Plan and may make such investments as it may deems desirable to assist it in meeting with obligations. Any such investments shall be assets of the Company subject to claims of its general creditors. No person eligible for a benefit under this Plan shall have any right, title to interest in any such investments.   -10- -------------------------------------------------------------------------------- 8.2 Amendment or Termination. (a) The Board of Directors reserves the right to amend, modify, restate or terminate the Plan; provided, however, that no such action by the Board of Directors shall reduce a Participant’s SERP Benefit accrued as of the time thereof. The provisions of this Section prohibiting an action by the Board of Directors which would reduce a Participant’s accrued SERP Benefit cannot be amended without the consent of all Participants (including those who have retired). Any amendment to the Plan shall be made in writing by the Board of Directors, with or without a meeting, or shall be made in writing by the Plan Administrator or Compensation Plan Administrator, to the extent that Board of Directors has specifically delegated the authority to make such amendment to the Plan the Plan Administrator or Compensation Plan Administrator. (b) If the plan is terminated, a determination shall be made of each Participant’s SERP Benefit as of the Plan termination date (determined in accordance with Section 8.2(a)). The amount of such benefits shall be payable to the Participant at the time it would have been payable under Article VI if the Plan had not been terminated. No interest shall be credited on a SERP Benefit. 8.3 Status of Employment. Nothing herein contained shall be construed as conferring any rights upon any Participant or any person for a continuation of employment, nor shall it be construed as limiting in any way the right of the Company to discharge any Participant or to treat him without regard to the effect which such treatment might have upon him as a Participant of the Plan. 8.4 Payments to Minors and Incompetents. If a Participant or beneficiary entitled to receive any benefits hereunder is a minor or is deemed by the Plan Administrator or is   -11- -------------------------------------------------------------------------------- adjudged to be legally incapable of giving valid receipt and discharge for such benefits, they will be paid to the duly appointed guardian of such minor or incompetent or to such other legally appointed person as the Plan Administrator might designate. Such payment shall, to the extent made, be deemed a complete discharge of any liability for such payment under the Plan. 8.5 Inalienability of Benefits. The right of any person to any benefit or payment under the Plan shall not be subject to voluntary or involuntary transfer, alienation or assignment, and, to the fullest extent permitted by law, shall not be subject to attachment, execution, garnishment, sequestration or other legal or equitable process. In the event a person who is receiving or is entitled to receive benefits under the Plan attempts to assign, transfer or dispose of such right, or if an attempt is made to subject said right to such process, such assignment, transfer or disposition shall be null and void. 8.6 Arbitration. The parties agree that any dispute or claim arising out of or relating to this Plan, including whether such disputes or claims are arbitrable, will be settled by binding arbitration. The arbitration proceeding will be conducted before a single arbitrator at a location within the State of New Jersey convenient to the parties and under the rules of the American Arbitration Association. The decision or award of the Arbitrator made under these rules shall be exclusive, final and binding on both parties, their beneficiaries, executors, administrators, successors and assigns. This arbitration procedure may be invoked   -12- -------------------------------------------------------------------------------- by written notice to the American Arbitration Association stating with particularity the issue proposed for arbitration. A copy of that written notice shall be served upon the other party by registered mail. In the event of a Change in Control as defined in the Participation Agreement, this Section 8.6 will cease to apply. 8.7 Governing Law.  Except to the extent pre-empted by federal law, the provisions of the Plan will be construed according to the laws of the State of New Jersey. IN WITNESS WHEREOF, the Board of Directors has directed its duly authorized officer to set his hand this 19th day of December, 1994 effective as of January 1, 1989.   VALLEY NATIONAL BANCORP By:   /s/ Robert E. McEntee   Robert E. McEntee   Chairman VNB Personnel and Compensation Committee of the Board of Directors   -13-

  Exhibit 10.4 LAUREL SAVINGS BANK AMENDED AND RESTATED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT      THIS AMENDED AND RESTATED AGREEMENT (this “Agreement”) is made effective the 20th day of July 2006 (the “Effective Date”), by and between Laurel Savings Bank (the “Bank”), a state-chartered savings bank located in Allison Park, Pennsylvania, and ___(the “Executive”), intending to be legally bound hereby. INTRODUCTION      The Bank and the Executive previously entered into a certain Supplemental Executive Retirement Plan Agreement effective as of January 1, 2004 (the “Prior Agreement”). This Agreement amends and restates 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 Agreement to be deemed grandfathered for purposes of Section 409A of the Code.      The purpose of this Agreement is to provide specified benefits to the Executive, a member of a select group of management or highly compensated employees who contribute materially to the continued growth, development and future business success of the Bank. This Agreement shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).      To encourage the Executive to remain an employee of the Bank, the Bank is willing to provide supplemental retirement benefits to the Executive. The Bank will pay the benefits from its general assets. AGREEMENT      The Bank and the Executive agree as follows: Article 1 Definitions      Whenever used in this Agreement, the following words and phrases shall have the meanings specified:      1.1 “Change in Control” means a change in the ownership of the Bank or the Corporation, a change in the effective control of the Bank or the Corporation or a change in the   --------------------------------------------------------------------------------   ownership of a substantial portion of the assets of the Bank or the Corporation as provided under Section 409A of the Code and the regulations thereunder.      1.2 “Corporation” means Laurel Capital Group, Inc.      1.3 “Disability” means the Executive (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 12 months, or (ii) is, 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, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Bank.      1.4 “Early Termination” means the Termination of Employment before Normal Retirement Age for reasons other than death, Disability, Termination for Cause or following a Change of Control.      1.5 “Early Termination Date” means the month, day and year in which Early Termination occurs.      1.6 “Normal Retirement Age” means the Executive’s attainment of age 70 and 1/2.      1.7 “Normal Retirement Date” means the later of the Normal Retirement Age or Separation from Service.      1.8 “Plan Year” means each twelve-month period commencing with the Effective Date of this Agreement.      1.9 “Separation from Service” shall mean separation from service within the meaning of Section 409A of the Code and the regulations thereunder.      1.10 “Termination for Cause” has the meaning set forth in Section 5.1 hereof.      1.11 “Termination of Employment” means a Separation from Service from the Bank for any reason, voluntary or involuntary, other than by reason of a leave of absence approved by the Bank. Article 2 Retirement Benefits      2.1 Normal Retirement Benefit. Upon Termination of Employment on or after the Normal Retirement Age for reasons other than death, the Bank shall pay to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Agreement.      2.1.1 Amount of Benefit. The annual normal retirement benefit under this Section 2.1 is $___ (___thousand dollars). [$60,000 for Mr. Maus; $48,000 for Mr. Howard] 2 --------------------------------------------------------------------------------        2.1.2 Payment of Benefit. The Bank shall pay the annual normal retirement benefit to the Executive each year for a period of 15 years. The annual benefit shall be paid in equal monthly installments commencing the first day of the month following the lapse of six months after the Executive’s Normal Retirement Date and continuing for the 179 months thereafter, resulting in a total of 180 payments.      2.2 Early Termination Benefit. Upon Early Termination, the Bank shall pay to the Executive the benefit described in this Section 2.2 in lieu of any other benefit under this Agreement.      2.2.1 Amount of Benefit. The benefit under this Section 2.2 is the Early Termination Annual Benefit set forth in Schedule A for the Plan Year ended immediately prior to the Early Termination Date (except if termination occurs during the first Plan Year, the benefit in the amount set forth for Plan Year 1 in Schedule A hereto).      2.2.2 Payment of Benefit. The Bank shall pay the annual Early Termination benefit to the Executive each year for a period of 15 years. The annual benefit shall be paid in equal monthly installments commencing the first day of the month following the lapse of six months after Termination of Employment and continuing for the 179 months thereafter, resulting in a total of 180 payments.      2.3 Disability Benefit. If the Executive terminates employment due to Disability prior to Normal Retirement Age, the Bank shall pay to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Agreement.      2.3.1 Amount of Benefit. The benefit under this Section 2.3 is the annual Disability benefit set forth in Schedule A for the Plan Year ended immediately prior to the date on which the Termination of Employment occurs (except if termination occurs during the first Plan Year, the benefit is the amount set forth for Plan Year 1 in Schedule A hereto).      2.3.2 Payment of Benefit. The Bank shall pay the annual Disability benefit to the Executive each year for a period of 15 years in equal monthly installments payable on the first day of each month commencing on the later of (a) the first day of the month immediately following the Executive’s Normal Retirement Date or (b) the first day of the month following the lapse of six months after Termination of Service, and continuing for the 179 months thereafter, resulting in a total of 180 payments.      2.4 Change in Control Benefit. Upon a Change in Control, the Bank shall pay to the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Agreement.      2.4.1 Amount of Benefit. The benefit under this Section 2.4 is the normal retirement benefit set forth in Section 2.1.1.      2.4.2 Payment of Benefit. The Bank shall pay the annual normal retirement benefit to the Executive each year for a period of 15 years. The annual benefit shall be paid in equal monthly installments commencing the first day of the month immediately following the 3 --------------------------------------------------------------------------------   Normal Retirement Date and continuing for the 179 months thereafter, resulting in a total of 180 payments; provided, however, that if this Agreement is terminated within 30 days prior to a Change in Control pursuant to the second sentence of Article 7 hereof, then the Bank shall pay to the Executive as of the date of the Change in Control a lump sum cash amount equal to the present value of the foregoing 180 monthly payments, with the present value calculated using a discount rate equal to 120% of the applicable federal rate (determined under Section 1274(d) of the Code) as published by the IRS for the month in which the Change in Control occurs.      2.5 Limitations. All benefits payable under this Article 2 shall be subject to the limitations contained in Article 5 of this Agreement. Article 3 Death Benefits      3.1 Death During Active Service. If the Executive dies while in the active service of the Bank, the Bank shall pay to the Executive’s beneficiary the benefit described in this Section 3.1. This benefit shall be paid in lieu of the benefits provided under Article 2.      3.1.1 Amount of Benefit. The benefit under this Section 3.1 is the Normal Retirement Benefit set forth in Section 2.1.1.      3.1.2 Payment of Benefit. The Bank shall pay the annual death benefit to the Executive’s beneficiary each year for a period of 15 years. The annual benefit shall be paid in equal monthly installments commencing within 90 days of the date on which the Executive’s death certificate is received by the Bank and continuing for the 179 months thereafter, resulting in a total of 180 payments.      3.2 Death During Period in Which Benefits Being Paid. If the Executive dies after any benefit payments have commenced under this Agreement but before receiving all such payments, the Bank shall pay the remaining benefits to the Executive’s beneficiary at the same time and in the same amounts they would have been paid to the Executive had the Executive survived.      3.3 Death Following Termination of Employment But Before Retirement Benefits Commence. If the Executive is entitled to benefits under this Agreement, but dies prior to receiving said benefits, the Bank shall pay to the Executive’s beneficiary the same benefits, in the same manner, that would have been paid to the Executive had the Executive survived; however, said benefit payments will commence within 90 days of receipt by the Bank of the Executive’s death certificate.      3.4 Limitations. All benefits payable under this Article 3 shall be subject to the limitations contained in Article 5 of this Agreement. 4 --------------------------------------------------------------------------------   Article 4 Beneficiaries      4.1 Beneficiary Designations. The Executive shall designate a beneficiary by filing a written designation with the Bank. The Executive may revoke or modify the designation at any time by filing a new designation. However, designations and revocation or modification of designations shall only be effective if they are filed with the Bank as a written document, signed by the Executive and received by the Bank 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 estate. Upon commencement of any payments due hereunder to the Executive’s beneficiary in accordance with the terms of this Agreement, the beneficiary shall designate his or her beneficiary by filing a written designation with the Bank. In the event the Executive’s beneficiary dies after commencement of benefits due hereunder to the beneficiary but prior to receiving all the payments due thereto under the terms hereof without a valid beneficiary designation, all payments shall be made to the beneficiary’s estate,      4.2 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 Bank 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 Bank may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Bank from all liability with respect to such benefit. Article 5 General Limitations      All benefits payable under this Agreement shall be subject to the following limitations:      5.1 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement, if the Bank terminates the Executive’s employment for cause. Termination of the Executive’s employment for “Cause” shall mean termination because of personal dishonesty by the Executive in the performance of his duties which results in demonstrable material injury to the Bank, willful misconduct by the Executive which remains uncured 15 days following the giving of written notice thereof to the Executive, breach by the Executive of a fiduciary duty to the Bank involving personal profit, intentional failure to perform stated duties following the giving of written notice thereof to the Executive, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order or material breach of any material provision of the Agreement. For purposes of this paragraph, no act or failure to act on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s action or omission was in the best interest of the Bank.      5.2 Removal. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement if the Executive is subject to a final removal or 5 --------------------------------------------------------------------------------   prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act.      5.3 Competition after Termination of Employment. The Executive shall forfeit his right to any further benefits hereunder if the Executive, without the prior written consent of the Bank, violates any of the following described restrictive covenants.      5.3.1 Non-compete Provision. The Executive shall not, for a period of 12 months following termination of employment, directly or indirectly, either as an individual or as a proprietor, stockholder, partner, officer, trustee, director, employee, agent, consultant or independent contractor of any individual, partnership, corporation or other entity (excluding an ownership interest of five percent (5%) or less in the stock of a publicly-traded company):   (i)   become employed by, participate in, or be connected in any manner with the ownership, management, operation or control of any bank, savings and loan or other similar financial institution if the Executive’s responsibilities will include providing banking or other financial services within the twenty-five (25) mile radius of the main office maintained by the Bank as of the date of the termination of the Executive’s employment;     (ii)   participate in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part-time or permanent basis, any individual who was employed by the Bank as of the date of termination of the Executive’s employment;     (iii)   sell, offer to sell, provide banking or other financial services, assist any other person in selling or providing banking or other financial services, or solicit or otherwise compete for, either directly or indirectly, any orders, contracts, or accounts for services of a kind or nature like or substantially similar to the financial services performed or financial products sold by the Bank (the preceding hereinafter referred to as “Services”), to or from any person or entity from whom the Executive or the Bank, to the knowledge of the Executive, provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services during the three (3) year period immediately prior to the termination of the Executive’s employment; or     (iv)   divulge, disclose, or communicate to others in any manner whatsoever, any nonpublic confidential information of the Corporation or the Bank or any of its subsidiaries, including, but not limited to, the names and addresses of customers or prospective customers, of the Bank or any of its subsidiaries, as they may have existed from time to time, work performed or services rendered for any customer, any method and/or procedures relating to projects or other work developed for the Bank or any of its subsidiaries, earnings or other information concerning the Corporation or the Bank or any of its subsidiaries. The restrictions contained in this subparagraph (iv) apply to all nonpublic 6 --------------------------------------------------------------------------------         confidential information regarding the Corporation or the Bank, regardless of the source who provided or compiled such information. Notwithstanding anything to the contrary, the restriction set forth in this paragraph shall not apply to any information that becomes known to the general public from sources other than the Executive.      5.3.2 Judicial Remedies. In the event of a breach or threatened breach by the Executive of any provision of these restrictions, the Executive recognizes the substantial and immediate harm that a breach or threatened breach will impose upon the Bank, and further recognizes that in such event monetary damages may be inadequate to fully protect the Bank. Accordingly, in the event of a breach or threatened breach of this Agreement, the Executive consents to the Bank’s entitlement to such ex parte, preliminary, interlocutory, temporary or permanent injunctive, or any other equitable relief, protecting and fully enforcing the Bank’s rights hereunder and preventing the Executive from further breaching any of his obligations set forth herein. The Executive expressly waives any requirement, based on any statute, rule of procedure, or other source, that the Bank post a bond as a condition of obtaining any of the above-described remedies. Nothing herein shall be construed as prohibiting the Bank from pursuing any other remedies available to the Bank at law or in equity for such breach or threatened breach, including the recovery of damages from the Executive. The Executive expressly acknowledges and agrees that: (i) the restrictions set forth in Section 5.3.1 hereof are reasonable in terms of scope, duration, geographic area and otherwise, (ii) the protections afforded the Bank in Section 5.3.1 hereof are necessary to protect its legitimate business interests, (iii) the restrictions set forth in Section 5.3.1 hereof will not be materially adverse to the Executive’s employment with the Bank, and (iv) his agreement to observe such restrictions forms a material part of the consideration for this Agreement.      5.3.3 Overbreadth of Restrictive Covenant. It is the intention of the parties that if any restrictive covenant in this Agreement is determined by a court of competent jurisdiction to be overly broad, then the court should enforce such restrictive covenant to the maximum extent permitted under the law as to area, scope, breadth and duration.      5.3.4 Applicability in Change in Control. The non-compete provision detailed in Section 5.3.1 hereof shall not be applicable following a Change in Control.      5.4 Suicide or Misstatement. No benefits shall be payable if the Executive commits suicide within two years after the date of this Agreement, or if the insurance company denies coverage for material misstatements of fact made by the Executive on any application for life insurance purchased by the Bank or for any other reason. The Bank shall have no liability to the Executive for any denial of coverage by the insurance company.      5.5 Severability. A determination that any provision of this Agreement is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof. 7 --------------------------------------------------------------------------------   Article 6 Claims and Review Procedures      6.1 Claims Procedure. An Executive or beneficiary (“claimant”) who has not received benefits under the Agreement that he or she believes should be paid shall make a claim for such benefits as follows:      6.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the Bank a written claim for the benefits.      6.1.2 Timing of Bank Response. The Bank shall respond to such claimant within 90 days after receiving the claim. If the Bank determines that special circumstances require additional time for processing the claim, the Bank can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Bank expects to render its decision.      6.1.3 Notice of Decision. If the Bank denies part or all of the claim, the Bank shall notify the claimant in writing of such denial. The Bank shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:      6.1.3.1 The specific reasons for the denial;      6.1.3.2 A reference to the specific provisions of the Agreement on which the denial is based;      6.1.3.3 A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;      6.1.3.4 An explanation of the Agreement’s review procedures and the time limits applicable to such procedures; and      6.1.3.5 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.      6.2 Review Procedure. If the Bank denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Bank of the denial, as follows:      6.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Bank’s notice of denial, must file with the Bank a written request for review.      6.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Bank shall also provide the claimant, upon request and free of charge, reasonable 8 --------------------------------------------------------------------------------   access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.      6.2.3 Considerations on Review. In considering the review, the Bank shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.      6.2.4 Timing of Bank Response. The Bank shall respond in writing to such claimant within 60 days after receiving the request for review. If the Bank determines that special circumstances require additional time for processing the claim, the Bank can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Bank expects to render its decision.      6.2.5 Notice of Decision. The Bank shall notify the claimant in writing of its decision on review. The Bank shall write the notification in a manner calculated to be understood by the claimant. If the decision is a denial, the notification shall set forth:      6.2.5.1 The specific reasons for the denial;      6.2.5.2 A reference to the specific provisions of the Agreement on which the denial is based;      6.2.5.3 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 (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and      6.2.5.4 A statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA. Article 7 Amendments and Termination      This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Executive, except as provided by the provisions of Article 5 and except as set forth below. This Agreement may be terminated within the 30 days preceding a Change in Control if (1) all substantially similar arrangements sponsored by the Bank and 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. In addition, notwithstanding anything in this Agreement to the contrary, the Bank may amend in good faith any terms of this Agreement, including retroactively, in order to comply with Section 409A of the Code. In no event shall the Corporation or the Bank be liable for any taxes or interest penalties incurred by the Executive under Section 409A of the Code. 9 --------------------------------------------------------------------------------   Article 8 Miscellaneous      8.1 Binding Effect. This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, successors, administrators and transferees.      8.2 No Guarantee 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 Bank, nor does it interfere with the Bank’s right to terminate the Executive’s employment. It also neither requires the Executive to remain in employment with the Bank nor interferes with the Executive’s right to terminate his employment with the Bank at any time.      8.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.      8.4 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.      8.5 Applicable Law. This 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.      8.6 Reorganization. The Bank shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to another company, firm, or person unless such succeeding or continuing company, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to the successor or survivor company.      8.7 Unfunded Arrangement. The Executive and the beneficiary thereof are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay such benefits. The rights to 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 Bank to which the Executive and beneficiary have no preferred or secured claim.      8.8 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.      8.9 Administrator. The Bank shall be the administrator of this Agreement. The Bank may delegate to others certain aspects of the management and operational responsibilities including the service of advisors and the delegation of ministerial duties to qualified individuals. 10 --------------------------------------------------------------------------------        8.10 Administration. The Bank shall have powers which are necessary to administer this Agreement, including but not limited to:      8.10.1 Interpreting the provisions of the Agreement;      8.10.2 Establishing and revising the method of accounting for the Agreement;      8.10.3 Maintaining a record of benefit payments;      8.10.4 Establishing rules and prescribing any forms necessary or desirable to administer the Agreement; and      8.10.5 Delegate any of the foregoing powers to any person or persons or committee or committees.      8.11 Right of Offset. The Bank shall have the right to offset the benefits against any unpaid obligation the Executive may have with the Bank.      8.12 Notice. Any notice, consent or demand required or permitted to be given under the provisions of this Agreement by one party to another shall be in writing, shall be signed by the party giving or making the same, and may be given either by delivering the same to such other party personally, or by mailing the same, by United States certified mail, postage prepaid, to such party, addressed to his or her last known address as shown on the records of the Bank. The date of such mailing shall be deemed the date of such mailed notice, consent or demand.      IN WITNESS WHEREOF, the Executive and the Bank have signed this Agreement.                   EXECUTIVE:       LAUREL SAVINGS BANK:                               By:                                     Date           Title:                            By execution hereof, Laurel Capital Group, Inc. consents to and agrees to be bound by the terms and conditions of this Agreement.               ATTEST:       LAUREL CAPITAL GROUP, INC.:                       By:                                         Title:                   11 --------------------------------------------------------------------------------   BENEFICIARY DESIGNATION LAUREL SAVINGS BANK SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT ___________ I designate the following as beneficiary of any death benefits under this Agreement:       Primary:                         Contingent:                   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 Bank. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved. Signature ______________________________ Date __________________________________ Received by the Bank this ______ day of _________________, 200_. By ____________________________________ Title __________________________________ 12

  Exhibit 10.76 (BUSINESS OBJECTS LOGO) [f24753f2475300.gif] BUSINESS OBJECTS S.A. CHANGE OF CONTROL SEVERANCE AGREEMENT      This Change of Control Severance Agreement (the “Agreement”) is made and entered into by and between                     (the “Employee”) and Business Objects S.A. (the “Company”), effective as of                     (the “Effective Date”). RECITALS      1. It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control. The Board of Directors of the Company (the “Board”) recognizes that such consideration can be a distraction to the Employee and can cause the Employee to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of the Employee, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein) of the Company.      2. The Board believes that it is in the best interests of the Company and its stockholders to provide the Employee with an incentive to continue his or her employment and to motivate the Employee to maximize the value of the Company upon a Change of Control for the benefit of its stockholders.      3. The Board believes that it is imperative to provide the Employee with certain severance benefits upon the Employee’s termination of employment following a Change of Control. These benefits will provide the Employee with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control.      4. Certain capitalized terms used in the Agreement are defined in Section 6 below. AGREEMENT      NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:      1. Term of Agreement. This Agreement shall terminate upon the date that all of the obligations of the parties hereto with respect to this Agreement have been satisfied.      2. At-Will Employment. The Company and the Employee acknowledge that the Employee’s employment is and shall continue to be at-will, as defined under applicable law, except as may otherwise be specifically provided under the terms of any written formal employment agreement or offer letter between the Company and the Employee (an “Employment Agreement”). Change of Control Template — U.S. — August 2006   --------------------------------------------------------------------------------   If the Employee’s employment terminates for any reason, including (without limitation) any termination prior to a Change of Control, the Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement or under his or her Employment Agreement, or as may otherwise be available in accordance with the Company’s established employee plans.      3. Severance Benefits.           (a) Involuntary Termination Other than for Cause or Voluntary Termination for Good Reason Following a Change of Control. If within twelve (12) months following a Change of Control (i) the Employee terminates his or her employment with the Company (or any parent or subsidiary of the Company) for “Good Reason” (as defined herein), or (ii) the Company (or any parent or subsidiary of the Company) terminates the Employee’s employment for other than “Cause” (as defined herein), and the Employee, signs and does not revoke a standard release of claims with the Company in a form acceptable to the Company, then the Employee shall receive the following severance benefits from the Company:                (i) Severance Payment. The Employee shall be entitled to receive a lump-sum severance payment (less applicable withholding taxes) equal to 150% of the Employee’s annual base salary (as in effect immediately prior to (A) the Change of Control, or (B) the Employee’s termination, whichever is greater) plus 150% of the Employee’s target bonus for the fiscal year in which the Change of Control or the Employee’s termination occurs, whichever is greater.                (ii) Options; Restricted Stock, Other Equity Compensation. All of the Employee’s then outstanding options to purchase shares of the Company’s Common Stock (the “Options”) shall immediately vest and become exercisable. The Options shall remain exercisable following the termination for the period prescribed in the respective option agreements. Additionally, all of the shares of the Company’s Common Stock then held by the Employee subject to a Company repurchase or forfeiture right (the “Restricted Stock”) shall immediately vest and the Company’s right of repurchase or receipt upon forfeiture with respect to such shares of Restricted Stock shall immediately lapse. All other Company equity compensation held by the Employee shall also immediately vest and the Company’s right to repurchase or receive upon forfeiture shall also immediately lapse.                (iii) Continued Employee Benefits. Company-paid health, dental, vision, and life insurance coverage at the same level of coverage as was provided to the Employee immediately prior to the Change of Control and at the same ratio of Company premium payment to Employee premium payment as was in effect immediately prior to the Change of Control (the “Company-Paid Coverage”) will continue as set out in this subparagraph. If such coverage included the Employee’s dependents immediately prior to the Change of Control, such dependents shall also be covered at Company expense. Company-Paid Coverage shall continue until the earlier of (i) eighteen (18) months from the date of termination, or (ii) the date upon which the Employee and his dependents become covered under another employer’s group health, dental, vision and life insurance plans that provide Employee and his dependents with comparable benefits and levels of coverage. For purposes of Title X of the Consolidated Budget Reconciliation Act of 1985 (“COBRA”), the date of the “qualifying event” for Employee and his or her dependents shall be the date upon which the Company-Paid Coverage terminates. Change of Control Template — U.S. — August 2006 -2- --------------------------------------------------------------------------------             (b) Timing of Severance Payments. The severance payment to which Employee is entitled shall be paid by the Company to Employee in cash and in full, not later than ten (10) calendar days after the date of the termination of Employee’s employment. If the Employee should die before all amounts have been paid, such unpaid amounts shall be paid in a lump-sum payment (less any withholding taxes) to the Employee’s designated beneficiary, if living, or otherwise to the personal representative of the Employee’s estate.           (c) Voluntary Resignation; Termination for Cause. If the Employee’s employment with the Company terminates within twelve (12) months following a Change of Control (i) voluntarily by the Employee other than for Good Reason or (ii) for Cause by the Company, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company’s then existing severance and benefits plans and practices or pursuant to other written agreements with the Company.           (d) Termination Apart from Change of Control. In the event the Employee’s employment is terminated for any reason, either prior to a Change of Control or after the twelve (12) month period following a Change of Control, then the Employee shall be entitled to receive severance and any other benefits only as may then be established under the Company’s existing written severance and benefits plans and practices or pursuant to other written agreements with the Company.           (e) Exclusive Remedy. In the event of a termination of Employee’s employment within twelve (12) months following a Change of Control, the provisions of this Section 3 are intended to be and are exclusive and in lieu of any other rights or remedies to which the Employee or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement, and the Employee shall be entitled to no benefits, compensation or other payments or rights upon termination of employment within twelve (12) months following a Change in Control other than those benefits expressly set forth in this Section 3.      4. Non-Competition/Non-Solicitation.           (a) Non-Competition. Employee acknowledges that the nature of the Company’s business is such that if Employee were to become employed by, or substantially involved in, the business of a competitor of the Company during the eighteen (18) months following the termination of Employee’s employment with the Company (or any parent or subsidiary of the Company), it would be very difficult for Employee not to rely on or use the Company’s trade secrets and confidential information. Thus, to avoid the inevitable disclosure of the Company’s trade secrets and confidential information, Employee agrees and acknowledges that Employee’s right to receive or retain the severance payments set forth in Section 3 (to the extent Employee is otherwise entitled to such payments) shall be conditioned upon Employee, for a period of eighteen (18) months after termination of the Employee’s employment with the Company (or any parent or subsidiary of the Company), not directly or indirectly engaging in (whether as an employee, consultant, agent, proprietor, principal, partner, stockholder, corporate officer, director or otherwise), nor having any ownership interest in or participating in the financing, operation, management or control of, any person, firm, corporation or business in Competition (as defined herein) with the Company. Notwithstanding the foregoing, Employee may, without violating this Section 4, own, as a passive investment, shares of capital stock of a publicly-held corporation that engages in Competition where the number of shares of such corporation’s capital stock that are owned by Employee represent less than three percent of the total number of shares of such corporation’s capital stock outstanding. For Change of Control Template — U.S. — August 2006 -3- --------------------------------------------------------------------------------   the purposes of this Section 4, “Competition” means the development, designing, manufacturing, marketing, distributing or servicing of business intelligence software products.           (b) Non-Solicitation. Employee acknowledges that the nature of the Company’s business is such that if Employee were to solicit, induce, recruit or encourage an employee to leave his or her employment with the Company (or any parent or subsidiary of the Company), or were to attempt to or cause any prospective or current client or customer to purchase products from a third party rather than the Company, this would have a significant adverse impact upon the Company. Thus, to avoid any such solicitation of employees, clients or customers, until the date eighteen (18) months after the termination of Employee’s employment with the Company (or any parent or subsidiary of the Company), for any reason, Employee agrees and acknowledges that Employee’s right to receive or retain the severance payments set forth in Section 3 (to the extent Employee is otherwise entitled to such payments) shall be conditional upon Employee not:                (i) directly or indirectly soliciting, inducing, recruiting or encouraging an employee to leave his or her employment with the Company (or any parent or subsidiary of the Company), either for the Employee or for any other entity or person with which or whom the Employee has a business relationship; and                (ii) on his or her own behalf or on behalf of any other person, firm, or company, solicit, call upon, or otherwise initiate communication with any client, customer, prospective client, or prospective customer of the Company for the purpose of causing or attempting to cause any such person to purchase products sold or services rendered by the Company from any person or entity other than the Company.           (c) Understanding of Covenants. Employee represents that he or she (i) is familiar with the foregoing covenants not to compete and not to solicit, and (ii) is fully aware of his obligations hereunder, including, without limitation, the reasonableness of the length of time, scope and geographic coverage of these covenants.           (d) Remedy for Breach.                (i) Upon any breach of this Section 4 by the Employee, all severance payments and benefits pursuant to this Agreement shall immediately cease and, notwithstanding the terms of the Employee’s stock option agreement(s), any stock options then held by Employee shall immediately terminate and be of no further force and effect, and Employee shall be obligated to return any payments already made under Section 3 hereof, including but not limited to, any gains from the sale of accelerated equity awards thereunder and any group health insurance premiums paid by the Company.                (ii) The Employee agrees that a breach by the Employee of any of the covenants contained in Section 4 would result in damages to the Company and that the Company could not adequately be compensated for such damages by monetary award. Accordingly, the Employee agrees that in the event of any such breach, in addition to all other remedies available to the Company at law or in equity, the Company shall be entitled as a matter of right to apply to a court of competent jurisdiction, in California, for such relief by way of restraining order, injunction, decree or otherwise, as may be appropriate to ensure compliance with the provisions of this agreement. Change of Control Template — U.S. — August 2006 -4- --------------------------------------------------------------------------------        5. Golden Parachute Excise Tax Best Results. In the event that the severance and other benefits provided for in this agreement or otherwise payable to Employee (a) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and (b) would be subject to the excise tax imposed by Section 4999 of the Code, then such benefits shall be either be   (i)   delivered in full, or     (ii)   delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income and employment taxes and the excise tax imposed by Section 4999, results in the receipt by Employee, on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. Unless the Company and the Employee otherwise agree in writing, the determination of Employee’s excise tax liability and the amount required to be paid under this Section 5 shall be made in writing by the Company’s independent auditors who are primarily used by the Company immediately prior to the Change of Control (the “Accountants”). For purposes of making the calculations required by this Section 5, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Employee shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 5.      6. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings:           (a) Cause. “Cause” shall mean (i) an act of personal dishonesty taken by the Employee in connection with his or her responsibilities as an employee and intended to result in substantial personal enrichment of the Employee, (ii) Employee being convicted of, or plea of nolo contendere to, a felony, (iii) a willful act by the Employee which constitutes gross misconduct and which is injurious to the Company, (iv) following delivery to the Employee of a written demand for performance from the Company which describes the basis for the Company’s reasonable belief that the Employee has not substantially performed his duties, continued violations by the Employee of the Employee’s obligations to the Company which are demonstrably willful and deliberate on the Employee’s part which, if curable, continues for a period of not less than thirty (30) days following delivery to Employee of the written demand of performance.           (b) Change of Control. “Change of Control” means the occurrence of any of the following, in one or a series of related transactions:                (i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or Change of Control Template — U.S. — August 2006 -5- --------------------------------------------------------------------------------                  (ii) Any action or event occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or                (iii) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation 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) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or                (iv) The consummation of the sale, lease or other disposition by the Company of all or substantially all the Company’s assets.           (c) Good Reason. “Good Reason” means without the Employee’s express written consent (i) a substantial reduction of the Employee’s duties, title, authority or responsibilities, relative to the Employee’s duties, title, authority or responsibilities as in effect immediately prior to such reduction, or the assignment to Employee of such reduced duties, title, authority or responsibilities; provided, however, that a reduction in duties, title, authority or responsibilities solely by virtue of the Company being acquired and made part of a larger entity (as, for example, when the Chief Financial Officer of the Company remains the Chief Financial Officer of the subsidiary or business unit substantially containing the Company’s business following a Change of Control) shall not by itself constitute grounds for a “Voluntary Termination for Good Reason;” provided, further, that Employee’s acceptance of a new position on or after a Change of Control shall not in and of itself constitute express written consent that such position does not constitute a substantial reduction in Employee’s duties, title, authority or responsibilities; (ii) a substantial reduction of the facilities and perquisites (including office space and location) available to the Employee immediately prior to such reduction; (iii) a reduction by the Company in the base compensation of the Employee as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of benefits to which the Employee was entitled immediately prior to such reduction with the result that such Employee’s overall benefits package is significantly reduced; (v) the relocation of the Employee to a facility or a location more than thirty-five (35) miles from such Employee’s then present location. Notwithstanding the foregoing, Good Reason shall not exist based on conduct described above unless Employee provides the Company with written notice specifying the particulars of the conduct constituting Good Reason, and the conduct described (if reasonably susceptible of cure) has not been cured within thirty (30) days following receipt by the Company of such notice.      7. Successors.           (a) The Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) and/or to all or substantially all of the Company’s business and/or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence Change of Control Template — U.S. — August 2006 -6- --------------------------------------------------------------------------------   of a succession. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets which executes and delivers an assumption agreement described in this Section 7(a) or which becomes bound by the terms of this Agreement by operation of law.           (b) The Employee’s Successors. The terms of this Agreement and all rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.      8. Notice.           (a) General. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one (1) business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one (1) business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to Employee, at his or her last known residential address and (ii) if to the Company, at the address of its principal corporate offices (attention: Secretary), or in any such case at such other address as a party may designate by ten (10) days’ advance written notice to the other party pursuant to the provisions above.           (b) Notice of Termination. Any termination by the Company (or any parent or subsidiary of the Company), for Cause or by the Employee for Good Reason or as a result of a voluntary resignation shall be communicated by a notice of termination to the other party hereto given in accordance with Section 8(a) of this Agreement. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than thirty (30) days after the giving of such notice). The failure by the Employee to include in the notice any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Employee hereunder or preclude the Employee from asserting such fact or circumstance in enforcing his or her rights hereunder.      9. Miscellaneous Provisions.           (a) Code Section 409A. The parties agree to amend this Agreement to the extent necessary to avoid imposition of any additional tax or income recognition prior to actual payment to Employee under Code section 409A and any temporary or final Treasury Regulations and IRS guidance thereunder.           (b) No Duty to Mitigate. The Employee shall not be required to mitigate the amount of any payment contemplated by this Agreement, nor shall any such payment be reduced by any earnings that the Employee may receive from any other source.           (c) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by Change of Control Template — U.S. — August 2006 -7- --------------------------------------------------------------------------------   the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.           (d) Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.           (e) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof, including but not limited to the [ ] Agreement dated [ ] between [ ] and [ ].           (f) Termination of [ ] Agreement. The [ ] Agreement is hereby terminated as of the Effective Date, and shall have no further force or effect.           (g) Choice of Law. The validity, interpretation, construction and performance of all aspects of this Agreement relating to whether a Change of Control has occurred shall be governed by and construed in accordance with the applicable laws of the Republic of France, and all other aspects of this Agreement shall otherwise be subject to California law, without regard to conflicts of laws. The Superior Court of Santa Clara County and/or the United States District Court for the Northern District of California shall have exclusive jurisdiction and venue over all controversies in connection with this Agreement.           (h) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.           (i) Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes.           (j) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Change of Control Template — U.S. — August 2006 -8- --------------------------------------------------------------------------------   IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.               COMPANY   BUSINESS OBJECTS S.A.                       By:                               John G. Schwarz         Title:   Chief Executive Officer                   EMPLOYEE   By:                                         Title:         Change of Control Template — U.S. — August 2006 -9-

Exhibit 10.4           THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER ANY STATE SECURITIES LAWS, IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION FOR NON-PUBLIC OFFERINGS. THIS SECURITY MAY NOT BE SOLD OR TRANSFERRED UNLESS IT IS REGISTERED UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR UNLESS THE ISSUER RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE. Warrant No.: C-1 Issuance Date: March __, 2006 UNITED ENERGY CORP. FEBRUARY 2006 SERIES C PURCHASE WARRANT WARRANT (“WARRANT”) TO PURCHASE SHARES OF COMMON STOCK, $0.01 PAR VALUE PER SHARE           This is to certify that, FOR VALUE RECEIVED, Sherleigh Associates Inc. Profit Sharing Plan(“Warrantholder”), is entitled to purchase, subject to the provisions of this Warrant, from United Energy Corp., a corporation organized under the laws of Nevada (“Company”), at any time and from time to time commencing from the Issuance Date (“Exercise Date”), but not later than 5:00 P.M., Eastern time, on the fifth (5th) anniversary of the Issuance Date (“Expiration Date”), a total of FIVE MILLION FOUR THOUSAND (5,004,000) shares (“Warrant Shares”) of Common Stock, $0.01 par value (“Common Stock”) of the Company, at an initial exercise price per share of One Dollar ($1.00). The exercise price in effect from time to time is hereafter called the “Warrant Price”. The number of Warrant Shares purchasable upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as described herein.           This Warrant has been issued pursuant to the terms of the Securities Purchase Agreement as amended (“Purchase Agreement”) dated March 18, 2005 between the Company and the Warrantholder and more specifically, pursuant to the Second Amendment thereto. Capitalized terms used herein and not defined shall have the meaning specified in the Purchase Agreement.                Section 1. Registration. The Company shall maintain books for the transfer and registration of the Warrant. Upon the initial issuance of the Warrant, the Company shall issue and register the Warrant in the name of the Warrantholder.                Section 2. Transfers. As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the Securities Act or an exemption from registration thereunder. Subject to such restrictions, the Company shall transfer this Warrant from time to time, upon the books to be maintained by the Company for that purpose, upon -------------------------------------------------------------------------------- surrender hereof for transfer properly endorsed or accompanied by appropriate instructions for transfer upon any such transfer, and a new Warrant shall be issued to the transferee and the surrendered Warrant shall be canceled by the Company.                Section 3. (a) Exercise of Warrant. Subject to the provisions hereof, the Warrantholder may exercise this Warrant in whole or in part at any time and from time to time on and after the Exercise Date and ending on the Expiration Date, upon surrender of the original of this Warrant, together with delivery of the duly executed Warrant exercise form attached hereto (the “Exercise Agreement”) (which may be by fax), to the Company during normal business hours on any business day at the Company’s principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), and upon payment to the Company in cash, by certified or official bank check or by wire transfer for the account of the Company of the Warrant Price for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued to the holder hereof or such holder’s designee, as the record owner of such shares, as of the close of business on the date on which the completed Exercise Agreement and original of this Warrant shall have been delivered to the Company (or such later date as may be specified in the Exercise Agreement). Certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in the Exercise Agreement, shall be delivered to the holder hereof within a reasonable time, not exceeding two (2) Business Days, after this Warrant shall have been so exercised. The certificates so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of such holder or such other name as shall be designated by such holder. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall (subject to Section 3(b) below), at its expense, at the time of delivery of such certificates, deliver to the holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. In lieu of delivering physical certificates representing the shares of Common Stock issuable upon exercise of this Warrant, provided the Company’s transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program and such certificates can be issued without restrictive legends in accordance with applicable securities laws, upon request of the Warrantholder, the Company shall use commercially reasonable efforts to cause its transfer agent to electronically transmit such shares issuable upon exercise to the Warrantholder (or its designee), by crediting the account of the Warrantholder’s (or such designee’s) prime broker with DTC through its Deposit Withdrawal Agent Commission system (provided that the same time periods herein as for stock certificates shall apply).                     (b) If the Company shall fail for any reason or for no reason (other than by reason of a failure, breach or omission on the part of the Warrantholder) to issue to the Warrantholder within three (3) Business Days after the warrant has been exercised, a certificate for the number of shares of Common Stock to which the Warrantholder is entitled or to credit such holder’s designee’s balance account with DTC, in accordance with Section 3(a) hereof, for such number of shares of Common Stock to which the holder is entitled upon the Warrantholder’s exercise of this Warrant, the Company shall, in addition to any other remedies under this Warrant or otherwise available to such holder, pay as additional damages in cash to such holder on each day such exercise is not timely effected an amount equal to 5.0% multiplied by the product of (I) the sum of the number of shares of Common Stock not issued to such holder 2 -------------------------------------------------------------------------------- and to which such holder is entitled and (II) the excess of the Closing Sale Price of the Common Stock as of the exercise date over the Warrant Exercise Price then in effect.                     (c) the holder of this Warrant may, at its election exercised in its sole discretion, exercise this Warrant and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Warrant Price for the Warrant Shares specified in the Exercise Agreement, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (a “Cashless Exercise”):           Net Number =   (A Í B) - (A Í C)       --------------------------------------------------------------------------------       B             For purposes of the foregoing formula:       A= the total number of shares with respect to which this Warrant is then being exercised.       B= the Closing Sale Price of the Common Stock on the trading day immediately preceding the date of the Exercise Agreement.       C= the Warrant Price then in effect at the time of such exercise.                Section 4. Compliance with the Securities Act of 1933. Neither this Warrant nor the Common Stock issued upon exercise hereof nor any other security issued or issuable upon exercise of this Warrant may be offered or sold except as provided in this Warrant and in conformity with the Securities Act, as amended, and then only against receipt of an agreement of such person to whom such offer of sale is made to comply with the provisions of this Section 4 with respect to any resale or other disposition of such security. The Company may cause the legend set forth on the first page of this Warrant to be set forth on each Warrant or similar legend on any security issued or issuable upon exercise of this Warrant until the Warrant Shares have been registered for resale under the Registration Rights Agreement or until Rule 144 is available, unless counsel for the Company is of the opinion as to any such security that such legend is unnecessary.                Section 5. Payment of Taxes. The Company will pay any documentary stamp taxes attributable to the initial issuance of Warrant Shares issuable upon the exercise of the Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered holder of this Warrant in respect of which such shares are issued. The holder shall be responsible for income taxes due under federal or state law, if any such tax is due.                Section 6. Mutilated or Missing Warrants. In case this Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and substitution of and 3 -------------------------------------------------------------------------------- upon cancellation of the mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and for the purchase of a like number of Warrant Shares, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of the Warrant, and with respect to a lost, stolen or destroyed Warrant, reasonable indemnity or bond with respect thereto, if reasonably requested by the Company.                Section 7. Reservation of Common Stock. The Company hereby represents and warrants that there have been reserved, and the Company shall at all applicable times keep reserved, out of the authorized and unissued Common Stock, a number of shares sufficient to provide for the exercise of the rights of purchase represented by the Warrant in full (without regard to any restrictions on beneficial ownership contained herein), and the transfer agent for the Common Stock, including every subsequent transfer agent for the Common Stock or other shares of the Company’s capital stock issuable upon the exercise of any of the right of purchase aforesaid (“Transfer Agent”), shall be irrevocably authorized and directed at all times to reserve such number of authorized and unissued shares of Common Stock as shall be requisite for such purpose. The Company agrees that all Warrant Shares issued upon exercise of the Warrant in accordance with its terms shall be, at the time of delivery of the certificates for such Warrant Shares, duly authorized, validly issued, fully paid and non-assessable shares of Common Stock of the Company. The Company will keep a conformed copy of this Warrant on file with its Transfer Agent. The Company will supply from time to time the Transfer Agent with duly executed stock certificates required to honor the outstanding Warrant.                Section 8. Warrant Price. The Warrant Price, subject to adjustment as provided in Section 9, shall, if payment is made in cash or by certified check, be payable in lawful money of the United States of America.                Section 9. Adjustment of Warrant Exercise Price and Number Of Shares. The Warrant Price and the number of shares of Common Stock issuable upon exercise of this Warrant shall be adjusted from time to time as follows:                     a. Adjustment of Warrant Price. If and whenever on or after the Issuance Date, the Company issues or sells, or is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but with the exception of Excluded Issuances) for a consideration per share less than a price (the “Applicable Price”) equal to the Warrant Price in effect immediately prior to such issuance or sale, then concurrent with such issue or sale, the Warrant Price then in effect shall be reduced to a price equal to such consideration per share. Upon each such adjustment of the Warrant Price hereunder, the number of shares of Common Stock acquirable upon exercise of this Warrant shall be adjusted to the number of shares determined by multiplying the Warrant Price in effect immediately prior to such adjustment by the number of shares of Common Stock acquirable upon exercise of this Warrant immediately prior to such adjustment and dividing the product thereof by the Warrant Price resulting from such adjustment. 4 --------------------------------------------------------------------------------                     b. Effect on Warrant Exercise Price. For purposes of determining the adjusted Warrant Price under Section 9(a) above, the following shall be applicable:                     (i) Issuance of Options. If the Company in any manner grants any Options (other than Excluded Issuances) and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exchange or exercise of any Convertible Securities issuable upon exercise of any such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 9(b)(i), the “lowest price per share for which one share of Common Stock is issuable upon exercise of any such Option or upon conversion, exchange or exercise of any Convertible Securities issuable upon exercise of any such Option” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting or sale of the Option, upon exercise of the Option and upon conversion, exchange or exercise of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Warrant Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion, exchange or exercise of such Convertible Securities.                     (ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities (other than Excluded Issuances) and the lowest price per share for which one share of Common Stock is issuable upon such conversion, exchange or exercise thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 9(b)(ii), the “lowest price per share for which one share of Common Stock is issuable upon such conversion, exchange or exercise” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exchange or exercise of such Convertible Security. No further adjustment of the Warrant Price shall be made upon the actual issuance of such Common Stock upon conversion, exchange or exercise of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Warrant Price had been or are to be made pursuant to other provisions of this Section 9(b), no further adjustment of the Warrant Price shall be made by reason of such issue or sale.                     (iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exchange or exercise of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exchangeable or exercisable for Common Stock changes at any time (other than Excluded Issuances, in each case), the Warrant Price in effect at the time of such change shall be adjusted to the Warrant Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold and the number of shares of Common Stock acquirable hereunder shall be 5 -------------------------------------------------------------------------------- correspondingly readjusted. For purposes of this Section 9(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the date of issuance of this Warrant are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon conversion, exchange or exercise thereof shall be deemed to have been issued as of the date of such change.                     (iv) Calculation of Consideration Received. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $0.01. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by the Company will be equal to the arithmetic average of the Closing Sale Prices of such marketable securities for the ten (10) consecutive trading days immediately preceding the date of receipt. If any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the holders of a majority of the Preferred Shares then outstanding. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Business Days after the tenth (10th) day following the Valuation Event by an independent, reputable appraiser jointly selected by the Company and the holders of a majority of the Preferred Shares then outstanding. The determination of such appraiser shall be deemed binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne equally by the Company and the holders of the Preferred Shares.                     (v) No adjustment pursuant to this Section 9(b) shall be made if such adjustment would result in an increase of the Warrant Price then in effect.                 c. Certain Events.                     (i) If the Company or any of its subsidiaries shall at any time or from time to time while the Warrant is outstanding, pay a dividend or make a distribution on its capital stock in shares of Common Stock, subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares into a smaller number of shares or issue by reclassification of its outstanding shares of Common Stock any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then the number of Warrant Shares purchasable upon exercise of the Warrant and the Warrant Price in effect immediately prior to the date upon which 6 -------------------------------------------------------------------------------- such change shall become effective, shall be adjusted by the Company so that the Warrantholder thereafter exercising the Warrant shall be entitled to receive the number of shares of Common Stock or other capital stock which the Warrantholder would have received if the Warrant had been exercised immediately prior to such event. Such adjustment shall be made successively whenever any event listed above shall occur.                     (ii) If any capital reorganization, reclassification of the capital stock of the Company, consolidation or merger of the Company with another corporation, or sale, transfer or other disposition of all or substantially all of the Company’s assets to another corporation shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be made whereby each Warrantholder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of the Warrant, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of Warrant Shares equal to the number of Warrant Shares immediately theretofore issuable upon exercise of the Warrant, had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of each Warrantholder to the end that the provisions hereof (including, without limitations, provision for adjustment of the Warrant Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or properties thereafter deliverable upon the exercise hereof. The Company shall not effect any such consolidation, merger, sale, transfer or other disposition unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume, by written instrument executed and delivered to the Company, the obligation to deliver to the holder of the Warrant such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to purchase and the other obligations under this Warrant. The provisions of this paragraph (ii) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers or other dispositions.                     (iii) In case the Company shall fix a record date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets or subscription rights or warrants, the Warrant Price to be in effect after such record date shall be determined by multiplying the Warrant Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the Closing Sale Price of Common Stock on such record date, less the fair market value (on a per share basis) (as determined by the Company’s Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such Closing Sale Price of Common Stock on such record date. Such adjustment shall be made successively whenever such a record date is fixed. 7 --------------------------------------------------------------------------------                     (iv) In the event that, as a result of an adjustment made pursuant to Section 9(c), the holder of this Warrant shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, the number of such other shares so receivable upon exercise of this Warrant shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Warrant.                     (v) In the event of any adjustment pursuant to this Section 9(c) in the number of Warrant Shares issuable hereunder upon exercise, the Warrant Price shall be inversely proportionately increased or decreased, as the case may be, such that the aggregate purchase price for Warrant Shares upon full exercise of this Warrant shall remain the same. Similarly, in the event of any adjustment in the Warrant Price, the number of Warrant Shares issuable hereunder upon exercise shall be inversely proportionately increased or decreased, as the case may be, such that the aggregate purchase price for Warrant Shares upon full exercise of this Warrant shall remain the same.                Section 10. Fractional Interest. The Company shall not be required to issue fractions of Warrant Shares upon the exercise of the Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon the exercise of the Warrant (or specified portions thereof), the Company shall round such calculation to the nearest whole number and disregard the fraction.                Section 11. Benefits. Nothing in this Warrant shall be construed to give any person, firm or corporation (other than the Company and the Warrantholder) any legal or equitable right, remedy or claim, it being agreed that this Warrant shall be for the sole and exclusive benefit of the Company and the Warrantholder.                Section 12. Notices to Warrantholder. Upon the happening of any event requiring an adjustment of the Warrant Price, the Company shall forthwith give written notice thereof to the Warrantholder at the address appearing in the records of the Company, stating the adjusted Warrant Price and the adjusted number of Warrant Shares resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. In the event of a dispute with respect to any such calculation, the certificate of the Company’s independent certified public accountants shall be conclusive evidence of the correctness of any computation made, absent manifest error. Failure to give such notice to the Warrantholder or any defect therein shall not affect the legality or validity of the subject adjustment. At the Warrantholder’s request, the Company shall deliver to the Warrantholder as of a requested date a notice specifying the Warrant Price and the number of Warrant Shares into which this Warrant is exercisable as of such date.                Section 13. Identity of Transfer Agent. The Transfer Agent for the Common Stock is Interstate Transfer Company. Forthwith upon the appointment of any subsequent transfer agent for the Common Stock or other shares of the Company’s capital stock issuable upon the exercise of the rights of purchase represented by the Warrant, the Company will fax to the Warrantholder a statement setting forth the name and address of such transfer agent. 8 --------------------------------------------------------------------------------                Section 14. Notices. Any notice pursuant hereto to be given or made by the Warrantholder to or on the Company shall be sufficiently given or made if delivered personally or by facsimile or if sent by an internationally recognized courier, addressed as follows:       If to the Company:       United Energy Corporation   600 Meadowlands Parkway   No. 20   Secaucus, New Jersey 07094   Att: Brian F. King, Chief Executive Officer       With a copy to:       Greenbaum, Rowe, Smith & Davis, LLP   99 Wood Avenue South   P.O. Box 5600   Woodbridge, New Jersey 07095   Att: W Raymond Felton, Esq.       If to the Purchasers, to the addresses set forth on the signature pages hereto.       With a copy to:       Silverman Sclar Shin & Byrne PLLC   381 Park Avenue South, Suite 1601   New York, New York 10016   Attn: Peter R. Silverman, Esq. or such other address as the Company may specify in writing by notice to the Warrantholder complying as to delivery with the terms of this Section 14.                Any notice pursuant hereto to be given or made by the Company to or on the Warrantholder shall be sufficiently given or made if personally delivered or if sent by an internationally recognized courier service by overnight or two-day service, to the address set forth on the books of the Company or, as to each of the Company and the Warrantholder, at such other address as shall be designated by such party by written notice to the other party complying as to delivery with the terms of this Section 14.                All such notices, requests, demands, directions and other communications shall, when sent by courier, be effective two (2) days after delivery to such courier as provided and addressed as aforesaid. All faxes shall be effective upon receipt. 9 --------------------------------------------------------------------------------                Section 15. Registration Rights. The initial holder of this Warrant is entitled to the benefit of certain registration rights in respect of the Warrant Shares as provided in the Registration Rights Agreement.                Section 16. Successors. All the covenants and provisions hereof by or for the benefit of the Warrantholder shall bind and inure to the benefit of its respective successors and assigns hereunder.                Section 17. Governing Law. This Warrant shall be deemed to be a contract made under the laws of the State of New York, without giving effect to its conflict of law principles, and for all purposes shall be construed in accordance with the laws of said State.                Section 18. Exercise Limitations. Notwithstanding anything to the contrary contained herein, in no event shall the Warrantholder be entitled to exercise this Warrant for a number of Warrant Shares in excess of the number of Warrant Shares, which upon giving effect to such exercise, would cause the aggregate number of shares of Common Stock beneficially owned by such holder and its affiliates to exceed 9.99% of the outstanding shares of Common Stock following such exercise. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by a holder and its affiliates shall include the number of shares of Common Stock issuable upon exercise of the Warrant with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable (i) upon exercise of the remaining unexercised Warrant beneficially owned by such holder and its affiliates and (ii) upon conversion or exercise of the unconverted or unexercised portion of any other securities of the Company beneficially owned by such holder and its affiliates subject to a limitation on conversion or exercise analogous to the limitation contained in this paragraph. Except as set forth in the preceding sentence, for purposes of this paragraph beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this paragraph, in determining the number of outstanding shares of Common Stock, a holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company or its transfer agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of any holder, the Company shall within one (1) Business Day confirm orally and in writing to any such holder the number of shares Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including the Warrant, by such holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The Holder may waive the limitations set forth herein by sixty-one (61) days written notice to the Company                Section 19. Replacement Warrants. The Company agrees that within five (5) Business Days after any request from time to time of the Warrantholder, it shall deliver to such holder a new Warrant in substitution of this Warrant which is identical in all respects except that the then Warrant Price shall be appropriately specified in the Warrant, and the Warrant shall specify the fixed number of Warrant Shares into which this Warrant is then exercisable. Such 10 -------------------------------------------------------------------------------- changes are intended not as amendments to the Warrant but only as clarification of the foregoing numbers for convenience purposes, and such changes shall not affect any provisions concerning adjustments to the Warrant Price or number of Warrant Shares contained herein.                Section 20. Absolute Obligation to Issue Warrant Shares. The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the holder hereof to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the holder hereof or any other Person of any obligation to the Company or any violation or alleged violation of law by the holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the holder hereof in connection with the issuance of Warrant Shares. The Company will at no time close its shareholder books or records in any manner which interferes with the timely exercise of this Warrant.                Section 21. Assignment. This Warrant and the rights granted hereunder shall be assignable by the Warrantholder without the consent of the Company.                Section 22. Judicial Proceedings. Any legal action, suit or proceeding brought against the Company with respect to this Warrant may be brought in any federal court of the Southern District of New York or any state court located in New York County, State of New York, and by execution and delivery of this Warrant, the Company hereby irrevocably and unconditionally waives any claim (by way of motion, as a defense or otherwise) of improper venue, that it is not subject personally to the jurisdiction of such court, that such courts are an inconvenient forum or that this Warrant or the subject matter may not be enforced in or by such court. The Company hereby irrevocably and unconditionally consents to the service of process of any of the aforementioned courts in any such action, suit or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, at its address set forth or provided for in Section 14, such service to become effective 10 days after such mailing. Nothing herein contained shall be deemed to affect the right of any party to serve process in any manner permitted by law or commence legal proceedings or otherwise proceed against any other party in any other jurisdiction to enforce judgments obtained in any action, suit or proceeding brought pursuant to this Section. The Company irrevocably submits to the exclusive jurisdiction of the aforementioned courts in such action, suit or proceeding.                Section 23. DEFINITIONS: The following words and terms as used in this Warrant shall have the following meanings:                     (i) “Approved Stock Plan” means any employee benefit plan, stock incentive plan or other similar plan or arrangement which has been approved by the Board of Directors of the Company or a duly authorized committee thereof, pursuant to which the Company’s securities may be issued to any employee, consultant, officer or director for services provided to the Company. 11 --------------------------------------------------------------------------------                     (ii) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law to remain closed.                     (iii) “Closing Sale Price” means, for any security, the closing sale price per such security as reported by the Principal Market on the trading day immediately preceding the date on which such value is being determined.                     (iv) “Convertible Securities” means any stock or securities (other than Options) directly or indirectly convertible into or exchangeable or exercisable for Common Stock.                     (v) “Excluded Issuances” means (A) provided such security is issued at a price which is greater than or equal to the greater of (a) 90% of the Applicable Price or (b) the arithmetic average of the Closing Sale Prices of the Common Stock for the ten (10) consecutive trading days immediately preceding the date of issuance, any of the following (i) any issuance by the Company of securities in connection with a strategic partnership or a joint venture (the primary purpose of which is not to raise equity capital) and (ii) any issuance by the Company of securities as consideration for a merger or consolidation or the acquisition of a business, product, license, or other assets of another person or entity, (B) any warrants or options outstanding as of the Issuance Date which have not been modified or amended since the Issuance Date and (C) options to purchase shares of Common Stock, provided (I) such options are issued after the Issuance Date to employees of the Company within 30 days of such employee starting their employment with the Company, (II) an aggregate of no more than 150,000 options are issued in reliance on this exclusion and (III) the exercise price of such options is not less than 75% of the market price of the Common Stock on the date of issuance of such options.                     (vi) “Issuance Date” means the date on which this Warrant is issued to the Warrantholder as is set forth on the first page of the Warrant.                     (vii) “Option” means any rights, warrants or options to subscribe for or purchase or otherwise acquire Common Stock or Convertible Securities.                     (viii) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.                     (ix) “Principal Market” means, with respect to any security, the principal securities exchange or trading market on which such security is traded.                     (x) “Securities Act” means the Securities Act of 1933, as amended. 12 --------------------------------------------------------------------------------           IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the date first written above.           UNITED ENERGY CORP.       By:     --------------------------------------------------------------------------------     Name: Brian King   Title:   Chief Executive Officer Attest:       Sign:   --------------------------------------------------------------------------------   Print Name: 13 -------------------------------------------------------------------------------- SUBSCRIPTION FORM TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT UNITED ENERGY CORP.           The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock (“Warrant Shares”) of United Energy Corp., a Nevada corporation (the “Company”), evidenced by the attached February 2006 Series C Warrant (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.           1. Form of Warrant Exercise Price. The Warrantholder intends that payment of the Warrant Price shall be made as:                        ______________                   a “Cash Exercise” with respect to _____________________ Warrant Shares; and/or                        ______________                   a “Cashless Exercise” with respect to _____________________ Warrant Shares (to the extent permitted by the terms of the Warrant).           2. Payment of Warrant Price. In the event that the holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the holder shall pay the sum of $___________________ to the Company in accordance with the terms of the Warrant.           3. Delivery of Warrant Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant. Date: ________________ ___, _____    Name of Registered Holder       By:       --------------------------------------------------------------------------------     Name:     Title:   --------------------------------------------------------------------------------

Exhibit 10.01 FIRST AMENDMENT TO CREDIT AGREEMENT Parties:   “CoBank”:    CoBank, ACB    5500 South Quebec Street    Greenwood Village, Colorado 80111 “Borrower”:    Pilgrim’s Pride Corporation    110 South Texas Street    Pittsburg, Texas 75686 “Syndication Parties”:    Whose signatures appear below Execution Date: December 13, 2006 Recitals: A. CoBank (in its capacity as the Administrative Agent (“Agent”), the Syndication Parties signatory thereto, and Borrower have entered into that certain 2006 Amended and Restated Credit Agreement (Convertible Revolving Loan and Term Loan) dated as of September 21, 2006 (as amended, modified, or supplemented from time to time, the “Credit Agreement”) pursuant to which the Syndication Parties, and any entity which becomes a Syndication Party on or after September 21, 2006, have extended certain credit facilities to Borrower under the terms and conditions set forth in the Credit Agreement. B. Borrower has requested that the Agent and the Syndication Parties modify certain provisions relating to the Available Amount calculation and Advances under the Term Loan, which the Agent and the Syndication Parties are willing to do under the terms and conditions as set forth in this First Amendment to Credit Agreement (“First Amendment”). Agreement: Now, therefore, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Amendments to Credit Agreement. The Credit Agreement is amended as of the Effective Date as follows: 1.1 The following Sections in Article 1 are amended to read as follows: -------------------------------------------------------------------------------- 1.12 Available Amount: the lesser of (a) the Aggregate Commitment; and (b) the sum of (i) seventy-five percent (75%) of the Appraised Value (as shown on the latest Available Amount Report pursuant to the latest Appraisal as provided pursuant to the 2004 Credit Agreement or this Credit Agreement, whichever is later) of the Collateral (other than the GK Collateral) in which the Syndication Parties have a perfected first priority lien, subject to Permitted Encumbrances, (without considering the lien which secures any Pari Passu Loan), plus (ii) so long as such properties are not included in clause (b)(i) of this Section, (A) seventy-five percent (75%) of the Appraised Value (as shown on the latest Available Amount Report based on the latest Appraisal as provided pursuant to this Credit Agreement, less the full amount owing under the Mayfield IRB Lien) of Borrower’s leasehold interest in the Mayfield , Kentucky Property arising under the Mayfield Lease, provided that the Syndication parties have a perfected second priority lien thereon (junior only to the Mayfield IRB Lien) or a second priority lien on the fee interest in the real property which is the subject of the Mayfield Lease (junior only to the lien granted in favor of the trustee under the Mayfield Indenture and/or to the issuer of the letter of credit (or substitute therefore) under the Mayfield Indenture, and provided that the issuer of such letter of credit (or substitute therefore) agrees in writing that in the event of a draw under such letter of credit (or equivalent claim under such substitute therefore), it will allow the Agent and the Syndication Parties to reimburse the issuer of the letter of credit (or substitute therefore) prior to commencing foreclosure in its lien on the fee interest), subject to Permitted Encumbrances, (without considering the lien which secures any Pari Passu Loan), and provided further that (1) on or prior to the date Borrower grants a second lien on borrower’s leasehold interest in the Mayfield Kentucky Property to the Agent for the benefit of the Syndication Parties, the holders of the Mayfield IRB Lien and the issuer under the Mayfield Indenture have executed such agreement as the Administrative Agent shall reasonably require regarding notice and cure of defaults under the Mayfield Lease, foreclosure on the Mayfield IRB Lien, and foreclosure on the lien on Borrower’s leasehold interest in the Mayfield Kentucky Property in favor of the Syndication Parties, agreeing to provide written notice to the Agent in the event it intends to issue any additional bonds under the Mayfield Indenture to be secured by the Mayfield IRB Lien (in which case the Available Amount would be automatically reduced by the amount of such additional bonds), and approving of the second lien on Borrower’s leasehold interest in the Mayfield Kentucky Property in favor of the Syndication Parties, (2) all of the requirements of Sections 10.18 hereof (as they relate to a leasehold, rather than fee, interest and shall insure the lien of the Administrative Agent on behalf of the Syndication Parties as a second priority lien, subject only to the Mayfield IRB Lien and Permitted Encumbrances) have been satisfied with respect to Borrower’s leasehold interest in such property, and (3) Borrower’s leasehold interest in the Mayfield Kentucky Property will automatically be excluded from determination under this clause (ii) of the Available Amount upon termination or expiration of the Mayfield Lease, and (B) seventy-five percent (75%) of the Appraised Value (as shown on the latest Available Amount Report based on the latest Appraisal as provided pursuant to this Credit Agreement, less the full amount owing under the Graves IRB Lien) of Borrower’s leasehold interest in the Graves County, Kentucky Property arising under the Graves Lease, provided that the Syndication parties have a perfected second   2 -------------------------------------------------------------------------------- priority lien thereon (junior only to the Graves IRB Lien) or a second priority lien on the fee interest in the real property which is the subject of the Graves Lease (junior only to the lien granted in favor of the trustee under the Graves Indenture and/or to the issuer of the letter of credit (or substitute therefore) under the Graves Indenture, and provided that the issuer of such letter of credit (or substitute therefore) agrees in writing that in the event of a draw under such letter of credit (or equivalent claim under such substitute therefore), it will allow the Agent and the Syndication Parties to reimburse the issuer of the letter of credit (or substitute therefore) prior to commencing foreclosure in its lien on the fee interest), subject to Permitted Encumbrances, (without considering the lien which secures any Pari Passu Loan), and provided further that (1) on or prior to the date Borrower grants a second lien on borrower’s leasehold interest in the Graves County Kentucky Property to the Agent for the benefit of the Syndication Parties, the holders of the Graves IRB Lien and the issuer under the Graves Indenture have executed such agreement as the Administrative Agent shall reasonably require regarding notice and cure of leasehold defaults, foreclosure on the Graves IRB Lien, and foreclosure on the lien on the Borrower’s leasehold interest in the Graves County Kentucky Property in favor of the Syndication Parties, agreeing to provide written notice to the Agent in the event it intends to issue any additional bonds under the Graves Indenture to be secured by the Graves IRB Lien (in which case the Available Amount would be automatically reduced by the amount of such additional bonds), and approving of the second lien on Borrower’s leasehold interest in the Graves County Kentucky Property in favor of the Syndication Parties, (2) all of the requirements of Section 10.18 hereof (as they relate to a leasehold, rather than fee, interest and shall insure the lien of the Administrative Agent on behalf of the Syndication parties as a second priority lien, subject only to the Graves IRB Lien and Permitted Encumbrances) have been satisfied with respect to Borrower’s leasehold interest in such property, and (3) Borrower’s leasehold interest in the Graves County Kentucky Property will automatically be excluded from determination under this clause (ii) of the Available Amount upon termination or expiration of the Graves Lease, plus (iii) (A) during the period from the Closing Date to, but not including, the Control Acquisition Date, the GK Pro Rata Share of 150% of the net book value of the GK Fixed Assets, (B) during the period on and after the Control Acquisition Date to, but not including, the GK Lien Date: (1) during any part of such period that the Loans are directly or indirectly secured by the Gold Kist Stock (and while the Gold Kist Stock constitutes “margin stock” as that term is defined in Federal Reserve Board Regulation U at 12 C.F.R. §221.2), then fifty percent (50.0%) of the market value (determined as provided in Federal Reserve Board Regulation U at 12 C.F.R. §221.7) of the Gold Kist Stock on which the Syndication Parties have a perfected first priority lien security interest, and (2) during any part of such period that the Loans are not secured, directly or indirectly, by any Gold Kist Stock (while the Gold Kist Stock constitutes “margin stock” as that term is defined in Federal Reserve Board Regulation U at 12 C.F.R. §221.2), then the GK Pro Rata Share of 150% of the net book value of the GK Fixed Assets, and (C) on and after the GK Lien Date, seventy-five percent (75%) of the Appraised Value (as shown on the latest Available Amount Report pursuant to the latest Appraisal as provided by Borrower to the Administrative Agent) of the GK Fixed Assets in which the Syndication Parties have a perfected first priority lien, subject to Permitted Encumbrances, (without considering the lien which secures any Pari Passu Loan) and as to which all of the requirements of Section 10.21 hereof have been satisfied, less (iv) the amount owing under all Pari Passu Loans.   3 -------------------------------------------------------------------------------- 1.79 Individual Term Pro Rata Share: shall, subject to such adjustment as may be required pursuant to Section 3.6 hereof in the event of a Hancock Payoff Advance, mean with respect to any Syndication Party a fraction, expressed as a percentage (rounded to 8 decimal points), (a) where the numerator is such Syndication Party’s Individual Term Commitment; and the denominator is the Aggregate Term Commitment; or (b) if the determination is being made solely with respect to the Fixed Rate Tranche, then where the numerator is such Syndication Party’s Individual Fixed Rate Term Commitment and the denominator is the Fixed Rate Term Commitment; or (c) if the determination is being made solely with respect to the Floating Rate Tranche, then where the numerator is such Syndication Party’s Individual Floating Rate Term Commitment and the denominator is the Floating Rate Term Commitment, determined in each case (y) in the case of LIBO Rate Loans, at 12:00 noon (Central time) on the Banking Day Borrower delivers a Borrowing Notice pursuant to which Borrower requests such LIBO Rate Loan, and (z) in all other cases, 12:00 noon (Central time) on the Banking Day such determination is to be made. 1.124 Term Loan Allocation Ratio: means (a) for the Floating Rate Tranche means the ratio, expressed as a percentage, determined by dividing (i) (A) the Floating Rate Term Commitment, less (B) the outstanding principal balance owing under the Floating Rate Tranche, by (ii) (A) the Aggregate Term Commitment, less (B) the aggregate outstanding principal balance owing under the Floating Rate Tranche and the Fixed Rate Tranche; and (b) for the Fixed Rate Tranche means the ratio, expressed as a percentage, determined by dividing (i) (A) the Fixed Rate Term Commitment, less (B) the outstanding principal balance owing under the Fixed Rate Tranche, by (ii) (A) the Aggregate Term Commitment, less (B) the aggregate outstanding principal balance owing under the Floating Rate Tranche and the Fixed Rate Tranche. 1.2 The following new Sections are added to Article 1, reading as follows: 1.134 Graves County Kentucky Property: means the real property described on Exhibit 1.134 hereto, and all fixtures, equipment, and improvements located on such real property. 1.135 Graves IRB Lien: means the Lien on the Graves County Kentucky Property created by that certain Mortgage and Security Agreement, dated as of December 1, 1988, between the County of Graves, Kentucky and Seaboard Farms of Kentucky, Inc., as Mortgagors and Debtors, and Irving Trust Company, as Trustee under the Graves Indenture and as issuer of an irrevocable letter of credit in the face amount of $10,075,206 to provide funds for the payment of amounts owing on the Graves Bonds, as Mortgagees and Secured Parties (“Graves Mortgage”), as supplemented by that certain Supplement, dated as of January 1, 1990, between the County of Graves, Kentucky and Seaboard Farms of Kentucky, Inc., as Mortgagors and Debtors, and The Bank of New York (f/k/a Irving Trust Company), as Mortgagees and Secured Parties, pursuant to which the property subject to the lien of the Graves Mortgage was more particularly described.   4 -------------------------------------------------------------------------------- 1.136 Graves Indenture: means that certain Amended and Restated Indenture of Trust, dated as of December 1, 1988, by and between the County of Graves, Kentucky, as Issuer, and Irving Trust Company, as Trustee, pursuant to which the Issuer issued $9,500,000 aggregate principal amount of its Variable Rate Demand Industrial Development Revenue Bonds (Seaboard Farms of Kentucky, Inc. Project) Series 1988 (“Graves Bonds”). 1.137 Graves Lease: means that certain Lease, dated as of December 1, 1988, by and between the County of Graves, Kentucky, as Lessor, and Seaboard Farms of Kentucky, Inc., as Lessee, pursuant to which (a) the Lessor leased the Graves County Property to the Lessee and (b) the Lessee has an option to purchase the Graves County Property for an amount equal to, and after deduction for any amounts then on deposit under the Graves Indenture and available therefore, the amount necessary to retire and redeem at the earliest permitted date all then outstanding Graves Bonds, pay all accrued interest, pay all fees and expenses of the Graves Trustee and other Persons described in Section 5.6(d) of the Graves Lease, and pay all amounts then due to the Issuer under the Graves Lease plus $100.00. 1.138 Mayfield County Kentucky Property: means the real property described on Exhibit 1.138 hereto, and all fixtures, equipment, and improvements located on such real property. 1.139 Mayfield IRB Lien: means the Lien on the Mayfield Kentucky Property created by that certain Mortgage and Security Agreement, dated as of August 1, 1989, between the City of Mayfield, Kentucky and Seaboard Farms of Kentucky, Inc., as Mortgagors and Debtors, and Irving Trust Company, as Trustee under the Mayfield Indenture and as issuer of an irrevocable letter of credit in the face amount of $4,984,575 to provide funds for the payment of amounts owing on the Mayfield Bonds, as Mortgagees and Secured Parties. 1.140 Mayfield Indenture: means that certain Indenture of Trust, dated as of August 1, 1989, by and between the City of Mayfield, Kentucky, as Issuer, and Irving Trust Company, as Trustee, pursuant to which the Issuer issued $4,700,000 aggregate principal amount of its Variable Rate Demand Industrial Development Revenue Bonds (Seaboard Farms of Kentucky, Inc. Project) Series 1989 (“Mayfield Bonds”). 1.141 Mayfield Lease: means that certain Lease, dated as of August 1, 1989, by and between the City of Mayfield, Kentucky, as Lessor, and Seaboard Farms of Kentucky, Inc., as Lessee, pursuant to which (a) the Lessor leased the Mayfield Kentucky Property to the Lessee and (b) the Lessee has an option to purchase the Mayfield Kentucky Property for an amount equal to, and after deduction for any amounts then on deposit under the Mayfield Indenture and available therefore, the amount necessary to retire and redeem at the earliest permitted date all then outstanding Mayfield Bonds, pay all accrued interest, pay all fees and expenses of the Mayfield Trustee and other Persons described in Section 5.6(d) of the Mayfield Lease, and pay all amounts then due to the Issuer under the Mayfield Lease plus $100.00.   5 -------------------------------------------------------------------------------- 1.3 Subsection 3.1.2 is amended to read as follows: 3.1.2 Individual Syndication Party Share. No Syndication Party shall be required or permitted to fund a Term Advance (a) under the Floating Rate Tranche (i) in excess of an amount equal to its Individual Floating Rate Term Commitment, nor (ii) in a proportion in excess of the ratio of (1) such Syndication Party’s Individual Floating Rate Term Commitment less its Individual Term Outstanding Obligations arising out of the Floating Rate Tranche, (2) divided by the amount of the Floating Rate Term Commitment less the Individual Term Outstanding Obligations arising out of the Floating Rate Tranche of all Syndication Parties (“Individual Floating Rate Share”); or (b) under the Fixed Rate Tranche (i) in excess of an amount equal to its Individual Fixed Rate Term Commitment, nor (ii) in a proportion in excess of the ratio of (1) such Syndication Party’s Individual Fixed Rate Term Commitment less its Individual Term Outstanding Obligations arising out of the Fixed Rate Tranche, (2) divided by the amount of the Fixed Rate Term Commitment less the Individual Term Outstanding Obligations arising out of the Fixed Rate Tranche of all Syndication Parties (“Individual Fixed Rate Share”). 1.4 Subsection 3.1.4 is amended to read as follows: 3.1.4 Voluntary Converted Loan. Borrower shall not be entitled to request a Term Advance (other than the Hancock Payoff Advance) unless and until Borrower has made its election to convert $295,000,000.00 of the outstanding principal owing under the Revolving Loan to the Voluntary Converted Loan. 1.5 Section 3.3, including Subsections 3.3.1 and 3.3.2, are amended, and a new Subsection 3.3.3 is added, in each case to read as follows: 3.3 Fixed Rate Tranche and Floating Rate Tranche. Except as provided in Section 3.6 and Subsection 3.3.3 hereof with respect to the Hancock Payoff Advance, each Term Advance shall be divided between two tranches as follows: 3.3.1 Fixed Rate Tranche. A portion of such Term Advance determined by multiplying the amount of the Term Advance by the Term Loan Allocation Ratio applicable to the Fixed Rate Tranche, shall be identified as the “Fixed Rate Tranche” and shall bear interest as provided in Subsection 4.4.1 and shall be payable as provided in Section 5.3 hereof. 3.3.2 Floating Rate Tranche. A portion of such Term Advance determined by multiplying the amount of the Term Advance by the Term Loan Allocation Ratio applicable to the Floating Rate Tranche, shall be identified as the “Floating Rate Tranche” and shall bear interest as provided in Subsection 4.4.2 and shall be payable as provided in Section 5.3 hereof.   6 -------------------------------------------------------------------------------- 3.3.3 Hancock Payoff Advance. In the event that, as provided in Section 3.6 hereof, the Hancock Payoff Advance is funded as a Term Advance by Hancock, the amount of such Term Advance funded by Hancock shall be allocated to the Fixed Rate Tranche. To the extent that, as provided in Section 3.6 hereof, the Hancock Payoff Advance is funded as a Term Advance by Syndication Parties other than Hancock, the amount so funded shall be allocated between the Fixed Rate Tranche and the Floating Rate Tranche as provided in Subsections 3.3.1 and 3.3.2 hereof. 1.6 Section 3.6 is hereby amended to read as follows: 3.6 Term Advances; Funding. Borrower may request, and, except as provided below in this Section 3.6 with respect to the Hancock Payoff Advance, the Syndication Parties shall fund (a) their applicable Individual Term Pro Rata Share of the portion of each Term Advance allocable to the Fixed Rate Tranche; and (b) their applicable Individual Term Pro Rata Share of the portion of each Term Advance allocable to the Floating Rate Tranche, in each case, in the manner and within the time deadlines as provided in Section 9.2 hereof. In the event that Borrower requests a Term Advance for the purpose of paying in full all amounts owing under the Hancock Loan (“Hancock Payoff Advance”), such Term Advance shall (x) be in the full amount of Hancock’s Individual Term Lending Capacity (regardless of the amount owing under the Hancock Loan); and (y) be funded by Hancock as a Term Advance under the Fixed Rate Tranche, up to the amount of Hancock’s Individual Term Lending Capacity. In the event that the Hancock Payoff Advance is made but the amount owing under the Hancock Loan exceeds the amount of Hancock’s Individual Term Lending Capacity, the excess shall be funded by each of the Syndication Parties other than Hancock as provided in the first sentence of this Section 3.6 and in accordance with their respective Individual Term Pro Rata Shares, computed for such purpose by subtracting the amount of Hancock’s Individual Term Commitment from the Aggregate Term Commitment. 1.7 Subsection 9.2.3 is hereby amended to read as follows: 9.2.3 Funding Notice and Funding. The Administrative Agent shall, on or before 12:00 noon (Central time) of the same Banking Day, notify each Syndication Party (“Funding Notice”) of its receipt of each such Borrowing Notice and the amount of such Syndication Party’s Funding Share thereunder, after having made the adjustments, if any, required pursuant to Section 3.6 hereof. Not later than 2:00 P.M. (Central time) on the date of an Advance, each Syndication Party will make available to the Administrative Agent at the Administrative Agent’s Office, in immediately available funds, such Syndication Party’s Funding Share of such Advance as shown on such Funding Notice. After the Administrative Agent’s receipt of such funds, but not later than 3:00 P.M. (Central time), and upon fulfillment of the applicable conditions set forth in Article 9 hereof, the Administrative Agent will make such Advance available to Borrower, in immediately available funds, and will transmit such funds by wire transfer to Borrower’s Account.   7 -------------------------------------------------------------------------------- 1.6 Clauses (b) and (c) of Section 10.18, but only those clauses, are hereby amended to read as follows: (b) Upon such time as Borrower, in addition to satisfying the requirements of clause (a) of this Section 10.18, shall, with respect to any such parcel of Additional Property, have provided to the Administrative Agent (i) a mortgagees’ title insurance policy (Standard Texas Mortgagees Policy Form with respect to Additional Property located in the State of Texas, and Standard ALTA form with respect to Additional Property located in states other than Texas) from an insurer acceptable to the Administrative Agent insuring the lien in favor of the Administrative Agent, on behalf of the Syndication Parties, as a first priority lien on each such parcel of Additional Property, subject only to Permitted Encumbrances, and (A) in such amount as the Administrative Agent shall require, (B) deleting the standard printed exceptions (including exceptions for mechanics liens and exceptions based on lack of adequate survey) and the gap exception, (C) containing only such exceptions to title as are reasonably acceptable to the Administrative Agent, (D) providing access coverage, and (E) containing such other endorsements as the Administrative Agent may reasonably require (but in any event including a revolving credit endorsement), (ii) a survey, which survey, the certifications thereon, and all information contained therein, shall be acceptable to the Administrative Agent, and shall contain a legal description and, except as specifically provided otherwise on Exhibit 10.18, shall, at a minimum, show the location of all structures, visible utilities, fences, hedges, or walls on the parcel and within 5 feet of all boundaries thereof, any conflicting boundary evidence or visible encroachments, and all easements, underground utilities, and tunnels for which properly recorded evidence is available; (iii) (A) Phase I environmental reports, satisfactory in form and content to the Administrative Agent, and (B) such Phase II environmental reports, or proof satisfactory to the Administrative Agent that Borrower has taken such remedial or other action as the Administrative Agent may reasonably require, in either case, based on the contents of such environmental reports; and (iv) an Appraisal, then such Additional Property shall be a part of the Collateral and shall be included in the Available Amount. (c) Borrower may include in the Available Amount any leasehold interest in connection with any Additional Property where Borrower is a lessee under a recorded lease (1) calling for a rental payment equal to or in excess of $100,000.00 per annum, or (2) which has an Appraised Value, as demonstrated in the Appraisal required pursuant to clause (v) below, of no less than $2,000,000.00, or (3) which is described as follows: (A) that certain Lease by and between the City of Natchitoches and J-M Poultry Packing Company, Ltd., dated June 24, 1977, recorded June 28, 1977 in MOB 360, page 148 of the Records of Natchitoches Parish, Louisiana, and (B) that certain Lease by and between the City of Natchitoches and J-M Poultry Packing Company, Ltd., dated June 24, 1977 and recorded June 29, 1977 in MOB 360, page 134 of the Records of Natchitoches Parish, Louisiana; provided that, in each case described in clauses (1), (2), and (3), Borrower provides to the Administrative Agent, (i) a leasehold mortgage or deed of trust substantially in form and substance satisfactory to the Administrative Agent, (ii) a Title Policy and survey satisfying the requirements set forth in clause (b) of this Section 10.18 (modified as necessary to reflect a leasehold, rather than fee, interest), (iii) a lessor consent in form and content satisfactory to the Administrative Agent and containing such estoppels of the lessor of the leasehold estate as the Administrative Agent shall require; (iv) (A) Phase I environmental reports,   8 -------------------------------------------------------------------------------- satisfactory in form and content to the Administrative Agent, and (B) such Phase II environmental reports, or proof satisfactory to the Administrative Agent that Borrower has taken such remedial or other action as the Administrative Agent may reasonably require, in either case, based on the contents of such environmental reports; and (v) an Appraisal. 1.7 Exhibits 1.134 and 1.138 shall be added in the form of Exhibit 1.134 and Exhibit 1.138 hereto. 2. Conditions to Effectiveness of this First Amendment. The effectiveness of this First Amendment is subject to satisfaction, in the Administrative Agent’s sole discretion, of each of the following conditions precedent (the date on which all such conditions precedent are so satisfied shall be the “Effective Date”): 2.1 Delivery of Executed Loan Documents. Borrower shall have delivered to the Administrative Agent, for the benefit of, and for delivery to, the Administrative Agent and the Syndication Parties, the following documents, each duly executed by Borrower and any other party thereto: A. This First Amendment 2.2 Representations and Warranties. The representations and warranties of Borrower in the Credit Agreement shall be true and correct in all material respects on and as of the Effective Date as though made on and as of such date. 2.3 No Event of Default. No Event of Default shall have occurred and be continuing under the Credit Agreement as of the Effective Date of this First Amendment. 2.4 Payment of Fees and Expenses. Borrower shall have paid the Administrative Agent, by wire transfer of immediately available federal funds (a) all fees presently due under the Credit Agreement (as amended by this First Amendment); and (b) all expenses owing as of the Effective Date pursuant to Section 15.1 of the Credit Agreement. 3. General Provisions. 3.1 No Other Modifications. The Credit Agreement, as expressly modified herein, shall continue in full force and effect and be binding upon the parties thereto. 3.2 Successors and Assigns. This First Amendment shall be binding upon and inure to the benefit of Borrower, Agent, and the Syndication Parties, and their respective successors and assigns, except that Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of all the Syndication Parties.   9 -------------------------------------------------------------------------------- 3.3 Definitions. Capitalized terms used, but not defined, in this First Amendment shall have the meaning set forth in the Credit Agreement. 3.4 Severability. Should any provision of this First Amendment be deemed unlawful or unenforceable, said provision shall be deemed several and apart from all other provisions of this First Amendment and all remaining provision of this First Amendment shall be fully enforceable. 3.5 Governing Law. To the extent not governed by federal law, this First Amendment and the rights and obligations of the parties hereto shall be governed by, interpreted and enforced in accordance with the laws of the State of Colorado. 3.6 Headings. The captions or headings in this First Amendment are for convenience only and in no way define, limit or describe the scope or intent of any provision of this First Amendment. 3.7 Counterparts. This First Amendment may be executed by the parties hereto in separate counterparts, each of which, when so executed and delivered, shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. Copies of documents or signature pages bearing original signatures, and executed documents or signature pages delivered by a party by telefax, facsimile, or e-mail transmission of an Adobe® file format document (also known as a PDF file) shall, in each such instance, be deemed to be, and shall constitute and be treated as, an original signed document or counterpart, as applicable. Any party delivering an executed counterpart of this First Amendment by telefax, facsimile, or e-mail transmission of an Adobe® file format document also shall deliver an original executed counterpart of this First Amendment, but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this First Amendment. [Signatures to follow on next page.]   10 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed as of the Effective Date.   ADMINISTRATIVE AGENT:   CoBank, ACB   By:   /s/ Brian J. Klatt   Name:   Brian J. Klatt   Title:   Senior Vice President BORROWER:   Pilgrim’s Pride Corporation   By:   /s/ Richard A. Cogdill   Name:   Richard A. Cogdill   Title:   Exe. VP, CFO, Sec & Treas. SYNDICATION PARTIES:   CoBank, ACB   By:   /s/ Brian J. Klatt   Name:   Brian J. Klatt   Title:   Senior Vice President   Agriland, FCS   By:   /s/ Roger Brist   Name:   Roger Brist   Title:   Chief Executive Officer   Deere Credit, Inc.   By:   /s/ Raymond L. Murphey   Name:   Raymond L. Murphey   Title:   Senior Account Credit Manager   11 -------------------------------------------------------------------------------- Bank of the West By:   /s/ Lee Rosin Name:   Lee Rosin Title:   Regional Vice President John Hancock Life Insurance Company By:   /s/ Kenneth L. Warlick Name:   Kenneth L. Warlick Title:   Managing Director The Variable Annuity Life Insurance Company By:   /s/ Lochlan O. McNew Name:   Lochlan O. McNew Title:   Managing Director The United States Life Insurance Company in the City of New York By:   /s/ Lochlan O. McNew Name:   Lochlan O. McNew Title:   Managing Director Merit Life Insurance Co. By:   /s/ Lochlan O. McNew Name:   Lochlan O. McNew Title:   Managing Director   12 -------------------------------------------------------------------------------- American General Assurance Company By:   /s/ Lochlan O. McNew Name:   Lochlan O. McNew Title:   Managing Director AIG International Group, Inc. By:   /s/ Lochlan O. McNew Name:   Lochlan O. McNew Title:   Managing Director AIG Annuity Insurance Company By:   /s/ Lochlan O. McNew Name:   Lochlan O. McNew Title:   Managing Director Transamerica Life Insurance Company By:   /s/ Steven Noonan Name:   Steven Noonan Title:   Vice President The CIT Group/Business Credit, Inc. By:   /s/ Mike Ryno Name:   Mike Ryno Title:   Vice President Metropolitan Life Insurance Company By:   /s/ Steven D. Craig Name:   Steven D. Craig Title:   Director   13

  EXHIBIT 10.3 SEPARATION AND RELEASE AGREEMENT      This Separation and Release Agreement (“Agreement”) is made by and between PAR PHARMACEUTICAL COMPANIES, INC., and PAR PHARMACEUTICAL, INC. (collectively referred to as “THE COMPANY”), and MICHAEL GRAVES (“EMPLOYEE”), a specified employee of THE COMPANY. The Effective Date of this Agreement shall be as set forth in Paragraph 9 herein. RECITALS      A. For purposes of this Agreement, “THE COMPANY” means PAR PHARMACEUTICAL COMPANIES, INC., and PAR PHARMACEUTICAL, INC., and each and any of their parent and subsidiary corporations, affiliates, departments, divisions, and/or joint ventures.      B. EMPLOYEE has been employed by THE COMPANY as President of the Generic Products Division.      C. As a result of EMPLOYEE’s separation from THE COMPANY, and to fully and finally resolve all issues concerning EMPLOYEE’s employment relationship with THE COMPANY, THE COMPANY and EMPLOYEE have decided to enter into this Agreement.           For and in consideration of the mutual promises and covenants in this Agreement, the parties agree as follows: OPERATIVE PROVISIONS           1. Separation of Employment. THE COMPANY and EMPLOYEE agree that EMPLOYEE shall separate from THE COMPANY effective at the end of business on November 15, 2006 (“Separation Date”).           2. Pay, Benefits and Stock Options Upon Separation.                (a) Separation Pay. THE COMPANY agrees to pay EMPLOYEE one hundred and sixty nine thousand dollars, ($169,000.00), in one lump sum, payable on January 1, 2007. The aforementioned payment shall be subject to all appropriate federal and state withholding and employment taxes. EMPLOYEE hereby agrees that he is entitled to no other payment from THE COMPANY as the result of his separation other than as set forth herein.                (b) Benefits/Termination. THE COMPANY shall, for a period of one (1) year from the Separation Date, pay EMPLOYEE’s portion of COBRA medical coverage at his level of family coverage in effect on the Separation Date and in addition shall maintain in effect for EMPLOYEE the group life insurance and disability plans in which EMPLOYEE currently participates (subject to changes in such plans or coverage that are generally applicable to other employees and to the requirements of such plans and applicable law); provided, that such benefits shall immediately terminate if EMPLOYEE becomes eligible for coverage, as an 1 --------------------------------------------------------------------------------   employee rather than as a dependent, under another employer’s benefit program prior to the expiration of the one-year period. Following the termination of such benefits, if employee is not eligible for coverage, as an employee rather than as a dependent, under another employer’s benefit program, EMPLOYEE will have the opportunity to elect continuation coverage pursuant to COBRA for an additional six (6) month period and will thus be then responsible for the execution of the COBRA continuation of coverage forms. All other benefits, except those in which EMPLOYEE has vested rights under the terms of an employee benefit plan or as otherwise provided herein, terminate as of EMPLOYEE’s Separation Date.                (c) Stock Options. EMPLOYEE agrees that as of the Separation Date, he has been granted options to purchase 164,853 shares of THE COMPANY’s common stock. Of this amount, 18,863 options are currently not vested. These unvested options shall vest as of the Separation Date. EMPLOYEE shall have twenty-four (24) months from such date to exercise all options, at the exercise price related to the respective option grants, provided that the relevant stock option plan remains in effect and such options have not otherwise expired; and provided further that options that have an exercise price that is less than the closing price of THE COMPANY’S share price on the New York Stock Exchange on the Separation Date shall expire on December 31, 2007. Except as noted above, EMPLOYEE’S exercise of such options is governed by the terms of the applicable plan.                (d) Restricted Stock. EMPLOYEE agrees that as of the Separation Date, he has been granted 37,869 shares of THE COMPANY’s restricted stock. Of this amount, 33,362 shares are currently not vested. These unvested shares shall vest as of the Separation Date.                (e) Unused Vacation. THE COMPANY shall, on the Separation Date, pay EMPLOYEE for his unused vacation days, which THE COMPANY and EMPLOYEE agree total twenty-four and one-half (24.5) days.                (f) Outplacement Services. THE COMPANY shall, on the Separation Date, pay EMPLOYEE ten thousand dollars ($10,000.00) to be utilized by EMPLOYEE for executive-level outplacement services.                (g) The payments and benefits contained in this Section 2 are contingent upon EMPLOYEE’s continued compliance with Sections 5, 8, 11, 12, 13 and 14 of this Agreement.           3. Earned Salary. EMPLOYEE acknowledges and agrees that he has been paid in full for all work performed for THE COMPANY, and is entitled to no further payments or bonuses from THE COMPANY whatsoever for services rendered or any other reason, except as set forth herein.           4. Sufficiency of Consideration. No Admission of Liability. The parties agree that the consideration paid to EMPLOYEE by the terms of this Agreement is good and sufficient consideration for this Agreement. EMPLOYEE acknowledges that neither this Agreement, nor payment of any consideration pursuant to this Agreement, shall be taken or 2 --------------------------------------------------------------------------------   construed to be an admission or concession of any kind with respect to alleged liability or alleged wrongdoing by THE COMPANY.           5. No Disparagement. THE COMPANY agrees to refrain from any publication or any type of communication, oral or written, of a defamatory or disparaging statement pertaining to EMPLOYEE. EMPLOYEE agrees to refrain from any publication or any type of communication, oral or written, of a defamatory or disparaging statement pertaining to THE COMPANY, its past, present and future officers, agents, directors, supervisors, employees or representatives. Nothing in this Section shall be construed as prohibiting THE COMPANY or EMPLOYEE from making any disclosures as required by law or statute, including the release of such information as is required to be disclosed by THE COMPANY or EMPLOYEE in connection with any legal proceeding, filing with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, or as otherwise required by law.           6. Indemnification and Advancement of Legal Fees.                (a) Mandatory Indemnification. In accordance with Section 5.1 of THE COMPANY’s Bylaws, and as more definitively set forth therein, THE COMPANY agrees to indemnify and hold harmless, to the fullest extent now or hereafter permitted by applicable law, EMPLOYEE if he is, or is threatened to be made, a party to or otherwise involved in any Proceeding, (as defined in the Bylaws), by reason of the fact that EMPLOYEE is or was an Authorized Representative, (as defined in the Bylaws), against all expenses (including attorneys’ fees and disbursements), judgments, fines (including excise taxes and penalties) and amounts paid in settlement actually and reasonably incurred by EMPLOYEE in connection with such Proceeding, whether the basis of EMPLOYEE’s involvement in the Proceeding is an alleged act or omission in EMPLOYEE’s capacity as an Authorized Representative or in another capacity while serving in such capacity or both.                (b) Advancement of Expenses. In accordance with Section 5.2 of THE COMPANY’s Bylaws, THE COMPANY shall promptly pay all expenses (including attorneys’ fees and disbursements) actually and reasonably incurred by EMPLOYEE in defending or appearing (otherwise than as a plaintiff) in any Proceeding in advance of the final disposition of such Proceeding upon receipt of an undertaking by or on behalf of EMPLOYEE to repay all amounts so advanced if it shall ultimately be determined by a final, unappealable judicial decision that EMPLOYEE is not entitled to be indemnified for such expenses under the Bylaws or otherwise.                (c) Permissive Indemnification and Advancement of Expenses. In accordance with Section 5.3 of THE COMPANY’s Bylaws, THE COMPANY may, as determined by the Board in its discretion, from time to time indemnify EMPLOYEE if he is, or is threatened to be made, a party to or otherwise involved in any Proceeding by reason of the fact that EMPLOYEE is or was an Authorized Representative, against all expenses (including attorneys’ fees and disbursements), judgments, fines (including excise taxes and penalties) and amounts paid in settlement actually and reasonably incurred by EMPLOYEE in connection with such Proceeding, whether the basis of EMPLOYEE’s involvement in the Proceeding is an alleged act or omission in EMPLOYEE’s capacity as an Authorized Representative or in another capacity while serving in such capacity or both. THE COMPANY may, as determined by the 3 --------------------------------------------------------------------------------   Board in its discretion from time to time, pay expenses actually and reasonably incurred by EMPLOYEE by reason of EMPLOYEE’s involvement in such a Proceeding in advance of the final disposition of the Proceeding.           7. General Release and Waiver of Claims. Solely in connection with EMPLOYEE’s employment relationship with THE COMPANY, and in consideration of the promises and covenants made by THE COMPANY in this Agreement, EMPLOYEE hereby knowingly and voluntarily compromises, settles and releases THE COMPANY from any and all past, present, or future claims, demands, obligations, or causes of action, whether based on tort, contract, statutory or other theories of recovery for anything that has occurred up to and including the date of EMPLOYEE’s execution of this Agreement. The released claims include those EMPLOYEE may have or has against THE COMPANY, or which may later accrue to or be acquired by EMPLOYEE against THE COMPANY and its predecessors, successors in interest, assigns, parent and subsidiary organizations, affiliates, and partners, and its past, present, and future officers, directors, shareholders, agents, and employees, and their heirs and assigns. EMPLOYEE specifically agrees to release and waive all claims for wrongful termination and any claim for retaliation or discrimination in employment under federal or state law or regulation including, but not limited to, discrimination based on age, sex, race, disability, handicap, national origin or any claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967 as amended by the Older Workers’ Benefits Protection Act of 1990 (ADEA and OWBPA), the Americans with Disabilities Act of 1990 (ADA), the New Jersey Law Against Discrimination (LAD), the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Employee Retirement Income Security Act (ERISA), the Immigration Reform and Control Act (IRCA), the Fair Labor Standards Act (FLSA), the Conscientious Employee Protection Act (CEPA), the Family Medical Leave Act (FMLA), the New Jersey Family Leave Act (NJFLA) and the New Jersey wage and hour laws. The release of claims agreed to herein specifically excludes any claims relating to a breach of this Agreement.           8. Covenant Not to Sue.                (a) Each party represents and agrees that such party has not filed any lawsuits or arbitrations against the other party, or filed or caused to be filed any charges or complaints against the other party with any municipal, state or federal agency charged with the enforcement of any law or any self-regulatory organization.                (b) THE COMPANY represents that it is currently not aware of any basis for any cause of action against EMPLOYEE relative to any matter that involved THE COMPANY and that occurred up to and including the date of THE COMPANY’s execution of this Agreement.                (c) EMPLOYEE agrees, not inconsistent with EEOC Enforcement Guidance or Non-Waivable Employee Rights Under EEOC-Enforced Statutes dated April 11, 1997, and to the fullest extent permitted by laws, not to sue or file a charge, complaint, grievance or demand for arbitration against THE COMPANY in any claim, arbitration, suit, action, investigation or other proceeding of any kind which relates to any matter that involved THE COMPANY, and that occurred up to and including the date of EMPLOYEE’s execution of this Agreement, unless required to do so by court order, subpoena or other directive by a court, 4 --------------------------------------------------------------------------------   administrative agency, arbitration panel or legislative body, or unless required to enforce this Agreement. Nothing in this Agreement shall prevent EMPLOYEE from (i) commencing an action or proceeding to enforce this Agreement, or (ii) exercising EMPLOYEE’s right under the OWBPA to challenge the validity of EMPLOYEE’s waiver of ADEA claims set forth in this Agreement.           9. Consideration and Revocation Periods: Effective Date. EMPLOYEE also understands and acknowledges that the ADEA requires THE COMPANY to provide EMPLOYEE with at least twenty one (21) calendar days to consider this Agreement (“Consideration Period”) prior to its execution. EMPLOYEE also understands that he is entitled to revoke this Agreement at any time during the seven (7) days following EMPLOYEE’s execution of this Agreement (“Revocation Period”) by notifying THE COMPANY in writing of his revocation. This Agreement shall become effective on the day after the seven-day Revocation Period has expired unless timely notice of EMPLOYEE’s revocation has been delivered to THE COMPANY (the “Effective Date”).           10. Return of Company Property. On his Separation Date, EMPLOYEE agrees forthwith to deliver to THE COMPANY all of THE COMPANY’s property in his possession or under his custody and control, including but not limited to all keys, and tangible items, notebooks, documents, records and other data relating to research or experiments conducted by any person relating to the products, formulas, formulations, processes or methods of manufacture of THE COMPANY, and to its customers and pricing of products, except that EMPLOYEE shall be entitled to keep the cellular telephone and Blackberry device provided to him by THE COMPANY, provided that EMPLOYEE agrees forthwith to deliver the Blackberry device to THE COMPANY, wherein THE COMPANY will remove all confidential and proprietary information from the Blackberry device and return it to EMPLOYEE.           11. Confidential Information. “Confidential Information” means any and all information (oral or written) relating to THE COMPANY or any of its subsidiaries or any person controlling, controlled by, or under common control with THE COMPANY or any of its subsidiaries or any of their respective activities, including, but not limited to, information relating to: technology; research; test procedures and results; machinery and equipment; manufacturing processes; financial information; products; identity and description of materials and services used; purchasing; costs; pricing; customers and prospects; advertising, promotion and marketing; and selling, servicing and information pertaining to any governmental investigation, except such information which becomes public, other than as a result of a breach of the provisions hereof.                EMPLOYEE acknowledges that during EMPLOYEE’s employment with THE COMPANY, EMPLOYEE has had access to Confidential Information. EMPLOYEE agrees that at all times hereafter EMPLOYEE will (i) hold in trust, keep confidential and not disclose to any third party or make any use of the Confidential Information of THE COMPANY or its customers; (ii) not cause the transmission, removal or transport of Confidential Information of THE COMPANY or its customers, and (iii) not publish, disclose, or otherwise disseminate Confidential Information of THE COMPANY or its customers except as otherwise permitted under applicable law. 5 --------------------------------------------------------------------------------             12. Covenants Not to Solicit. EMPLOYEE acknowledges and agrees that for a period of one (1) year following the Separation Date, EMPLOYEE shall be restrained from directly or indirectly, hiring, offering to hire, enticing away or in any other manner persuading or attempting to persuade any officer or employee of THE COMPANY or any of its subsidiaries to discontinue or alter his or its relationship with THE COMPANY or any of its subsidiaries; provided that this covenant shall not be applicable to hiring or offer to hire pursuant to a response to a general advertisement by a subsequent employer with which EMPLOYEE is affiliated, so long as these methods are not utilized to solicit or attract only employees of THE COMPANY or to target employees of THE COMPANY.           13. Confidentiality. EMPLOYEE agrees to keep both the existence and the terms of this Agreement completely confidential, except that EMPLOYEE may discuss this Agreement with EMPLOYEE’s family, and his attorney, accountant, or other professional person who may assist EMPLOYEE in evaluating, reviewing, or negotiating this Agreement, and as otherwise permitted or required under applicable law. EMPLOYEE understands and agrees that his disclosure of the terms of this Agreement contrary to the terms set forth herein will constitute a breach of this Agreement; provided that EMPLOYEE may disclose his covenant not to solicit set forth in Paragraph 12 to a successor employer or potential successor employer.           14. No Public Statements. EMPLOYEE and THE COMPANY represent and warrant that they will refrain from making any public statement regarding EMPLOYEE’s separation from THE COMPANY for ninety (90) days following the Separation Date, absent written approval from the other. However, THE COMPANY is permitted to make any disclosures regarding EMPLOYEE’s status or this agreement as required by law or regulations, including release of such information or that is required to be disclosed by THE COMPANY in its filings under the Securities Exchange Act of 1934 with the Securities and Exchange Commission (“SEC”).           15. Disclosure of Information. EMPLOYEE represents and warrants that he is not aware of any material non-public information concerning THE COMPANY, its business or its affiliates that he has not disclosed to the Board of Directors of THE COMPANY prior to the date of this Agreement or that is required to be disclosed by THE COMPANY in its filings under the Securities Exchange Act of 1934 with the SEC and that has not been so disclosed.           16. Cooperation. EMPLOYEE hereby agrees that:                (a) EMPLOYEE will make himself available to THE COMPANY either by telephone or, if THE COMPANY believes necessary, in person upon reasonable notice, to assist THE COMPANY in connection with any matter relating to services performed by him on behalf of THE COMPANY prior to the Separation Date.                (b) EMPLOYEE further agrees that he will cooperate fully with THE COMPANY in relation to any investigation or hearing with the SEC or any other governmental agency, as well as in the defense or prosecution of any claims or actions now in existence, including but not limited to ongoing commercial litigation matters, shareholder derivative actions, and class action law suits, or which may be brought or threatened in the future against or on behalf of THE COMPANY, its directors, shareholders, officers, or employees. 6 --------------------------------------------------------------------------------                  (c) EMPLOYEE will cooperate in connection with such claims or actions referred to in Paragraph 16(b) above including, without limitation, his being available to meet with THE COMPANY to prepare for any proceeding (including depositions, fact-findings, arbitrations or trials), to provide affidavits, to assist with any audit, inspection, proceeding or other inquiry, and to act as a witness in connection with any litigation or other legal proceeding affecting THE COMPANY. THE COMPANY shall reimburse EMPLOYEE for any reasonable travel expenses incurred by EMPLOYEE in connection therewith and shall also, in the event that EMPLOYEE’s participation as set forth herein exceeds one business day, pay employee a per diem rate of fourteen hundred dollars ($1,400) for each subsequent day.                (d) EMPLOYEE further agrees that should he be contacted (directly or indirectly) by any individual or any person representing an individual or entity that is or may be legally or competitively adverse to THE COMPANY in connection with any claims or legal proceedings, he will promptly notify THE COMPANY of that fact in writing, but in no event later than the next business day, or immediately if he already has been so contacted. Such notification shall include a reasonable description of the content of the communication with the legally or competitively adverse individual or entity.                (e) Notwithstanding the provisions herein, EMPLOYEE acknowledges that his cooperation obligation requires him to participate truthfully and accurately in all matters contemplated under this Section 16.                (f) THE COMPANY shall assist the EMPLOYEE in the preparation and filing of his final reports for the year 2006 as an officer of THE COMPANY under Section 16 of the Securities Exchange Act of 1934, as amended.           17. Injunctive Relief. EMPLOYEE acknowledges that his failure to abide by Sections 5, 11, 12, 13 and 14 of this Agreement will result in immediate and irreparable damage to THE COMPANY and will entitle THE COMPANY to injunctive relief from a court having appropriate jurisdiction.           18. Representation by Attorney. EMPLOYEE acknowledges that he has been given the opportunity to be represented by independent counsel in reviewing this Agreement, and that EMPLOYEE understands the provisions of this Agreement and knowingly and voluntarily agrees to be bound by them.           19. No Reliance Upon Representations. EMPLOYEE hereby represents and acknowledges that in executing this Agreement, EMPLOYEE does not rely and has not relied upon any representation or statement made by THE COMPANY or by any of THE COMPANY’s past or present agents, representatives, employees or attorneys with regard to the subject matter, basis or effect of this Agreement other than as set forth in this Agreement.           20. Tax Advice.                (a) THE COMPANY makes no representations regarding the federal or state tax consequences of the payments or benefits referred to above and provided for herein, and shall not be responsible for any tax liability, interest or penalty including but not limited to those which may arise under Internal Revenue Service Code Section 409A, incurred by 7 --------------------------------------------------------------------------------   EMPLOYEE which in any way arises out of or is related to said payments or benefits. With the exception of the regular payroll deductions for federal and state withholding and employment taxes, EMPLOYEE agrees that it shall be his sole responsibility to pay any amount that may be due and owing as federal or state taxes, interest and penalties, including but not limited to those which may arise under Internal Revenue Service Code Section 409A, arising out of the payments or benefits provided for herein.                (b) EMPLOYEE agrees and understands that he is not relying upon THE COMPANY or its counsel for any tax advice regarding the tax treatment of the payments made or benefits received pursuant to this Agreement, and EMPLOYEE agrees that he is responsible for determining the tax consequences of all such payments and benefits hereunder, including but not limited to those which may arise under Internal Revenue Service Code Section 409A, and for paying taxes, if any, that he may owe with respect to such payments or benefits.                (c) EMPLOYEE further agrees to (i) hold harmless THE COMPANY and its attorneys against, and indemnify THE COMPANY and its attorneys for, any and all losses and/or damages arising from claims by the Internal Revenue Service (“IRS”), or any other taxing authority or other governmental agency (whether federal, state or local), which may be made against THE COMPANY and its attorneys arising out of or relating to the payments or benefits hereunder and (ii) reimburse THE COMPANY and its attorneys for any resulting payment, including without limitation, all penalties and interest payable to the IRS, or any other taxing authority or governmental agency.                (d) EMPLOYEE and THE COMPANY further agree that they and their attorneys will give mutual notice of any such claims. EMPLOYEE agrees that he will cooperate in the defense of such claim. In any action commenced against EMPLOYEE to enforce the provisions of this paragraph, THE COMPANY and its attorneys shall be entitled to recover their attorneys’ fees, costs, disbursements, and the like incurred in prosecuting the action.           21. Entire Agreement. This Agreement constitutes the entire Agreement between the parties relating to EMPLOYEE’s separation from and release of employment-related claims against THE COMPANY, and it shall not be modified except in writing signed by the party to be bound.           22. Severability. If a court finds any provision of this Agreement invalid or unenforceable as applied to any circumstance, the remainder of this Agreement and the application of such provision shall be interpreted so as best to effect the intent of the parties hereto. The parties further agree to replace any such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business, or other purposes of the void or unenforceable provision.           23. Governing Law and Jurisdiction. Notwithstanding any agreement to the contrary, this Agreement shall be governed by the laws of the State of New Jersey and any claims hereunder shall be pursued in the state or federal courts located in the State of New Jersey. 8 --------------------------------------------------------------------------------              24. Survival of Terms. EMPLOYEE understands and agrees that the terms set out in this Agreement, including the confidentiality and non-solicitation provisions, shall survive the signing of this Agreement and the receipt of benefits thereunder.           25. Construction. The terms and language of this Agreement are the result of arm’s length negotiations between both parties hereto and their attorneys. Consequently, there shall be no presumption that any ambiguity in this Agreement should be resolved in favor of one party and against another. Any controversy concerning the construction of this Agreement shall be decided neutrally without regard to authorship.           26. Copies. This Agreement may be executed in counterparts, and each counterpart, when executed, shall have the efficacy of a signed original.      EMPLOYEE AGREES THAT: (1) HE HAS FULLY READ THIS AGREEMENT; (2) HE HAS TAKEN THE TIME NECESSARY TO REVIEW COMPLETELY AND FULLY UNDERSTAND THIS AGREEMENT; AND (3) HE FULLY UNDERSTANDS THIS AGREEMENT, ACCEPTS IT, AGREES TO IT, AND AGREES THAT IT IS FULLY BINDING UPON HIM FOR ALL PURPOSES.             EMPLOYEE       /s/ Michael Graves       MICHAEL GRAVES              PAR PHARMACEUTICAL COMPANIES, INC.       /s/ Patrick G. LePore       By:   Patrick G. LePore       President and C.E.O.      PAR PHARMACEUTICAL, INC.       /s/ Gerard A. Martino       By:   Gerard A. Martino       Executive Vice President and Chief Financial Officer      9

EXHIBIT 10.2   MapInfo Corporation   1993 Director Stock Option Plan   1. Purpose   The purpose of this 1993 Director Stock Option Plan (the “Plan”) of MapInfo Corporation (the “Company”) is to encourage ownership in the Company by outside directors of the Company whose continued services are considered essential to the Company’s future progress and to provide them with a further incentive to remain as directors of the Company.   2. Administration   The Board of Directors shall supervise and administer the Plan. Grants of stock options under the Plan and the amount and nature of the awards to be granted shall be automatic in accordance with Section 5. However, all questions of interpretation of the Plan or of any options issued under it shall be determined by the Board of Directors and such determination shall be final and binding upon all persons having an interest in the Plan.   3. Participation in the Plan   Directors of the Company who are not employees of the Company or any subsidiary of the Company shall be eligible to participate in the Plan.   4. Stock Subject to the Plan   (a) The maximum number of shares which may be issued under the Plan shall be 497,5001 shares of the Company’s Common Stock, par value $.002 per share (“Common Stock”), subject to adjustment as provided in Section 9 of the Plan.   (b) If any outstanding option under the Plan for any reason expires or is terminated without having been exercised in full, the shares allocable to the unexercised portion of such option shall again become available for grant pursuant to the Plan.   (c) All options granted under the Plan shall be non-statutory options not entitled to special tax treatment under Section 422 of the Internal Revenue Code of 1986, as amended to date and as it may be amended from time to time (the “Code”).   -------------------------------------------------------------------------------- 1 Number revised to reflect 3 for 2 stock split in the form of a stock dividend effective 1/10/00 and 3 for 2 stock split in the form of a stock dividend effective 9/28/00. -------------------------------------------------------------------------------- 5. Terms, Conditions and Form of Options   Each option granted under the Plan shall be evidenced by a written agreement in such form as the Board of Directors shall from time to time approve, which agreements shall comply with and be subject to the following terms and conditions:   (a) Option Grants. On the date of each annual meeting of stockholders of the Company, the Company shall grant to each eligible director an option for such number of shares of Common Stock equal to $20,000 divided by the option exercise price per share for each such option (the “Annual Option”).   (b) Option Exercise Price. The option exercise price per share for each option granted under the Plan shall equal (i) the last reported sales price per share of the Company’s Common Stock on the NASDAQ National Market System (or, if the Company is traded on a nationally recognized securities exchange on the date of grant, the reported closing sales price per share of the Company’s Common Stock by such exchange) on the date of grant (or if no such price is reported on such date such price as reported on the nearest preceding day) or (ii) if the Common Stock is not traded on NASDAQ or an exchange, the fair market value per share on the date of grant as most recently determined by the Board of Directors.   (c) Options Non-Transferable. Each option granted under the Plan by its terms shall not be transferable by the optionee otherwise than by will, or by the laws of descent and distribution, and shall be exercised during the lifetime of the optionee only by him. No option or interest therein may be transferred, assigned, pledged or hypothecated by the optionee during his lifetime, whether by operation of law or otherwise, or be made subject to execution, attachment or similar process.   (d) Exercise Period. Each Annual Option shall become exercisable at the end of nine years and nine months after the date of grant, provided that such option shall become exercisable one year after the date of grant if the director has attended during such year at least 75% of the aggregate of the number of meetings of the Board of Directors and the number of meetings held by all committees on which he then served. In the event an optionee ceases to serve as a director, each such option may be exercised by the optionee (or, in the event of his death, by his administrator, executor or heirs), at any time within 12 months after the optionee ceases to serve as a director, to the extent such option was exercisable at the time of such cessation of service. Notwithstanding the foregoing, no option shall be exercisable after the expiration of ten years from the date of grant.   -2- -------------------------------------------------------------------------------- (e) Exercise Procedure. Options may be exercised only by written notice to the Company at its principal office accompanied by (i) payment in cash of the full consideration for the shares as to which they are exercised or (ii) an irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price or delivery of irrevocable instructions to a broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price.   6. Assignments   The rights and benefits of participants under the Plan may not be assigned, whether voluntarily or by operation of law, except as provided in Section 5(d).   7. Effective Date   The Plan shall become effective immediately upon its adoption by the Board of Directors, but all grants of options shall be conditional upon the approval of the Plan by the stockholders of the Company within 12 months after adoption of the Plan by the Board of Directors.   8. Limitation of Rights   (a) No Right to Continue as a Director. Neither the Plan, nor the granting of an option nor any other action taken pursuant to the Plan, shall constitute or be evidence of any agreement or understanding, express or implied, that the Company will retain a director for any period of time.   (b) No Stockholders’ Rights for Options. An optionee shall have no rights as a stockholder with respect to the shares covered by his options until the date of the issuance to him of a stock certificate therefor, and no adjustment will be made for dividends or other rights (except as provided in Section 9) for which the record date is prior to the date such certificate is issued.   9. Changes in Common Stock   (a) If the outstanding shares of Common Stock are increased, decreased or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to such shares of Common Stock or other securities, through merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other distribution with respect to such shares of Common Stock, or other securities, an appropriate and proportionate adjustment will be made in (i) the maximum number and kind of shares reserved for issuance under the Plan, (ii) the number and kind of shares or other securities subject to then outstanding options under the Plan and (iii) the price for   -3- -------------------------------------------------------------------------------- each share subject to any then outstanding options under the Plan, without changing the aggregate purchase price as to which such options remain exercisable. No fractional shares will be issued under the Plan on account of any such adjustments.   (b) In the event that the Company is merged or consolidated into or with another corporation (in which consolidation or merger the stockholders of the Company receive distributions of cash or securities of another issuer as a result thereof), or in the event that all or substantially all of the assets of the Company are acquired by any other person or entity, or in the event of a reorganization or liquidation of the Company, the Board of Directors of the Company, or the board of directors of any corporation assuming the obligations of the Company, shall, as to outstanding options, either (i) provide that such options shall be assumed, or equivalent options shall be substituted, by the acquiring or successor corporation (or an affiliate thereof), or (ii) upon written notice to the optionees, provide that all unexercised options will terminate immediately prior to the consummation of such merger, consolidation, acquisition, reorganization or liquidations unless exercised by the optionee within a specified number of days following the date of such notice.   10. Amendment of the Plan   The Board of Directors may suspend or discontinue the Plan or review or amend it in any respect whatsoever; provided, however, that without approval of the stockholders of the Company no revision or amendment shall change the number of shares subject to the Plan (except as provided in Section 9), change the designation of the class of directors eligible to receive options, or materially increase the benefits accruing to participants under the Plan. The Plan may not be amended more than once in any six-month period.   11. Governing Law   The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of New York.   Adopted by the Board of Directors on November 23, 1993 Approved by the stockholders on December 8, 1993     -4- -------------------------------------------------------------------------------- AMENDMENT NO. 1 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION   The first sentence of Subsection 5(a) of the 1993 Director Stock Option Plan (the “Plan”) of MapInfo Corporation is hereby amended and restated in its entirety to provide as follows:   “(a) Option Grants. On the date of each annual meeting of stockholders of the Company, the Company shall grant to each eligible director an option for such number of shares of Common Stock equal to $40,000 divided by the option exercise price per share for each stock option (the “Annual Option”).”   Adopted by the Board of Directors on December 9, 1994 Approved by the stockholders on January 20, 1995   -5- -------------------------------------------------------------------------------- AMENDMENT NO. 2 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION   The first sentence of Subsection 5(a) of the 1993 Director Stock Option Plan (the “Plan”) of MapInfo Corporation is hereby amended and restated in its entirety, subject to stockholder approval, to provide as follows:   “(a) Option Grants. On the date of each annual meeting of stockholders of the Company, the Company shall grant to each eligible director an option for 6,7502 shares of Common Stock (the ”Annual Option”).”   Adopted by the Board of Directors on December 19, 1995 Approved by the Stockholders on February 2, 1996   -------------------------------------------------------------------------------- 2 Number revised to reflect 3 for 2 stock split in the form of a stock dividend effective 1/10/00 and the three-for-two stock split in the form of a stock dividend effective 9/28/00.   -6- -------------------------------------------------------------------------------- AMENDMENT NO. 3 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION   Subsection 4(a) of the 1993 Director Stock Option Plan (the “Plan”) of MapInfo Corporation is hereby amended and restated in its entirety, subject to stockholder approval, to provide as follows:   “(a) The maximum number of shares which may be issued under the Plan shall be 112,5003 shares of the Company’s Common Stock, par value $.002 per share (“Common Stock”), subject to adjustment as provided in Section 9 of the Plan.”   The first sentence of Subsection 5(a) of the Plan is hereby amended and restated in its entirety, subject to stockholder approval, to provide as follows:   “(a) Option Grants. On the date of each annual meeting of stockholders of the Company, the Company shall grant to each eligible director an option for 11,2504 shares of Common Stock (the ”Annual Option”).”   Adopted by the Board of Directors on November 12, 1996 Approved by the Stockholders on March 20, 1997   -------------------------------------------------------------------------------- 3 Number revised to reflect 3 for 2 stock split in the form of a stock dividend effective 1/10/00 and three-for-two stock split in the form of a stock dividend effective 9/28/00. 4 Number revised to reflect 3 for 2 stock split in the form of a stock dividend effective 1/10/00 and three-for-two stock split in the form of a stock dividend effective 9/28/00.   -7- -------------------------------------------------------------------------------- AMENDMENT NO. 4 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION   Section 5(c) of the 1993 Director Stock Option Plan (the “Plan”) of MapInfo Corporation is hereby amended and restated in its entirety to provide as follows:   “(c) Options Non-Transferable. Except as otherwise provided in the option agreement evidencing the option grant, each option granted under the Plan shall not be transferable by the optionee otherwise than by will, or by the laws of descent and distribution, and shall be exercised during the lifetime of the optionee only by him.”   Section 10 of the Plan is hereby amended and restated in its entirety to read as follows:   “10. Amendment of the Plan. The Board of Directors may at any time, and from time, modify, terminate or amend the Plan in any respect, except that if at any time the approval of the stockholders of the Company is required as to such modification or amendment under any applicable tax or regulatory requirement, the Board of Directors may not effect such modification or amendment without such approval.”   Adopted by the Board of Directors on December 9, 1996   -8- -------------------------------------------------------------------------------- AMENDMENT NO. 5 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION   Section 11 of the 1993 Director Stock Option Plan (the “Plan”) of MapInfo Corporation is hereby amended and restated in its entirety to provide as follows:   “11. Governing Law   The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Delaware.”   Adopted by the Board of Directors on February 11, 1998   -9- -------------------------------------------------------------------------------- AMENDMENT NO. 6 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION   Subsection 4(a) of the 1993 Director Stock Option Plan (the “Plan”) of MapInfo Corporation is hereby amended and restated in its entirety, subject to stockholder approval, to provide as follows:   “(a) The maximum number of shares which may be issued under the Plan shall be 180,0005 shares of the Company’s Common Stock, par value $.002 per share (“Common Stock”), subject to adjustment as provided in Section 9 of the Plan.”   Adopted by the Board of Directors on November 14, 1998 Approved by the Stockholders on February 24, 1999   -------------------------------------------------------------------------------- 5 Number revised to reflect 3 for 2 stock split in the form of a stock dividend effective 1/10/00 and 3 for 2 stock split in the form of a stock dividend effective 9/28/00.   -10- -------------------------------------------------------------------------------- AMENDMENT NO. 7 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION   Subsection 4(a) of the 1993 Director Stock Option Plan (the “Plan”) of MapInfo Corporation is hereby amended and restated in its entirety, subject to stockholder approval, to provide as follows:   “(a) The maximum number of shares which may be issued under the Plan shall be 247,5006 shares of the Company’s Common Stock, par value $.002 per share (“Common Stock”), subject to adjustment as provided in Section 9 of the Plan.”   Adopted by the Board of Directors on November 23, 1999 Approved by the Stockholders on March 7, 2000   -------------------------------------------------------------------------------- 6 Number revised to reflect 3 for 2 stock split in the form of a stock dividend effective 1/10/00 and 3 for 2 stock split in the form of a stock dividend effective 9/28/00.   -11- -------------------------------------------------------------------------------- AMENDMENT NO. 8 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION   In order to adjust the number of shares covered by the Annual Option under the 1993 Director Stock Option Plan (the “Plan”) of MapInfo Corporation (the “Company”) to reflect the three-for-two stock split in the form of a stock dividend effected by the Company in January 2000, the reference in the first sentence of Section 5(a) of the Plan to “5,000” shares is hereby amended to “7,500 shares,” and the following clause is hereby added to the end of Section 5(a) of the Plan: “, subject to adjustment as provided in Section 9 of the Plan.”   The following clause is hereby added to the end of the first sentence of Section 9(a) of the Plan: “and (iv) the number and kind of shares or other securities issuable pursuant to Section 5(a) of the Plan.”   Adopted by the Board of Directors on February 25, 2000 Approved by the Stockholders on March 7, 2000   -12- -------------------------------------------------------------------------------- AMENDMENT NO. 9 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION   Section 2 of the 1993 Director Stock Option Plan (the “Plan”) of MapInfo Corporation is hereby amended and restated in its entirety to read as follows:   “2. Administration: The Board of Directors shall supervise and administer the Plan. All questions of interpretation of the Plan or any options issued under it shall be determined by the Board of Directors and such determination shall be final and binding upon all persons having an interest in the Plan.”   Section 5(f) is hereby added to the, Plan, which shall read in its entirety as follows:   “(f) Other Grants. The Board of Directors may grant options under the Plan to eligible directors on such other terms and conditions as the Board may determine, which terms and conditions need not comply with clauses (a) – (f) of this Section 5.”   Adopted by the Board of Directors On May 9, 2000   -13- -------------------------------------------------------------------------------- AMENDMENT NO. 10 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION   Subsection 4(a) of the 1993 Director Stock Option Plan (the “Plan”) of MapInfo Corporation is hereby amended and restated in its entirety, subject to stockholder approval, to provide as follows:   “(a) The maximum number of shares which may be issued under the Plan shall be 347,5007 shares of the Company’s Common Stock, par value $.002 per share (“Common Stock”), subject to adjustment as provided in Section 9 of the Plan.”   In order to adjust the number of shares covered by the Annual Option under the 1993 Director Stock Option Plan (the “Plan”) of MapInfo Corporation (the “Company”) to reflect the three-for-two stock split in the form of a stock dividend effected by the Company in September 2000, the reference in the first sentence of Section 5(a) of the Plan to “7,500” shares is hereby amended to “11,250 shares,” and the following clause is hereby added to the end of Section 5(a) of the Plan: “, subject to adjustment as provided in Section 9 of the Plan.”   Adopted by the Board of Directors on November 1, 2000 Approved by the Stockholders on February 27, 2001   -------------------------------------------------------------------------------- 7 Number revised to reflect 3 for 2 stock split in the form of a stock dividend effective 1/10/00 and 3 for 2 stock split in the form of a stock dividend effective 9/28/00.   -14- -------------------------------------------------------------------------------- AMENDMENT NO. 11 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION   The first sentence of Subsection 5(a) of the Plan is hereby amended and restated in its entirety, to provide as follows:   “(a) Option Grants. On the date of each annual meeting of stockholders of the Company, the Company shall grant to each eligible director an option for 15,000 shares of Common Stock (the ”Annual Option”).”   Adopted by the Board of Directors on April 25, 2003   -15- -------------------------------------------------------------------------------- AMENDMENT NO. 12 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION   Subsection 4(a) of the 1993 Director Stock Option Plan (the “Plan”) of MapInfo Corporation is hereby amended and restated in its entirety, subject to stockholder approval, to provide as follows:   “(a) The maximum number of shares which may be issued under the Plan shall be 497,5008 shares of the Company’s Common Stock, par value $.002 per share (“Common Stock”), subject to adjustment as provided in Section 9 of the Plan.”   Adopted by the Board of Directors on November 12, 2003 Approved by the Stockholders on February 12, 2004   -------------------------------------------------------------------------------- 8 Number revised to reflect 3 for 2 stock split in the form of a stock dividend effective 1/10/00 and 3 for 2 stock split in the form of a stock dividend effective 9/28/00.   -16- -------------------------------------------------------------------------------- AMENDMENT NO. 13 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION   The first sentence of Subsection 5(a) of the Plan is hereby amended and restated in its entirety, to provide as follows:   “(a) Option Grants. On the date of each annual meeting of stockholders of the Company, the Company shall grant to each eligible director an option for 20,000 shares of Common Stock (the ”Annual Option”).”   Adopted by the Board of Directors on February 17, 2005   -17- -------------------------------------------------------------------------------- AMENDMENT NO. 14 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION   Subsection 4(a) of the 1993 Director Stock Option Plan (the “Plan”) of MapInfo Corporation is hereby amended and restated in its entirety, subject to stockholder approval, to provide as follows:   “(a) The maximum number of shares which may be issued under the Plan shall be 647,500 shares of the Company’s Common Stock, par value $.002 per share (“Common Stock”), subject to adjustment as provided in Section 9 of the Plan.”   Adopted by the Board of Directors on December 13, 2005 Approved by the Stockholders on February 16, 2006   -18-

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   $300,000.00    January 20, 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 Three Hundred Thousand Dollars ($300,000.00). 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 March 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/ Robert F. Hussey --------------------------------------------------------------------------------     Robert F. Hussey     Interim 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 10.5 THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT      Number of Shares: 2,375,000 Date of Issuance: October 31, 2006    (subject to adjustment) StockerYale, Inc. Common Stock Purchase Warrant (Void after October 31, 2016 (the “Expiration Date”)) StockerYale, Inc., a Massachusetts corporation (the “Company”), for value received, hereby certifies that The Eureka Interactive Fund Limited, or its registered assigns (the “Registered Holder”), is entitled, subject to the terms and conditions set forth below, to purchase from the Company, at any time or from time to time on or after the date of issuance and on or before 5:00 p.m. (Boston time) on October 31, 2016, an aggregate of 2,375,000 nonassessable shares of Common Stock, $0.001 par value per share, of the Company, at a purchase price of $1.15 per share. The shares purchasable upon exercise of this Warrant, and the purchase price per share, each as adjusted from time to time pursuant to the provisions of this Warrant, are hereinafter referred to as the “Warrant Shares” and the “Purchase Price,” respectively. 1. Exercise. (a) This Warrant may be exercised by the Registered Holder, in whole or in part, by surrendering this Warrant, with the purchase form appended hereto as Exhibit I duly executed by the Registered Holder or by the Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full, in lawful money of the United States, of the Purchase Price payable in respect of the number of Warrant Shares purchased upon such exercise. (b) The Registered Holder may, at its option, elect to pay some or all of the Purchase Price payable upon an exercise of this Warrant by cancelling a portion of this Warrant exercisable for such number of Warrant Shares as is determined by dividing (i) the total Purchase Price payable in respect of the number of Warrant Shares being purchased upon such exercise by (ii) the excess of the Fair Market Value per share of Common Stock (as defined below) as of the Exercise Date (as defined in subsection 1(c) below) over the Purchase Price per share. If the Registered Holder wishes to exercise this Warrant pursuant to this method of payment with respect to the maximum number of Warrant Shares purchasable pursuant to this method, then the number of Warrant Shares so purchasable shall be equal to the total number of Warrant Shares, minus the product obtained by multiplying (x) the total number of Warrant Shares by (y) a fraction, the numerator of which shall be the Purchase Price per share and the denominator of -------------------------------------------------------------------------------- which shall be the Fair Market Value per share of Common Stock as of the Exercise Date. The Fair Market Value per share of Common Stock shall be determined as follows: (i) If the Common Stock is listed on a national securities exchange, the Nasdaq Global Market or another nationally recognized trading system as of the Exercise Date, the Fair Market Value per share of Common Stock shall be deemed to be the average of the high and low reported sale prices per share of Common Stock thereon on the trading day immediately preceding the Exercise Date (provided that if no such price is reported on such day, the Fair Market Value per share of Common Stock shall be determined pursuant to clause (ii)). (ii) If the Common Stock is not listed on a national securities exchange, the Nasdaq Global Market or another nationally recognized trading system as of the Exercise Date, the Fair Market Value per share of Common Stock shall be deemed to be the amount most recently determined by the Board of Directors to represent the fair market value per share of the Common Stock (including without limitation a determination for purposes of granting Common Stock options or issuing Common Stock under an employee benefit plan of the Company); and, upon request of the Registered Holder, the Board of Directors (or a representative thereof) shall promptly notify the Registered Holder of the Fair Market Value per share of Common Stock. Notwithstanding the foregoing, if the Board of Directors has not made such a determination within the three-month period prior to the Exercise Date, then (A) the Board of Directors shall make a determination of the Fair Market Value per share of the Common Stock within 15 days of a request by the Registered Holder that it do so, and (B) the exercise of this Warrant pursuant to this subsection 1(b) shall be delayed until such determination is made. (c) Notwithstanding anything to the contrary herein, each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on such day which is 61 days subsequent to the date on which this Warrant shall have been surrendered to the Company as provided in subsection 1(a) above (such subsequent day the “Exercise Date”). On the Exercise Date and not before, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise as provided in subsection 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates. Prior to the Exercise Date such person or persons shall continue to be deemed to be owners of this Warrant and not of any corresponding underlying Warrant Shares. Provided this Warrant is surrendered on or prior to the Expiration Date, this Warrant may be exercised in accordance with the terms and conditions herein notwithstanding the fact that the Exercise Date may be later than the Expiration Date. This Section 1(c) shall survive the termination or voiding of this Warrant and continue in full force and effect. (d) As soon as practicable after the exercise of this Warrant in full or in part on the Exercise Date, and in any event within 3 business days thereafter, the Company, at its expense, will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct: (i) a certificate or certificates for the number of full Warrant Shares to which the Registered Holder shall be entitled upon such exercise plus, in lieu of any fractional share to   - 2 - -------------------------------------------------------------------------------- which the Registered Holder would otherwise be entitled, cash in an amount determined pursuant to Section 3 hereof; and (ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of Warrant Shares equal (without giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant minus the sum of (a) the number of such shares purchased by the Registered Holder upon such exercise and paid for in cash pursuant to subsection 1(a) (if any) plus (b) the number of Warrant Shares (if any) covered by the portion of this Warrant cancelled in payment of the Purchase Price payable upon such exercise pursuant to subsection 1(b) above. 2. Adjustments. (a) Adjustment for Stock Splits and Combinations. If the Company shall at any time or from time to time after the date on which this Warrant was first issued (the “Original Issue Date”) effect a subdivision of the outstanding Common Stock, the Purchase Price then in effect immediately before that subdivision shall be proportionately decreased. If the Company shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Purchase Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective. (b) Adjustment for Certain Dividends and Distributions. In the event the Company at any time, or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Purchase Price then in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Purchase Price then in effect by a fraction: (1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Purchase Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Purchase Price shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions.   - 3 - -------------------------------------------------------------------------------- (c) Adjustment in Number of Warrant Shares. When any adjustment is required to be made in the Purchase Price pursuant to subsections 2(a) or 2(b), the number of Warrant Shares purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Purchase Price in effect immediately prior to such adjustment, by (ii) the Purchase Price in effect immediately after such adjustment. (d) Adjustments for Other Dividends and Distributions. In the event the Company at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Company (other than shares of Common Stock) or in cash or other property (other than cash out of earnings or earned surplus, determined in accordance with generally accepted accounting principles), then and in each such event provision shall be made so that the Registered Holder shall receive upon exercise hereof, in addition to the number of shares of Common Stock issuable hereunder, the kind and amount of securities of the Company and/or cash and other property which the Registered Holder would have been entitled to receive had this Warrant been exercised into Common Stock on the date of such event and had the Registered Holder thereafter, during the period from the date of such event to and including the Exercise Date, retained any such securities receivable, giving application to all adjustments called for during such period under this Section 2 with respect to the rights of the Registered Holder. (e) Adjustment for Mergers or Reorganizations, etc. If there shall occur any reorganization, recapitalization, consolidation or merger involving the Company in which the Common Stock is converted into or exchanged for securities, cash or other property (other than a transaction covered by subsections 2(a), 2(b) or 2(d)), or the sale of all or substantially all of its assets to another corporation shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, following any such reorganization, recapitalization, consolidation or merger, the Registered Holder shall receive upon exercise hereof the kind and amount of securities, cash or other property which the Registered Holder would have been entitled to receive if, immediately prior to such reorganization, recapitalization, consolidation or merger, the Registered Holder had held the number of shares of Common Stock subject to this Warrant. In any such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Company) shall be made in the application of the provisions set forth herein with respect to the rights and interests thereafter of the Registered Holder, to the end that the provisions set forth in this Section 2 (including provisions with respect to changes in and other adjustments of the Purchase Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities, cash or other property thereafter deliverable upon the exercise of this Warrant. The Company will not effect any consolidation, merger or sale, unless prior to the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume, by written instrument executed and mailed or delivered to the Holder at the last address of such Holder appearing on the books of the Company, the obligation to deliver to such Holder such shares of stock, securities or assets (including cash) as, in accordance with the foregoing provisions, the Holder may be entitled to receive.   - 4 - -------------------------------------------------------------------------------- (f) Adjustments for Prepayment of 10% Senior Fixed Rate Secured Bond. Simultaneously with the issuance of this Warrant, StockerYale (UK) Limited, a direct subsidiary of the Company issued a 10% Senior Fixed Rate Secured Bond (the “Bond”) to the Registered Holder in the original principal amount of US$4,750,000. If StockerYale (UK) Limited shall prepay all amounts outstanding under the Bond prior to the third anniversary of the date hereof, then the number of Warrant Shares purchasable upon exercise of this Warrant shall be changed to the following numbers: (i) 1,900,000 if the Bond is repaid in full prior to the first anniversary of the date hereof; (ii) 2,018,750 if the Bond is repaid in full prior to the second anniversary of the date hereof; and (iii) 2,137,500 if the Bond is repaid in full prior to the third anniversary of the date hereof. (g) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Purchase Price pursuant to this Section 2, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to the Registered Holder a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property for which this Warrant shall be exercisable and the Purchase Price) and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of the Registered Holder, furnish or cause to be furnished to the Registered Holder a certificate setting forth (i) the Purchase Price then in effect and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the exercise of this Warrant. 3. Fractional Shares. The Company shall not be required upon the exercise of this Warrant to issue any fractional shares, but shall make an adjustment therefor in cash on the basis of the Fair Market Value per share of Common Stock, as determined pursuant to subsection 1(b) above. 4. Requirements for Transfer. (a) This Warrant and the Warrant Shares shall not be sold or transferred unless either (i) they first shall have been registered under the Securities Act of 1933, as amended (the “Act”), or (ii) the Company first shall have been furnished with an opinion of legal counsel, reasonably satisfactory to the Company, to the effect that such sale or transfer is exempt from the registration requirements of the Act. (b) Notwithstanding the foregoing, no registration or opinion of counsel shall be required for (i) a transfer by a Registered Holder which is a corporation to a wholly owned subsidiary of such corporation, a transfer by a Registered Holder which is a partnership to a partner of such partnership or a retired partner of such partnership or to the estate of any such partner or retired partner, or a transfer by a Registered Holder which is a limited liability company to a member of such limited liability company or a retired member or to the estate of any such member or retired member, provided that the transferee in each case agrees in writing to be subject to the terms of this Section 4, or (ii) a transfer made in accordance with Rule 144 under the Act.   - 5 - -------------------------------------------------------------------------------- (c) Each certificate representing Warrant Shares shall bear a legend substantially in the following form: “The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be offered, sold or otherwise transferred, pledged or hypothecated unless and until such securities are registered under such Act or an opinion of counsel satisfactory to the Company is obtained to the effect that such registration is not required.” The foregoing legend shall be removed from the certificates representing any Warrant Shares, at the request of the holder thereof, at such time as they become eligible for resale pursuant to Rule 144(k) under the Act. 5. No Impairment. The Company will not, by amendment of its charter or through reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. 6. Notices of Record Date, etc. In the event: (a) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right; or (b) of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the surviving entity and its Common Stock is not converted into or exchanged for any other securities or property), or any transfer of all or substantially all of the assets of the Company; or (c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company, then, and in each such case, the Company will mail or cause to be mailed to the Registered Holder a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such   - 6 - -------------------------------------------------------------------------------- reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at least ten days prior to the record date or effective date for the event specified in such notice. 7. Reservation of Stock. The Company will at all times reserve and keep available, solely for issuance and delivery upon the exercise of this Warrant, such number of Warrant Shares and other securities, cash and/or property, as from time to time shall be issuable upon the exercise of this Warrant. 8. Exchange of Warrants. Upon the surrender by the Registered Holder, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 4 hereof, issue and deliver to or upon the order of such Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of the Registered Holder or as the Registered Holder (upon payment by the Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock (or other securities, cash and/or property) then issuable upon exercise of this Warrant. 9. Replacement of Warrants. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor. 10. Transfers, etc. (a) The Company will maintain a register containing the name and address of the Registered Holder of this Warrant. The Registered Holder may change its or his address as shown on the warrant register by written notice to the Company requesting such change. (b) Subject to the provisions of Section 4 hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant with a properly executed assignment (in the form of Exhibit II hereto) at the principal office of the Company. (c) Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder as the absolute owner hereof for all purposes; provided, however, that if and when this Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. 11. Mailing of Notices, etc. All notices and other communications from the Company to the Registered Holder shall be mailed by first-class certified or registered mail, postage prepaid, to the address last furnished to the Company in writing by the Registered Holder. All notices and other communications from the Registered Holder or in connection herewith to the Company shall be mailed by first-class certified or registered mail, postage prepaid, to the Company at its principal office at 32 Hampshire Road, Salem, New Hampshire 03079, Attn: Chief Financial Officer. If the Company should at any time change the location of its principal   - 7 - -------------------------------------------------------------------------------- office to a place other than as set forth above, it shall give prompt written notice to the Registered Holder and thereafter all references in this Warrant to the location of its principal office at the particular time shall be as so specified in such notice. 12. No Rights as Stockholder. Until the exercise of this Warrant, the Registered Holder shall not have or exercise any rights by virtue hereof as a stockholder of the Company. Notwithstanding the foregoing, in the event (i) the Company effects a split of the Common Stock by means of a stock dividend and the Purchase Price of and the number of Warrant Shares are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), and (ii) the Registered Holder exercises this Warrant between the record date and the distribution date for such stock dividend, the Registered Holder shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend. 13. Change or Waiver. Any term of this Warrant may be changed or waived only by an instrument in writing signed by the party against which enforcement of the change or waiver is sought. 14. Section Headings. The section headings in this Warrant are for the convenience of the parties and in no way alter, modify, amend, limit or restrict the contractual obligations of the parties. 15. Governing Law. This Warrant will be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts (without reference to the conflicts of law provisions thereof).   - 8 - -------------------------------------------------------------------------------- EXECUTED as of the Date of Issuance indicated above.   STOCKERYALE, INC. By:   /s/ Mark Blodgett Title:   Chairman & CEO

Exhibit 10.29 “Pages where confidential treatment has been requested are marked ‘Confidential Treatment Requested.’ The redacted material has been separately filed with the Commission, and the appropriate section has been marked at the appropriate place with [REDACTED] and in the margin with a star (*).” FINANCIAL COVENANTS AGREEMENT THIS FINANCIAL COVENANTS AGREEMENT (“Agreement”) is entered into by and between Seminole Electric Cooperative, Inc. a Florida corporation, (hereinafter referred to as “Purchaser”) and Alliance Coal, LLC, a Delaware limited liability company (hereinafter referred to as “Seller”). Purchaser and Seller may be referred to individually as “Party” or collectively as the “Parties” and all references to Purchaser or Seller shall include its respective successors or assigns by way of merger, consolidation, sale or divestiture. WHEREAS, Purchaser and Webster County Coal, LLC, a Delaware limited liability company, White County Coal, LLC, a Delaware limited liability company, and Alliance Coal, LLC, as agent for Webster County Coal, LLC and White County Coal, LLC, all having an address of 1717 South Boulder Avenue, Tulsa, Oklahoma 74119-4886, entered into that certain Restated and Amended Coal Supply Agreement, effective February 1, 1986, as amended (hereinafter referred to as the “Existing Agreement”) and that certain New Coal Supply Agreement, effective January 1, 2011, (hereinafter referred to as the “New Agreement”); and WHEREAS, simultaneously herewith, Seller has agreed to execute that certain Guaranty, as referred to in the New Agreement. NOW, THEREFORE, in consideration of the execution of the New Agreement and the Guaranty, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties and their respective successors and assigns, agree as follows: 1. The effective date (“Effective Date”) of this Agreement shall be the earlier of (i) the date on which Purchaser has acquired the legal title or the trust beneficial interest in Unit 2 of the Seminole Generating Station near Palatka, Florida; or (ii) January 1, 2011. 2. As of the Effective Date, the Parties agree to the following financial covenants: (a) Seller (and any successor of Seller by way of merger, consolidation, sale or divestiture) shall be required to maintain a [REDACTED] through December 31, 2012, which shall decline at the rate of [REDACTED] after the end of each calendar year, beginning December 31, 2005 and continuing through December 31, 2012. If Purchaser elects to extend the New Agreement through December 31, 2016, Seller (and any successor) agrees to maintain a [REDACTED] effective January 1, 2013, which shall decline at the rate of [REDACTED] after the end of each calendar year, beginning December 31, 2013 and continuing through December 31, 2016. (b) Seller (and any successor thereto by way of merger, consolidation, sale or divestiture) covenants and agrees to deliver to Purchaser its annual consolidated financial   -------------------------------------------------------------------------------- [REDACTED] denotes confidential information with respect to which a separate confidential treatment request has been filed with the Securities and Exchange Commission. -------------------------------------------------------------------------------- Confidential Treatment Requested statements as soon as practicable and in any event within 90 days after the end of each fiscal year, all in reasonable detail and certified by an authorized financial officer of Seller (or any successor, if applicable). Furthermore, Seller (and any successor) shall self report to Purchaser at any time during any calendar year if its [REDACTED] falls below the minimum limits for such calendar year as required pursuant to this Section 2. The failure of Seller (and any successor) to comply with the provisions of this Section 2, shall hereinafter be referred to as a “Seller Triggering Event.” (c) Purchaser (and any successor thereto by way of merger, consolidation, sale or divestiture) covenants and agrees to deliver to Seller (and any successor) Purchaser’s (and any successor’s) annual consolidated financial statements as soon as practicable and in any event within 90 days after the end of each fiscal year, all in reasonable detail and certified by an authorized financial officer of Purchaser (or any successor, if applicable). Furthermore, Purchaser (and any successor) shall self report to Seller (and any successor) at any time during any calendar year if Purchaser’s (and any successor’s) [REDACTED] falls below [REDACTED]. For purposes of this Agreement, a “Purchaser Triggering Event” shall mean (i) the failure of Purchaser (and any successor) to maintain an [REDACTED], (ii) the failure of Purchaser (and any successor) to self report its failure to maintain such [REDACTED] as provided by the preceding sentence and/or (iii) the failure of Purchaser (and any successor) to deliver its annual consolidated financial statements in accordance with the provisions of this Section 2. (d) If a Purchaser Triggering Event occurs, or, alternatively, if a Seller Triggering Event occurs, then the Purchaser (and any successor), in the case of a Seller Triggering Event, or Seller (and any successor) in the case of a Purchaser Triggering Event, (the Purchaser or the Seller, as the case may be, the “Affected Party”), may demand, in writing, assurance of performance (“Performance Assurance”) in an amount determined in a commercially reasonable manner and in a form reasonably acceptable to such Affected Party. Such Performance Assurance may be in the form of either (i) cash or other collateral, (ii) a letter of credit in a form and from an issuer reasonably acceptable to the Affected Party, (iii) a third-party guaranty from a guarantor whose credit is reasonably acceptable to the Affected Party or (iv) any other form of security or collateral reasonably acceptable to the Affected Party. The Performance Assurance or other acceptable collateral shall be delivered within five (5) Business Days of the date of such request. The failure of Seller or Purchaser to provide such Performance Assurance pursuant to the terms of this Section 2 within five (5) Business Days shall permit the Party entitled to receive such Performance Assurance to seek any remedy provided by the Uniform Commercial Code, or as otherwise provided in law or equity for such breach, but not termination of the Existing Agreement or New Agreement, as applicable. 3. Notwithstanding the provisions of Section 2 above, if a Purchaser Triggering Event occurs, as an alternative to requesting Performance Assurance pursuant to Section 2, Seller may require [REDACTED].   -------------------------------------------------------------------------------- [REDACTED] denotes confidential information with respect to which a separate confidential treatment request has been filed with the Securities and Exchange Commission.   2 -------------------------------------------------------------------------------- Executed as of the date set forth below, but made effective as provided for above.   SEMINOLE ELECTRIC COOPERATIVE, INC. By:   /s/ Richard J. Midulla Name:   Richard J. Midulla Title:   Executive Vice President   and General Manager Date: 10/21/05 ALLIANCE COAL, LLC By:   /s/ Gary J. Rathburn Name:   Gary J. Rathburn Title:   Senior Vice President – Marketing Date: 10/25/05 Signature Page to Financial Covenants Agreement

EXHIBIT 10.16   For Awards Made After December 12, 2005 to the CEO or CFO   COINSTAR, INC.   NOTICE OF RESTRICTED STOCK AWARD TO CEO OR CFO 1997 AMENDED AND RESTATED EQUITY INCENTIVE PLAN   Date:                          , 200     To:                                You have been granted an award of restricted stock (the “Restricted Stock Award”) by Coinstar, Inc. (the “Company”). This Restricted Stock Award is subject to the terms of the enclosed Restricted Stock Award Agreement and the Company’s 1997 Amended and Restated Equity Incentive Plan (the “Plan”). Except as expressly provided otherwise in the Restricted Stock Award Agreement, the Restricted Stock Award is limited by and subject to the express terms and conditions of the Plan. Defined terms in the Plan shall have the same meaning in this Notice of Restricted Stock Award, except where the context otherwise requires. By accepting this Restricted Stock Award, you accept it subject to the terms of this Notice of Restricted Stock Award and the enclosed Restricted Stock Award Agreement.   The basic terms of the Restricted Stock Award are summarized as follows:   1. Number of Shares:                        2. Grant Date:                            3. Fair Market Value Per Share (Informational, for tax purposes):                4. Vesting   The Restricted Stock Award is subject to forfeiture upon varying circumstances relating to your termination of employment with the Company. The restrictions on the shares will lapse and the shares will no longer be subject to forfeiture according to the following schedule:   Date on Which Portion of Restricted Stock Award Is No Longer Subject to Forfeiture --------------------------------------------------------------------------------   Portion of Restricted Stock Award No Longer Subject to Forfeiture -------------------------------------------------------------------------------- _________________   _________________ _________________   _________________ _________________   _________________ -------------------------------------------------------------------------------- COINSTAR, INC.   RESTRICTED STOCK AWARD AGREEMENT FOR AWARDS TO CEO OR CFO   Pursuant to your Notice of Restricted Stock Award, (the “Grant Notice”) the Company has awarded you an award of restricted stock (the “Restricted Stock Award”) under its 1997 Amended and Restated Equity Incentive Plan (the “Plan”) for the number of shares of the Company’s Common Stock indicated in your Grant Notice. The Grant Notice, the Plan and this Restricted Stock Award Agreement (this “Agreement”) govern the terms of the award. Capitalized terms not explicitly defined in this Agreement but defined in the Plan shall have the same definitions as in the Plan.   1. Vesting   Shares that have vested and are no longer subject to forfeiture according to the vesting schedule set forth in the Grant Notice are referred to herein as “Vested Shares.” Shares that are not vested and remain subject to forfeiture under the preceding schedule are referred to herein as “Unvested Shares.” The Unvested Shares will vest (and to the extent so vested cease to be Unvested Shares remaining subject to forfeiture) in accordance with the vesting schedule set forth in the Grant Notice. Collectively, the Unvested Shares and the Vested Shares are referred to herein as the “Shares.”   2. Transfer Restrictions   Any sale, transfer, assignment, encumbrance, pledge, hypothecation, conveyance in trust, gift, transfer by bequest, devise or descent, or other transfer or disposition of any kind, whether voluntary or by operation of law, directly or indirectly, of Unvested Shares shall be strictly prohibited and void, except by will or the laws of descent and distribution.   3. Status of Participant   You will be recorded as a stockholder of the Company with respect to the Shares.   4. Securities Law Compliance   4.1 You represent and warrant that you (a) have been furnished with all information which you deem necessary to evaluate the merits and risks of receipt of the Shares, (b) have had the opportunity to ask questions and receive answers concerning the information received about the Shares and the Company, and (c) have been given the opportunity to obtain any additional information you deem necessary to verify the accuracy of any information obtained concerning the Shares and the Company.   4.2 You hereby agree that you will in no event sell or distribute all or any part of the Shares unless (a) there is an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”) and applicable state securities laws covering any -------------------------------------------------------------------------------- such transaction involving the Shares or (b) the Company receives an opinion of your legal counsel (concurred in by legal counsel for the Company) stating that such transaction is exempt from registration or the Company otherwise satisfies itself that such transaction is exempt from registration. You understand that the Company has no obligation to you to register the Shares with the Securities and Exchange Commission and has not represented to you that it will so register the Shares.   4.3 You confirm that you have been advised, prior to your receipt of the Shares, that neither the offering of the Shares nor any offering materials have been reviewed by any administrator under the Securities Act or any other applicable securities act.   4.4 You hereby agree to indemnify the Company and hold it harmless from and against any loss, claim or liability, including attorneys’ fees or legal expenses, incurred by the Company as a result of any breach by you of, or any inaccuracy in, any representation, warranty or statement made by you in this Agreement or the breach by you of any terms or conditions of this Agreement.   5. Termination of Employment; Company Transaction   5.1 Termination of Employment   Except as provided in Section 5.2 below, in the event your Continuous Status as an Employee, Director or Consultant terminates for any reason, including without limitation, your voluntary termination, termination by the Company, or the occurrence of your death, disability or retirement, the Unvested Shares shall be forfeited by you without payment of any further consideration to you.   5.2 Company Transaction   In the event of a merger, reorganization or sale of substantially all of the assets of the Company (a “Company Transaction”), 100% of any Unvested Shares shall automatically become fully vested so that the restrictions on the Shares will lapse and the Shares will no longer be subject to forfeiture.   6. Section 83(b) Election for Restricted Stock Award; Independent Tax Advice   You understand that under Section 83(a) of the Internal Revenue Code of 1986 (the “Code”), the fair market value of the Unvested Shares on the date the forfeiture restrictions lapse will be taxed, on the date such forfeiture restrictions lapse, as ordinary income subject to payroll and withholding tax and tax reporting, as applicable. For this purpose, the term “forfeiture restrictions” means the right of the Company to receive back any Unvested Shares upon termination of your employment with the Company. You understand that you may elect under Section 83(b) of the Code to be taxed at ordinary income rates on the fair market value of the Unvested Shares at the time they are acquired, rather than when and as the Unvested Shares cease to be subject to the forfeiture restrictions. Such election (an “83(b) Election”) must be filed with the Internal Revenue Service within 30 days from the grant date of the Restricted Stock Award.   -2- -------------------------------------------------------------------------------- You understand that there are significant risks associated with the decision to make and 83(b) Election. If you make an 83(b) Election and the Unvested Shares are subsequently forfeited to the Company, you will not be entitled to a deduction for any ordinary income previously recognized as a result of the 83(b) Election. If you make an 83(b) Election and the value of the Unvested Shares subsequently declines, the 83(b) Election may cause you to recognize more compensation income than you would have otherwise recognized. On the other hand, if the value of the Unvested Shares increases and you have not made an 83(b) Election, you may recognize more compensation income than you would have if you had made the election.   THE FORM FOR MAKING AN 83(b) ELECTION IS ATTACHED TO THIS AGREEMENT AS EXHIBIT B. YOU UNDERSTAND THAT, IF YOU DECIDE TO MAKE AN 83(b) ELECTION, IT IS YOUR RESPONSIBILITY TO FILE SUCH AN ELECTION WITH THE INTERNAL REVENUE SERVICE AND THAT FAILURE TO FILE SUCH AN ELECTION WITHIN THE 30-DAY PERIOD MAY RESULT IN THE RECOGNITION OF ORDINARY INCOME BY YOU AS THE FORFEITURE RESTRICTIONS LAPSE. You further understand that an additional copy of such election form should be filed with your federal income tax return for the calendar year in which the date of this Agreement falls. You acknowledge that the foregoing is only a summary of the federal income tax laws that apply to the award of the Shares under this Agreement and does not purport to be complete. YOU FURTHER ACKNOWLEDGE THAT THE COMPANY HAS DIRECTED YOU TO SEEK INDEPENDENT ADVICE REGARDING THE APPLICABLE PROVISIONS OF THE CODE AND THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH YOU MAY RESIDE.   You agree to execute and deliver to the Company with this Agreement a copy of the Acknowledgment and Statement of Decision Regarding Section 83(b) Election (the “Acknowledgment”) attached hereto as Exhibit A. You further agree that if you choose to make an 83(b) Election with the Internal Revenue Service, you will also deliver to the Company with this signed Agreement a signed copy of the 83(b) Election.   You acknowledge that determining the actual tax consequences to you of receiving or disposing of the Shares may be complicated. These tax consequences will depend, in part, on your specific situation and may also depend on the resolution of currently uncertain tax law and other variables not within the control of the Company. You are aware that you should consult a competent and independent tax advisor for a full understanding of the specific tax consequences to you of receiving or disposing of the Shares. Prior to executing this Agreement, you either have consulted with a competent tax advisor independent of the Company to obtain tax advice concerning the Shares in light of your specific situation or have had the opportunity to consult with such a tax advisor but have chosen not to do so.   -3- -------------------------------------------------------------------------------- 7. Book Entry Registration of the Shares   The Company will issue the Shares by registering the Shares in book entry form with the Company’s transfer agent in your name and the applicable restrictions will be noted in the records of the Company’s transfer agent and in the book entry system. No certificate(s) representing all or a part of the Shares will be issued until the Shares become Vested Shares.   8. Stop-Transfer Notices   You understand and agree that, in order to ensure compliance with the restrictions referred to in this Agreement, the Company may issue appropriate “stop-transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. The Company will not be required to (a) transfer on its books any Shares that have been sold or transferred in violation of the provisions of this Agreement or (b) treat as the owner of the Shares, or otherwise accord voting, dividend or liquidation rights to, any transferee to whom the Shares have been transferred in contravention of this Agreement.   9. Tax Withholding   As a condition to the removal of restrictions from your Vested Shares registered in book entry form with the Company’s transfer agent, you agree to make arrangements satisfactory to the Company for the payment of any federal, state, local or foreign withholding tax obligations that arise either upon receipt of the Shares or as the forfeiture restrictions on any Shares lapse. You may satisfy such withholding obligation by any of the following means or a combination thereof: (a) tendering a cash payment, (b) authorizing the Company to withhold shares from the shares of Common Stock otherwise issuable pursuant to the Restricted Stock Award (up to the employer’s minimum tax withholding rate) or (c) delivering to the Company already owned and unencumbered shares of Common Stock (up to the employer’s minimum required tax withholding rate to the extent the shares have been held for less than six months). Notwithstanding the previous sentence, you acknowledge and agree that the Company and any Affiliate has the right to deduct from payments of any kind otherwise due to you any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to the Restricted Stock Award.   10. General Provisions   10.1 Notices   Whenever any notice is required or permitted hereunder, such notice must be in writing and personally delivered or sent by mail. Any notice required or permitted to be delivered hereunder shall be deemed to be delivered on the date on which it is personally delivered, or, whether actually received or not, on the third business day after it is deposited in the United States mail, certified or registered, postage prepaid, addressed to the person who is to receive it at the address that such person has theretofore specified by written notice delivered in accordance herewith. The Company or Participant may change, by written   -4- -------------------------------------------------------------------------------- notice to the other, the address previously specified for receiving notices. Notices delivered to the Company shall be addressed as follows:   Company:    Coinstar, Inc.      Attn: General Counsel      1800 114th Avenue SE      Bellevue, WA 98004   10.2 No Waiver   No waiver of any provision of this Agreement will be valid unless in writing and signed by the person against whom such waiver is sought to be enforced, nor will failure to enforce any right hereunder constitute a continuing waiver of the same or a waiver of any other right hereunder.   10.3 Undertaking   You hereby agree to take whatever additional action and execute whatever additional documents the Company may deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on either you or the Shares pursuant to the express provisions of this Agreement.   10.4 Entire Contract   This Agreement, the Grant Notice and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof and supersede all prior oral or written agreements on the subject. This Agreement is made pursuant to the provisions of the Plan and will in all respects be construed in conformity with the express terms and provisions of the Plan.   10.5 Successors and Assigns   The provisions of this Agreement will inure to the benefit of, and be binding on, the Company and its successors and assigns and you and your legal representatives, heirs, legatees, distributees, assigns and transferees by operation of law, whether or not any such person will have become a party to this Agreement and agreed in writing to join herein and be bound by the terms and conditions hereof.   10.6 Counterparts   This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but which, upon execution, will constitute one and the same instrument.   10.7 Governing Law   The provisions of the Grant Notice and this Agreement shall be governed by the laws of the state of Washington, without giving effect to principles of conflicts of law.   -5- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement dated as of                         , 200  .   COINSTAR, INC. By:     -------------------------------------------------------------------------------- Name:     -------------------------------------------------------------------------------- Title:     -------------------------------------------------------------------------------- [NAME OF RECIPIENT]   -------------------------------------------------------------------------------- Recipient’s Signature   -6- -------------------------------------------------------------------------------- EXHIBIT A   ACKNOWLEDGMENT AND STATEMENT OF DECISION REGARDING SECTION 83(b) ELECTION   The undersigned, a recipient of              shares of common stock of Coinstar, Inc., a Delaware corporation (the “Company”), pursuant to a restricted stock award granted under the Company’s 1997 Amended and Restated Equity Incentive Plan (the “Plan”), hereby states as follows:   1. The undersigned acknowledges receipt of a copy of the Restricted Stock Award Agreement and the Plan relating to the offering of such shares. The undersigned has carefully reviewed the Plan and the Restricted Stock Award Agreement pursuant to which the award was granted.   2. The undersigned either (check and complete as applicable)   (a)         has consulted, and has been fully advised by, the undersigned’s own tax advisor,                                 , whose business address is                                 , regarding the federal, state and local tax consequences of receiving shares under the Plan, and particularly regarding the advisability of making an election pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”), and pursuant to the corresponding provisions, if any, of applicable state law, or   (b)         has knowingly chosen not to consult such a tax advisor.   3. The undersigned hereby states that the undersigned has decided (check as applicable)   (a)         to make an election pursuant to Section 83(b) of the Code, and is submitting to the Company, together with the undersigned’s executed Restricted Stock Award Agreement, an executed form entitled “Election Under Section 83(b) of the Internal Revenue Code of 1986”, or   (b)         not to make an election pursuant to Section 83(b) of the Code.   4. Neither the Company nor any subsidiary or representative of the Company has made any warranty or representation to the undersigned with respect to the tax consequences of the undersigned’s acquisition of shares under the Plan or of the making or failure to make an election pursuant to Section 83(b) of the Code or the corresponding provisions, if any, of applicable state law.   Dated:     --------------------------------------------------------------------------------     --------------------------------------------------------------------------------         Recipient           --------------------------------------------------------------------------------         Print Name -------------------------------------------------------------------------------- EXHIBIT B   ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE OF 1986   The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code, to include in taxpayer’s gross income for the current taxable year the amount of any compensation taxable to taxpayer in connection with taxpayer’s receipt of the property described below:   1. The name, address, taxpayer identification number and taxable year of the undersigned are as follows:   NAME OF TAXPAYER:                                    ADDRESS: ____________________                     ____________________   IDENTIFICATION NO. OF TAXPAYER:                        TAXABLE YEAR:            2. The property with respect to which the election is made is described as follows:                        shares of the Common Stock of Coinstar, Inc., a Delaware corporation (the “Company”).   3. The date on which the property was transferred is:                                4. The property is subject to the following restrictions:   The property is subject to a forfeiture right pursuant to which the Company can reacquire the Shares if for any reason taxpayer’s services with the Company are terminated. The Company’s right to receive back the shares lapses as follows:                         .   5. The aggregate 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, of such property is: $               6. The amount (if any) paid for such property is: $               The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property. The undersigned is the person performing the services in connection with the transfer of said property.   The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner of Internal Revenue.   Dated:     --------------------------------------------------------------------------------     --------------------------------------------------------------------------------         Taxpayer   B-2 -------------------------------------------------------------------------------- DISTRIBUTION OF COPIES   1. File original with the Internal Revenue Service Center where the taxpayer’s income tax return will be filed. Filing must be made by no later than 30 days after the date of grant.   2. Attach one copy to the taxpayer’s income tax return for the taxable year in which the property was transferred.   3. Mail one copy to the Company at the following address:   Coinstar, Inc. 1800 114th Avenue SE Bellevue, WA 98004

  Exhibit 10.1   STIFEL FINANCIAL CORP.   SUBSCRIPTION AGREEMENT     1. Name of Subscriber: ___________________________________   2  Number of Shares Subscribed For:         3. Total Purchase Price     Number of Shares × $25.00 = $__________________________________   NOTE:     The due date for returning subscription agreements is by 5:00 p.m. Eastern time on Thursday January 6, 2006, subject to the right of Stifel to extend such date in its sole discretion. This document should be returned to the attention of Hugh Warns, 100 Light Street, Baltimore MD. You are not required to tender payment for the Shares subscribed for at that time. The due date for payment for the Shares will be Thursday, January 19, 2006, or at a later date if Stifel extends such date. In such case Stifel will notify you of the revised date for tendering funds. Such funds shall be transmitted to Stifel by check, wire transfer (or other method permitted by Stifel).     THE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND THEY MAY NOT BE RESOLD UNLESS THEY ARE REGISTERED OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THIS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES DESCRIBED HEREIN IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SALE. _______________________________   Stifel Financial Corp. 501 N. Broadway St. Louis, Missouri 63102   Ladies and Gentlemen:   The undersigned (the “Subscriber”), by signing this Subscription Agreement and completing the Subscription Qualification Page attached hereto as Schedule 1 (together, the “Agreement”), hereby tenders this subscription and applies for the purchase of the number of shares of common stock, par value $0.15 per share (“Shares”) set forth above, in Stifel Financial Corp. (“Stifel”), at a purchase price of $25.00 per share. The Subscriber understands that the acceptance of any subscription and the offering is made in connection   1   --------------------------------------------------------------------------------   with the completion on December 1, 2005 of the acquisition by Stifel of the capital markets business of Legg Mason, Inc. (“Legg Mason”) from Citigroup Inc. (the “Legg Mason Transaction”). The Subscriber understands that the funds submitted herewith will be held by Stifel and will be returned promptly, without deduction and without interest to the undersigned in the event this subscription is rejected or if the sale of the Shares is not consummated for any reason (in which event this subscription shall be deemed to be rejected). The Subscriber hereby acknowledges receipt of a copy of the Confidential Placement Memorandum dated October 10, 2005 (as supplemented and/or amended from time to time, together with all enclosures thereto, the “Confidential Placement Memorandum”). The Confidential Placement Memorandum is hereby incorporated by reference into this Agreement. NOW, THEREFORE, Stifel and the Subscriber do hereby agree as follows: (1)           Acceptance of Subscription. Subject to the terms and conditions of this Agreement, the Subscriber does hereby subscribe for the number of Shares set forth above. The Subscriber acknowledges and agrees that the offering (and the acceptance of any subscription) is made in connection with the completion of the Legg Mason Transaction on December 1, 2005. The Subscriber agrees that subscriptions need not be accepted in the order they are received. The Subscriber acknowledges that Stifel reserves the right to withdraw, cancel or modify this offering at any time. No selling commission will be paid to any party in connection with any subscription made pursuant to this Agreement. This Agreement must be tendered to Stifel no later than 5:00 p.m. Thursday, January 6, 2006, provided that Stifel may extend such date in its sole discretion. The payment due date for the Shares will be Thursday, January 19, 2006, or at a later date in the event Stifel determines to extend such date in its sole discretion. (2)          Representations and Warranties. The Subscriber hereby expressly represents and warrants to Stifel that: (a)           The residence of the Subscriber set forth below is the true and correct residence of the Subscriber and the Subscriber has no present intention of becoming a resident or domiciliary of any other state, country or jurisdiction. (b)           The Subscriber is an individual citizen or resident alien of the United States and is at least 21 years of age, or is such an individual who is treated as the owner of a “grantor trust” as defined in the United States Internal Revenue Code of 1986 (as amended, the “Code”) or who is the beneficiary of a “qualified subchapter S trust” as defined in the Code. (c)           The Shares for which the Subscriber hereby subscribes will be acquired by the Subscriber for investment only, in the Subscriber’s own account, and not with a view to, or for sale in connection with, any distribution of the interests in violation of the Securities Act of 1933 (as amended, the “Securities Act”) or any rule or regulation under the Securities Act. The Shares are not being purchased for subdivision or fractionalization thereof; and the Subscriber has no contract, undertaking, agreement or arrangement with any person or entity to sell, hypothecate, pledge, donate or otherwise transfer (with or without consideration) to any such person or entity any Shares for which the Subscriber hereby subscribes, and the Subscriber has no present plans or intentions to enter into any such contract, undertaking, agreement or arrangement. (d)           The Subscriber understands that the Shares have not been registered under the Securities Act, and that the Subscriber’s transfer rights are restricted by the Securities Act, applicable state securities laws and the absence of a market for the Shares. The Subscriber understands that the   2     --------------------------------------------------------------------------------   Shares are not and will not be registered under the Securities Act in reliance on the exemption from registration for limited offers and sales contained in Section 4(2) and Rule 506 of the Securities Act. Moreover, the restrictions on transferability will likely limit the price for which the Subscriber would be able to sell any Shares. The Board of Directors of Stifel (the “Board”) has no current intention to redeem or repurchase Shares. The Subscriber may not sell or transfer the Shares in the absence of an effective registration statement under the Securities Act or without an opinion of counsel satisfactory to Stifel that such sale or transfer does not require registration under the Securities Act and will not be in violation of the Securities Act or applicable state securities and other laws. The Subscriber acknowledges that Stifel is not under any obligation to, and does not intend to, register the Shares for resale. (e)           The Subscriber has sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in the purchase of the Shares subscribed for hereby and to make an informed investment decision with respect to such purchase. (f)            The Subscriber’s commitment to investments, including the Shares, which are not readily marketable, is not disproportionate to such investor’s net worth. (g)           The Subscriber has adequate means of providing for current needs and personal contingencies, has no need for liquidity with respect to Subscriber’s investment in the Shares, and can bear the risk of losing the entire investment. (h)           The Subscriber’s investment in Stifel will not adversely affect his, her or its overall need for diversification and liquidity. (i)            The Subscriber hereby agrees that he, she or it satisfies any special requirements of such Subscriber’s state of residence and/or the state in which the Shares are being offered. (j)            Prior to executing this Agreement, the Subscriber has received and read the Confidential Placement Memorandum. The Subscriber understands that there are substantial risks involved in an investment in Stifel, including those identified in the “Risk Factors” section of the Confidential Placement Memorandum. (k)           The Subscriber has not relied upon representations or other information (whether written or oral) other than as set forth in the Confidential Placement Memorandum and the other documents related thereto, and only as provided to the Subscriber by Stifel. (l)            The Subscriber hereby has the opportunity to ask questions and receive answers concerning the terms and conditions of this offering and to obtain additional information which Stifel possesses or can acquire without unreasonable effort or expense. (m)          The information contained in the Subscription Qualification Page attached hereto as Schedule 1 is true and complete. (n)           The Subscriber has the legal capacity to execute, deliver and perform the Subscriber’s obligations pursuant to this Agreement and the other documents related thereto.   3     --------------------------------------------------------------------------------     (o)           All legal and tax advice, registrations, declarations or filings with, or consents, waivers, exemptions, licenses, approvals or authorizations of, any legislative body, governmental department or other governmental authority, necessary or appropriate in connection with the Subscriber’s investment in the fund have been obtained or complied with. (p)           The Subscriber is an “accredited investor” (as defined in the Subscription Qualification Page on Schedule 1). (q)           Neither Stifel nor any person on behalf of Stifel offered to sell to the Subscriber any of the Shares by means of any form of media advertising, public solicitation or seminars. (3)          The Subscriber understands that Stifel will inform the Subscriber whether this subscription for Shares has been accepted and the date on which any Shares will be issued. The Subscriber understands that this offering will terminate not later than March 31, 2006. (4)           The Subscriber understands that Stifel may require other documentation in addition to this Subscription Agreement, and Stifel reserves the right to request such documentation prior to deciding whether or not to accept this subscription. (5)           (a)          The Subscriber understands and agrees that Stifel is in no way representing that the purchase of Shares is a suitable investment for the Subscriber. Subscriber is therefore encouraged to consult a financial advisor in order to determine whether an investment in the Shares is an appropriate investment for the Subscriber. Subscriber acknowledges that Bryan Cave LLP represents Stifel and not the Subscriber, and that Bryan Cave LLP has not advised the Subscriber with respect to its investment in Stifel. (b)         The Subscriber further understands and acknowledges that, as a condition to the issuance of shares of Stifel common stock hereunder, Stifel will have the right to deduct from payments of any kind otherwise due to a LM Capital Markets employee any federal, state, or local taxes of any kind required by law to be withheld upon the issuance of the shares of Stifel common stock under this Subscription Agreement as described in the Confidential Placement Memorandum. Subscriber may designate below in Section 14 the manner in which such withholding obligation may be satisfied. (6)           Indemnification. The Subscriber understands that the Shares are being offered and sold in reliance on specific exemptions from the registration requirements of federal and state law and that Stifel is relying on the truth and accuracy of Subscriber’s representations, warranties and agreements contained herein in order to determine the application of such exemptions. The Subscriber understands that a misrepresentation or breach of any warranty or agreement made by the Subscriber could subject Stifel to significant damages and expenses. The Subscriber hereby agrees to indemnify, defend, and hold harmless Stifel and its respective affiliates from and against any loss, liability, damage, cost or expenses (including any taxes and penalties and any legal fees and expenses incurred in the investigation, prosecution, defense or settlement of any demands, claims, or lawsuits) which may result, directly or indirectly, from the Subscriber’s misrepresentation or breach of any warranty or agreement set forth in this Agreement or any other document delivered by the Subscriber in connection with this Agreement. (7)           Binding Effect. This Agreement and the rights, powers, and duties set forth herein shall bind and inure to the benefit of the heirs, executors, administrators, legal representatives, successors, and assigns of the parties hereto. If the Subscriber is more than one person, the obligations of the Subscriber shall be joint and several and the agreements, representations, warranties and acknowledgments herein contained shall   4     --------------------------------------------------------------------------------   be deemed to be made by and be binding upon each such person and his, her or its respective heirs, executors, administrators, successors, legal representatives and assigns. (8)           Subscription Irrevocable. Except as otherwise provided in this Agreement, Subscriber understands and agrees that its subscription for the Shares is irrevocable, but is contingent upon, among other things, its acceptance by Stifel. (9)           Entire Agreement; Modification. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and neither this Agreement nor any provisions hereof shall be waived, changed, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought. This Agreement supersedes any and all previous proposals, documents, term sheets and information previously provided to any prospective investor. No investor should rely upon any information not expressly provided in this Agreement in determining whether to purchase any Shares. (10)         Governing Law. This Agreement shall be construed in accordance with, and governed in all respects by, the laws of Missouri, without giving effect to the principles of conflicts of laws thereof. (11)         Severability; Counterparts. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. This Agreement may be executed simultaneously in two or more counterparts (including facsimiles), any one of which need not contain the signatures of more than one party, but all such counterparts taken together shall constitute one and the same Agreement. (12)         Survival of Representations. The representations, warranties, agreements and indemnification obligations of the Subscriber contained in this Agreement shall survive the execution hereof and the purchase of the Shares. (13)         No Third Party Rights. Nothing in this Agreement, express or implied, is intended to confer upon any third party any rights, remedies, obligations or liabilities under or by reason of this Agreement.   5     --------------------------------------------------------------------------------     (14) The name and address of the Subscriber, for entry in the ledger of Stifel, are as follows: Exact Name in which Shares   are to be registered: ______________________________________________________   Address of registered owner: ______________________________________________________     ______________________________________________________     ______________________________________________________     ______________________________________________________ Phone number: (      )   Fax number: (      )     Email address: ____________________________ Social Security or Federal Entity Identification Number: _________________________________ Withholding election: I would like to have the withholding obligation described above in Section 5(b) satisfied by (check one): ______ (1) causing Stifel to withhold shares of common stock of Stifel otherwise issuable to the Subscriber; ______ (2) delivering to Stifel shares of common stock of Stifel already owned by the Subscriber and held by the Subscriber for at least six months; or ______ (3) paying an equivalent amount of cash equal to such withholding obligation to Stifel. If no election is received by the Subscriber, the withholding shall be effected in the manner described in (1) above. The information contained in this Section 14 may be changed upon two weeks written or fax notice to Stifel at the address set forth below: Stifel Financial Corp. 501 N. Broadway St. Louis, Missouri 63102 Fax No.: (314) 342-2097 Attn: Neal Burkemper and James Laschober   (15)         Legend. The Subscriber agrees that a legend reading substantially as follows may be placed on each certificate evidencing the Shares issued to the Subscriber pursuant to this Subscription Agreement and that Stifel may take all steps it may deem necessary or desirable to see that the restrictions contained herein are complied with: “The shares of stock represented by this certificate have not been registered under the Securities Act of 1933, as amended, or any state securities act, and such shares cannot be sold or transferred except (1) pursuant to the registration provisions of such acts or an   6     --------------------------------------------------------------------------------   exemption therefrom and (2) if required by the corporation, the corporation receives an opinion of counsel satisfactory to the corporation in the case of a exempt transfer, that such an exemption is available.” IN WITNESS WHEREOF, the undersigned Subscriber has executed this Subscription Agreement on the date set forth below.     ______________________________________     Name of Individual (Please type or print)     ______________________________   (Signature of Individual Subscriber)       Accepted by: STIFEL FINANCIAL CORP. By:                                                                             Name:                                                                       Title:                                                                           7     --------------------------------------------------------------------------------     SCHEDULE 1   SUBSCRIPTION QUALIFICATION PAGE   THE QUESTIONS THAT FOLLOW ARE DESIGNED TO ASSIST STIFEL IN DETERMINING WHETHER THE SUBSCRIBER IS AN ACCREDITED INVESTOR. INITIAL ALL APPROPRIATE SPACES ON THE FOLLOWING PAGES, INDICATING THE BASIS UPON WHICH THE SUBSCRIBER MAY QUALIFY TO PURCHASE SHARES. FAILING TO INITIAL ALL SPACES APPLICABLE TO THE SUBSCRIBER MAY RESULT IN STIFEL NOT HAVING ENOUGH INFORMATION TO DETERMINE IF THE SUBSCRIBER IS AN ACCREDITED INVESTOR.   The Subscriber represents that:   [    ]   a. The Subscriber had an individual income* (exclusive of any income attributable to the Subscriber’s spouse) in excess of $200,000 in each of the last two calendar years and it reasonably expects to have an individual income in excess of $200,000 during the current calendar year, or   [    ]   b. The Subscriber, together with the Subscriber’s spouse, had a combined income in excess of $300,000 in each of the last two calendar years and it reasonably expects to have a combined income in excess of $300,000 during the current calendar year, or   [    ]   c. The Subscriber has an individual net worth**, or together with the Subscriber’s spouse a combined net worth, in excess of $1,000,000.   ___________   * For purposes of this Subscription Agreement, individual income means gross income, as reported for income tax purposes, less any income attributable to a spouse or to property owned by a spouse, increased by the following amounts (but not including any amounts attributable to a spouse or to property owned by a spouse): (1) the amount of any tax-exempt interest income received under Section 103 of the Code, (2) the amount of losses claimed as a limited partner in a limited partnership as reported on Schedule E of Form 1040 and (3) any deduction claimed for depletion under Section 611 et seq. of the Code.   ** “Net worth” means the excess of total assets at fair market value, including home, home furnishings and automobiles, over total liabilities. For purposes of determining “net worth,” the principal residence owned by an individual must be valued either at (A) cost, including the cost of improvements, net of current encumbrances upon the property, or (B) the appraised value of the property as determined by a written appraisal used by an institutional lender making a loan to the individual secured by the property, including the cost of subsequent improvements, net of current encumbrances, upon the property.          

  Exhibit 10.1 EMPLOYMENT AGREEMENT BETWEEN THE COMPANY AND THOMAS L. MONAHAN III DATED MAY 19, 2006      THIS EMPLOYMENT AGREEMENT (this “Agreement”), effective as of the 1st of January, 2006 (the “Effective Date”), is made and entered into on May 19, 2006 by and between The Corporate Executive Board Company (hereinafter the “Company”) and Thomas L. Monahan III (hereinafter the “Executive”).      WHEREAS, the Company employs the Executive as its Chief Executive Officer; and      WHEREAS, the Executive and the Company desire to memorialize the terms and conditions of the Executive’s employment with the Company in a written binding contract.      NOW, THEREFORE, in consideration of the mutual promises contained herein, and for other good and valuable consideration, the adequacy of which is hereby acknowledged, the parties agree as follows: 1. Employment      The Company hereby agrees to employ the Executive on the terms and conditions stated herein, to perform and discharge such services and duties as are reasonably required of the Chief Executive Officer, and such other substantially similar services and duties as he may be assigned from time to time by the Company’s Board of Directors (the “Board”). The Executive agrees to accept such employment with the Company as of the Effective Date on the terms and conditions stated herein, and to devote his full business time and best efforts, energies and abilities to the Company; provided, however, that the Executive may engage in charitable, civic or community activities, manage his personal investments and, with the prior approval of the Board, serve as a director of any company that is not directly or indirectly in competition with the Company, as long as such activities or service do not materially interfere with his duties and obligations to the Company hereunder. 2. Term; Effective Date      The term of employment of the Executive by the Company pursuant to this Agreement shall commence as of the Effective Date and, unless earlier terminated pursuant to Section 8 hereof, shall end on the second anniversary of the Effective Date; provided that the term of Executive’s employment under this Agreement shall be extended automatically for one additional year as of each anniversary of the Effective Date, unless no later than 90 days prior to any such renewal date either the Board, on behalf of the Company, or the Executive gives written notice to the other that the term of Executive’s employment under this Agreement shall not be so extended. This Agreement does not address any terms of the Executive’s employment other than as Chief Executive Officer.   --------------------------------------------------------------------------------   3. Compensation           (a) Base Salary           During his employment under this Agreement, the Company shall, commencing with the Effective Date, pay the Executive a base salary at the rate of Five Hundred Fifty Thousand Dollars ($550,000.00) per annum, payable in installments in accordance with the Company’s policy governing salary payments to executive employees generally. The Board will review the Executive’s salary periodically and may, in its sole discretion, grant increases to the Executive’s salary rate.           (b) Annual Incentive Bonus           Each fiscal year, the Executive shall have a target annual incentive bonus opportunity of not less than 110% of the Executive’s Base Salary in effect at the beginning of such fiscal year. The actual incentive bonus payable to the Executive for any fiscal year shall be based upon criteria established and approved by the Compensation Committee and/or the Board in its sole discretion, which need not be objective performance criteria, and may be less than (including zero) or greater than the target annual incentive bonus opportunity for such fiscal year.           (c) Additional Compensation           Executive confirms and acknowledges that any other elements of compensation, including without limitation grants of equity-based compensation, are provided at the sole discretion of the Board of Directors and/or its compensation committee, which also shall have sole discretion to determine the terms, amount and frequency of any such other elements of compensation.           (d) Board Service           Unless otherwise specifically approved by the Board of Directors, the Executive shall not receive separate or additional compensation for service on the Board of Directors or for service in any other or additional capacity to the Company and/or its subsidiaries. 4. Benefits      The Company shall provide the Executive with all of the standard benefits it provides to other executive employees who are similarly situated, as such benefits may be modified from time to time, including without limitation vacation, holidays, sick leave, group health insurance, short term and long term disability insurance, life insurance and participation in the 401(k) plan. Notwithstanding the foregoing, the Company agrees to maintain for the benefit of the Executive short term and long term disability insurance with coverage amounts at least equal to such coverage amounts maintained by the Company with respect to the Executive on the Effective Date. In addition, the Company agrees, subject to the Board’s approval, to reimburse the Executive for membership fees and other reasonable expenses incurred with respect to the Executive’s participation in professional development, community and business-related organizations.   --------------------------------------------------------------------------------   5. Expenses      The Company shall reimburse the Executive for all reasonable and necessary business expenses incurred by him in the performance of his duties hereunder, in accordance with its policies, and provided they are vouchered in a form satisfactory to the Internal Revenue Service and consistent with company policy with respect to such expenses. The Company shall pay the reasonable legal fees and expenses incurred by the Executive in connection with the negotiation and preparation of this Agreement. 6. Compliance With Other Agreements      The Executive represents and warrants that his performance hereunder shall not conflict with any other agreements to which he is a party. He further represents and warrants that he will not use in his performance hereunder any information, material or documents of a former employer which are trade secrets or are otherwise confidential or proprietary to said employer, unless he has first obtained written authorization from such former employer for their possession or use. The Executive agrees not to enter into any agreement, either written or oral, which may conflict with this Agreement, and he authorizes the Company to make known the terms of this Agreement to any person or entity. 7.  Exclusive Services, Confidential Information, Business Opportunities, Non-Competition, Non-Solicitation and Work Product      The Executive and the Company’s predecessor previously entered into an Agreement Concerning Exclusive Services, Confidential Information, Business Opportunities, Non-Competition, Non-Solicitation and Work Product, dated August 20, 1997 (as such may be amended from time to time, the “Non-Competition Agreement”), which is hereby affirmed and incorporated herein in its entirety by this reference. 8. Termination and Termination Benefits      If, for any reason, the Executive’s employment by the Company is terminated, the Executive immediately shall resign his position as a director of the Company. The termination of the Executive’s employment by the Company shall be governed by the following:           (a) By the Company                (i) Termination for Cause                The Company may terminate the employment of the Executive for Cause at any time upon three (3) months notice to the Executive. For purposes of this Agreement, “Cause” shall mean the commission of a material act of fraud, theft or dishonesty against the Company; conviction for any felony; or willful non-performance of material duties which is not cured within sixty (60) days after receipt of written notice to the Executive from the Board of Directors; provided, however, that no action(s) or inaction(s) by the Executive will constitute Cause unless a resolution finding that Cause exists has been approved by a majority of all of the members of the Board at a meeting of the Board at which the Executive is allowed to appear with his legal counsel. In the event of termination pursuant to this Section 8(a)(i), the Executive shall not be entitled to any further compensation or benefits from the Company except such compensation or benefits which have been earned prior to the date of termination pursuant to the express terms of this Agreement or that are payable or otherwise provided pursuant to the Non-   --------------------------------------------------------------------------------   Competition Agreement or the benefit plans and arrangements in which the Executive participates at the time of his termination (including without limitation any further vesting or exercisability that may be provided for in such circumstances under the express terms of an equity compensation arrangement then held by executive).                (ii) Termination Without Cause                The Company, in its sole discretion, may terminate the employment of the Executive at any time without “Cause” as defined by Section 8(a)(i) or without any other cause or reason whatsoever. For purposes of this Section 8(a)(ii), a termination by the Company without cause shall include a termination upon the expiration of the term of this Agreement as the result of notice from the Board to the Executive pursuant to Section 2 above that this Agreement shall not be extended, but shall not include a termination due to death or disability (as defined in Section 8(b) below) or a termination by the Executive without Good Reason (as defined in Section 8(c)(ii) below). In the event of termination pursuant to this Section 8(a)(ii), (A) (I) the Company shall pay the Executive a lump sum payment equal to the sum of (x) 200% of one year’s base salary of the Executive at the time of such termination and (y) the Executive’s prorated (through and including the date on which the Executive’s employment terminates) target annual incentive bonus for the year in which termination occurs, (II) all of the options and stock appreciation rights granted to the Executive shall vest and immediately become exercisable and such options and stock appreciation rights shall expire ninety (90) days after such termination without Cause, (III) all restricted stock units and other equity or deferred compensation of the Executive shall vest and (IV) the Company shall provide to the Executive for a period of two years following the date on which the Executive’s employment terminates, at the same cost to the Executive as is charged to active executive employees of the Company, the same welfare benefits, including, without limitation, health, life and disability insurance coverage, provided to the Executive immediately prior to the termination of the Executive’s employment (or alternative coverage which is no less favorable to the Executive in all respects if continued coverage under the Company’s welfare benefit plans is not less possible) and (B) the Executive shall not be entitled to any further compensation or benefits from the Company except such compensation or benefits which have been earned prior to the date of termination pursuant to the express terms of this Agreement or that are payable or otherwise provided pursuant to the Non-Competition Agreement or the benefit plans and arrangements in which the Executive participates at the time of his termination (including without limitation any further vesting or exercisability that may be provided for in such circumstances under the express terms of an equity compensation arrangement then held by executive).                (b) Death or Disability                The Executive’s employment shall be terminated in the event of his death or disability. The term “disability” shall mean a serious and permanent medical incapacity or disability that precludes the Executive from performing professional work. The Company, at its option and expense, shall be entitled to retain a physician reasonably acceptable to the Executive to confirm the existence of such incapacity or disability. In the event of termination under this Section 8(b), (i) the Company shall pay the Executive a lump sum payment equal to the Executive’s prorated (through and including the date on which the Executive’s employment terminates) target annual incentive bonus for the year in which termination occurs, (ii) all of the options and stock appreciation rights granted to the Executive shall vest and immediately become exercisable and such options and stock appreciation rights shall expire ninety (90) days (twelve (12) months in the case of termination due to the Executive’s death) after such   --------------------------------------------------------------------------------   termination, (iii) all restricted stock units and other equity or deferred compensation of the Executive shall vest and (iv) neither the Executive nor his estate shall be entitled to any further compensation or benefits from the Company except for such compensation or benefits which have been earned prior to the date of termination pursuant to the express terms of this Agreement or that are payable or otherwise provided pursuant to the benefit plans and arrangements in which the Executive participates at the time of his termination (including without limitation any further vesting or exercisability that may be provided for in such circumstances under the express terms of an equity compensation arrangement then held by executive).           (c) By the Executive                (i) Termination for Good Reason                The Executive may terminate his employment for Good Reason at any time upon sixty (60) days notice to the Company. For purposes of this Agreement, “Good Reason” shall mean during the period of the Executive’s employment under this Agreement, without the written consent of the Executive, (V) there is a material reduction in the Executive’s responsibility for, and authority over, the same internal functions of the Company’s business as he had prior to such reduction; provided that (I) the designation of another director as Chairman of the Board or as lead outside director shall not be deemed a reduction in authority, regardless of whether the Executive shall have previously served as Chairman of the Board, and (II) the assignment of responsibilities to an executive or other employee who reports to the Executive shall not be deemed to be a reduction in the Executive’s responsibility for or authority over any internal functions, (W) a reduction in the base salary or target annual incentive bonus opportunity of the Executive, (X) the Executive is required to relocate his place of employment to a location that is more than thirty-five (35) miles from the location of the Company’s headquarters at the Effective Date, (Y) termination by the Company without Cause of the Executive as Chief Executive Officer of the Company or (Z) a material breach of this Agreement by the Company; provided that no event enumerated in (V), (W), (X), (Y) or (Z) shall be deemed to be a basis for Executive’s termination for Good Reason unless, within 60 days of the occurrence of the event enumerated in (V), (W), (X), (Y) or (Z), the Executive delivers written notice to the Company stating that the Executive believes that a basis for termination for Good Reason exists and specifying the event that the Executive considers to constitute the basis for termination for Good Reason, and the Company shall not have remedied or cured such event within 60 days of receipt of such notice. In the event of termination pursuant to this Section 8(c)(i), (A) (I) the Company shall pay the Executive a lump sum payment equal to the sum of (x) 200% of one year’s base salary of the Executive at the time of such termination and (y) the Executive’s prorated (through and including the date on which the Executive’s employment terminates) target annual incentive bonus for the year in which termination occurs, (II) all of the options and stock appreciation rights granted to the Executive shall vest and immediately become exercisable and such options and stock appreciation rights shall expire ninety (90) days after such termination for Good Reason, (III) all restricted stock units and other equity or deferred compensation previously granted to the Executive that by its terms is scheduled to vest within twelve months of the date on which Executive’s employment terminates shall immediately vest and, except as provided in clause (B) of this sentence, all other unvested restricted stock units and other equity or deferred compensation shall immediately expire, and (IV) the Company shall provide to the Executive for a period of two years following the date on which the Executive’s employment terminates, at the same cost to the Executive as is charged to active executive employees of the Company, the same welfare benefits, including, without   --------------------------------------------------------------------------------   limitation, health, life and disability insurance coverage, provided to the Executive immediately prior to the termination of the Executive’s employment (or alternative coverage which is no less favorable to the Executive in all respects if continued coverage under the Company’s welfare benefit plans is not less possible) and (B) the Executive shall not be entitled to any further compensation or benefits from the Company except such compensation or benefits which have been earned prior to the date of termination pursuant to the express terms of this Agreement or that are payable or otherwise provided pursuant to the Non-Competition Agreement or the benefit plans and arrangements in which the Executive participates at the time of his termination (including without limitation any further vesting or exercisability that may be provided for in such circumstances under the express terms of an equity compensation arrangement then held by executive).                (ii) Termination Without Good Reason                The Executive may voluntarily terminate his employment without Good Reason at any time upon six (6) months’ written notice to the Company. A voluntary termination by the Executive shall not include a termination of employment due to death or disability (as defined in Section 8(b) above). In the event of such voluntary termination by the Executive, the Company may at any time prior to the expiration of the notice period relieve him of his duties and pay him his salary in lieu of notice for the remainder of said notice period. In the event of termination pursuant to this Section 8(c)(ii), the Executive shall not be entitled to any compensation or benefits from the Company except for such compensation or benefits which have been earned prior to the date of termination pursuant to the express terms of this Agreement or that are payable or otherwise provided pursuant to the Non-Competition Agreement or the benefit plans and arrangements in which the Executive participates at the time of his termination (including without limitation any further vesting or exercisability that may be provided for in such circumstances under the express terms of an equity compensation arrangement then held by executive).                (d) Change of Control                In the event of a Change of Control (as defined in Section 10), the Executive may at any time until the first anniversary of the date that the Change of Control transaction is actually consummated voluntarily terminate his employment hereunder for any reason or no reason upon thirty (30) days’ written notice to the Company. In the event of termination pursuant to this Section 8(d), (A) (I) the Company shall pay the Executive a lump sum payment equal to the sum of (x) 200% of one year’s base salary of the Executive at the time of such termination and (y) the Executive’s prorated (through and including the date on which the Executive’s employment terminates) target annual incentive bonus for the year in which termination occurs, (II) all of the options and stock appreciation rights granted to the Executive shall vest and immediately become exercisable and such options and stock appreciation rights shall expire ninety (90) days after such termination, (III) all restricted stock units and other equity or deferred compensation previously granted to the Executive that by its terms is scheduled to vest within twelve months of the date on which Executive’s employment terminates shall immediately vest and, except as provided in clause (B) of this sentence, all other unvested restricted stock units and other equity or deferred compensation shall immediately expire, and (IV) the Company shall provide to the Executive for a period of two years following the date on which the Executive’s employment terminates, at the same cost to the Executive as is charged to active executive employees of the Company, the same welfare benefits, including, without limitation, health, life and disability insurance coverage, provided to the Executive immediately prior to the termination   --------------------------------------------------------------------------------   of the Executive’s employment (or alternative coverage which is no less favorable to the Executive in all respects if continued coverage under the Company’s welfare benefit plans is not less possible) and (B) the Executive shall not be entitled to any further compensation or benefits from the Company except such compensation or benefits which have been earned prior to the date of termination pursuant to the express terms of this Agreement or that are payable or otherwise provided pursuant to the Non-Competition Agreement or the benefit plans and arrangements in which the Executive participates at the time of his termination (including without limitation any further vesting or exercisability that may be provided for in such circumstances under the express terms of an equity compensation arrangement then held by executive) 9. Additional Payments                (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company or its affiliated companies to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a “Payment”) would, after taking into account the operation of Section 11 below, be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.                (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized public accounting firm selected by the Company and approved by the Executive (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm’s determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written statement that failure to report the Excise Tax on the Executive’s applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (“Underpayment”), consistent with the calculations required to be made hereunder.   --------------------------------------------------------------------------------   In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.                (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:                (i) give the Company any information reasonably requested by the Company relating to such claim;                (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company;                (iii) cooperate with the Company in good faith in order effectively to contest such claim; and                (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided further, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such   --------------------------------------------------------------------------------   advance or with respect to any imputed income with respect to such advance; and provided further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.           (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive, and receives, any refund with respect to such claim, the Executive shall (subject to the Company’s complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Definition of Certain Terms      For purposes of this Agreement, the following capitalized terms shall have the meanings set forth below.           (a) “Change of Control” means any of the following:                (i) the “acquisition” by a “person” or “group” (as those terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules promulgated thereunder), other than by Permitted Holders (as defined in Section 9(b)), of beneficial ownership (as defined in Exchange Act Rule 13d-3) directly or indirectly, of any securities of the Company or any successor of the Company immediately after which such person or group owns securities representing 50% or more of the combined voting power of the Company or any successor of the Company; or                (ii) within any 12-month period, the individuals who were directors of the Company as of December 31, 2005 (the “Incumbent Directors”) ceasing for any reason other than death or disability to constitute at least a majority of the Board of Directors, provided that any director who was not a director as of December 31, 2005 shall be deemed to be an Incumbent Director if such director was appointed or elected to the Board of Directors by, or on the recommendation or approval of, at least a majority of directors who then qualified as Incumbent Directors, provided further that any director appointed or elected to the Board of Directors to avoid or settle a threatened or actual proxy contest shall in no event be deemed to be an Incumbent Director; or                (iii) approval by the stockholders of the Company of any merger, consolidation or reorganization involving the Company, unless either (A) the stockholders of the   --------------------------------------------------------------------------------   Company immediately before such merger, consolidation or reorganization own, directly or indirectly immediately following such merger, consolidation or reorganization, at least 60% of the combined voting power of the company(ies) resulting from such merger, consolidation or reorganization in substantially the same proportion as their ownership in the Company immediately before such merger, consolidation or reorganization, or (B) the stockholders of the Company immediately after such merger, consolidation or reorganization are Permitted Holders; or                (iv) approval by the stockholders of the Company of a transfer of 50% or more of the assets of the Company or a transfer of assets that during the current or either of the prior two fiscal years accounted for more than 50% of the Company’s revenues or income, unless the person to which such transfer is made is either (A) a Subsidiary of the Company, (B) wholly owned by all of the stockholders of the Company, or (C) wholly owned by Permitted Holders; or                (v) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.           (b) “Permitted Holders” means:                (i) the Company,                (ii) any Subsidiary,                (iii) any employee benefit plan of the Company or any Subsidiary, and                (iv) any group which includes or any person who is wholly or partially owned by a majority of the individuals who immediately prior to such acquisition of securities or stockholder approval specified under Section 9(a)(i), 9(a)(iii) or 9(a)(iv) are executive officers (as defined in Exchange Act Rule 3b-7) of the Company or any successor of the Company; provided that immediately prior to and for six months following such acquisition of securities or stockholder approval such executive officers of the Company are beneficial owners (as defined in Exchange Act Rule 16a-1(a)(2)) of the common stock of the Company or any successor of the Company; and provided further that such executive officers’ employment is not terminated by the Company or any successor of the Company (other than as a result of death or disability) during the six months following such acquisition of securities or stockholder approval. A Change of Control shall be deemed to have occurred on any date within six months following an acquisition of securities or stockholder approval under Section 9(a)(i), 9(a)(iii) or 9(a)(iv) on which any of the conditions set forth in this clause (iv) cease to be satisfied.           (c) “Subsidiary” means any corporation in which the Company owns, directly or indirectly, stock possessing 50% or more of the total combined voting power of all classes of stock in such corporation.           (d) “Headquarters Jurisdiction” means the District of Columbia from the Effective Date until the date that the principal executive offices are relocated to Rosslyn, Virginia, and thereafter means the Commonwealth of Virginia. 11. Delay of Payments      In the event that any payment or distribution to be made to the Executive upon termination of the Executive’s employment hereunder is determined to constitute “deferred compensation” subject to Section 409A of the Code, and the Executive is determined to be a “specified employee” (as defined in Section 409A of the Code), such payment or distribution   --------------------------------------------------------------------------------   shall not be made before the date which is six months after the termination of the Executive’s employment (or, if earlier, the date of the Executive’s death). 12. Arbitration      The parties shall endeavor to settle all disputes by amicable negotiations. Any claim, dispute, disagreement or controversy that arises among the parties relating to this Employment Agreement (excluding enforcement by the Company of its rights under the Non-Competition Agreement) that is not amicably settled shall be resolved by arbitration, as follows:           (a) An arbitration may be commenced by any party to this Agreement by the service of a written request for arbitration upon the other affected party(ies). Such request for arbitration shall summarize the controversy or claim to be arbitrated, and shall be referred by the complaining party to the appointing authority for appointment of arbitrators ten (10) days following such service or thereafter. If the panel of arbitrators is not appointed by the appointing authority within thirty (30) days following such reference, any party may apply to any court within the Headquarters Jurisdiction for an order appointing arbitrators qualified as set forth below.           (b) Any such arbitration shall be heard in the Headquarters Jurisdiction, before a panel consisting of one (1) to three (3) arbitrators, each of whom shall be impartial. Except as the parties may otherwise agree, an arbitrator shall be selected in the first instance by those members of the Board of Directors who are neither members of the Compensation Committee of the Board of Directors nor employees of the Company. If there are no such members of the Board of Directors, an arbitrator shall be selected by the Board of Directors. Executive may request that additional arbitrators be appointed, which arbitrator(s) shall be named by the appropriate official in the District of Columbia office of the American Arbitration Association or, in the event of his or her unavailability by reason of disqualification or otherwise, by the appropriate official in the New York City office of the American Arbitration Association. In determining the number and appropriate background of any additional arbitrators, the appointing authority shall give due consideration to the issues to be resolved, but his or her decision as to the number of arbitrators and their identity shall be final. Any arbitrator shall be an individual who is an attorney licensed to practice law in the Headquarters Jurisdiction. Such arbitrator shall be neutral within the meaning of the Commercial Rules of Dispute Resolution of the American Arbitration Association; provided, however, that the arbitration shall not be administered by the American Arbitration Association. Any challenge to the neutrality of an arbitrator shall be resolved by the arbitrator whose decision shall be final and conclusive. The arbitration shall be administered and conducted by the arbitrator(s) pursuant to the then-current employment dispute resolution rules of the American Arbitration Association.           (c) All attorneys’ fees and costs of the arbitration shall in the first instance be borne by the respective party incurring such costs and fees, but the arbitrators shall have the discretion to award costs and/or attorneys’ fees as they deem appropriate under the circumstances; provided, however, that, notwithstanding the foregoing, if any contest or dispute shall arise under this Agreement involving termination of the Executive’s employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall advance to the Executive, on a current basis, all legal fees and expenses, if any, incurred by the Executive in connection with such contest or dispute, together with interest thereon at a rate equal to the prime rate, as published under “Money Rates” in The Wall Street Journal from time to time plus 300 basis points, but in no event higher than   --------------------------------------------------------------------------------   the maximum legal rate permissible under applicable law (the “Interest Rate”), such interest to accrue from the date the Company receives the Executive’s written statement for such fees and expenses through the date of payment thereof; provided, further, that in the event the resolution of any such contest or dispute includes a finding denying, in total, the Executive’s claims in such contest or dispute, the Executive shall be required to reimburse the Company, over a period of 12 months from the date of such resolution, for all sums advanced to the Executive pursuant to this Section 12(c), but in no event shall the Executive be required to reimburse the Company for the Company’s attorneys’ fees and costs. The parties hereby expressly waive punitive damages, and under no circumstances shall an award contain any amount that in any way reflects punitive damages.           (d) The decision of the arbitrator on the issue(s) presented for arbitration shall be final and conclusive and may be enforced in any court of competent jurisdiction.           (e) It is intended that controversies or claims submitted to arbitration under this Section 12 shall remain confidential, and to that end it is agreed by the parties that neither the facts disclosed in the arbitration, the issues arbitrated, nor the views or opinions of any persons concerning them, shall be disclosed to third persons at any time, except to the extent necessary to enforce an award or judgment or as required by law or regulation, including the federal securities laws and the regulations thereunder, in response to legal process or in connection with such arbitration. 13. Non-Waiver      It is understood and agreed that one party’s failure at any time to require the performance by the other party of any of the terms, provisions, covenants or conditions hereof shall in no way affect the first party’s right thereafter to enforce the same, nor shall the waiver by either party of the breach of any term, provision, covenant or condition hereof be taken or held to be a waiver of any succeeding breach. 14. Severability      In the event that any provision of this Agreement conflicts with the law under which this Agreement is to be construed, or if any such provision is held invalid or unenforceable by a court of competent jurisdiction or any arbitrator, such provision shall be deleted from this Agreement and this Agreement shall be construed to give full effect to the remaining provisions thereof. 15. Governing Law      This Agreement shall be interpreted, construed and governed according to the laws of the Headquarters Jurisdiction, without regard to the principle of conflicts of laws thereof. 16. Headings and Captions      The paragraph headings and captions contained in this Agreement are for convenience only and shall not be construed to define, limit or affect the scope or meaning of the provisions hereof. 17. Survival      This Agreement shall survive and continue in full force and effect in accordance with its terms until all obligations hereunder have been satisfied in full. The provisions of the Non-   --------------------------------------------------------------------------------   Competition Agreement and the Stock Option Agreement (and any agreements incorporated therein by reference) shall survive the termination and/or expiration of this Agreement. 18. Entire Agreement      This Agreement, including the agreements expressly incorporated by reference herein (and any agreements incorporated therein by reference), contains and represents the entire agreement of the parties and supersedes all prior agreements, representations or understandings, oral or written, express or implied with respect to the subject matter hereof. This Agreement may not be modified or amended in any way unless in a writing signed by both the Executive and the Company. 19. Assignability      Neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the prior written consent of the other. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, successors and assigns. The Company agrees that concurrently with any merger, consolidation, or transfer of all or substantially all material Company assets, it will cause any surviving or resulting corporation or transferee to unconditionally assume all of the obligations of the Company under this Agreement. 20. Notices      All notices required or permitted hereunder shall be in writing and shall be deemed properly given when (a) delivered personally or sent by overnight courier to the address of the other party hereto pursuant to this Section 19 or (b) sent by facsimile, with a confirmatory copy delivered by overnight courier to the address of the other party hereto pursuant to this Section 19. Any such notice or communication shall be addressed: (a) if to the Company, to Chairman of the Board, The Corporate Executive Board Company, 2000 Pennsylvania Avenue, N.W., Washington, D.C. 20006; or (b) if to the Executive, to his last known home address on file with the Company; or to such other address as the parties shall have furnished to one another in writing. 21. Counterparts      This Agreement may be executed in two or more counterparts all of which shall have the same force and effect as if all parties hereto had executed a single copy of this Agreement.      IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, to be effective as of the Effective Date.             The Corporate Executive Board Company       By:   /s/ James C. Edgemond       Name:   James C. Edgemond      Title:   Treasurer and Secretary              By: /s/ Thomas L. Monahan III       Name: Thomas L. Monahan III      Title:   Chief Executive Officer             

Exhibit 10.2     WARRANT AGREEMENT  dated as of   June 13, 2006   between   THE INTERPUBLIC GROUP OF COMPANIES, INC.   and   LASALLE BANK NATIONAL ASSOCIATION as Warrant Agent       -------------------------------------------------------------------------------- TABLE OF CONTENTS         PAGE      ARTICLE 1 DEFINITIONS   Section 1.01.    Certain Definitions    1    ARTICLE 2 ISSUANCE, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES    Section 2.01.    Issuance of Warrants    7  Section 2.02.    Form of Warrant Certificates    10  Section 2.03.    Legends; Transfer Restrictions    10  Section 2.04.    Transfer, Exchange and Substitution    15  Section 2.05.    Taxes Imposed Upon Receipt of Warrants    16  Section 2.06.    The Global Warrant    16  Section 2.07.    Surrender of Warrant Certificates    18    ARTICLE 3 EXERCISE AND SETTLEMENT OF WARRANTS   Section 3.01.    Exercise on the Expiration Date    18  Section 3.02.    Settlement in Cash    19  Section 3.03.    Settlement in Shares    20  Section 3.04.    Settlement in Cash and Shares    20  Section 3.05.    Early Settlement Upon a Fundamental Change    20  Section 3.06.    Delivery of Common Stock    24  Section 3.07.    No Fractional Shares to Be Issued    25  Section 3.08.    Acquisition of Warrants by the Company; Cancellation of   Warrants    25  Section 3.09.    Direction of Warrant Agent    26    ARTICLE 4 ADJUSTMENTS   Section 4.01.    Adjustment of Exercise Price    26  Section 4.02.    Adjustment of Warrant Multiplier    32  Section 4.03.    Recapitalizations, Reclassifications and Changes of Common  Stock   32  Section 4.04.    Consolidation, Merger and Sale of Assets    33  Section 4.05.    Covenant to Reserve Shares for Issuance on Exercise    34  Section 4.06.    Payment of Taxes on Stock Certificates Issued upon Exercise    35    i     -------------------------------------------------------------------------------- Section 4.07    Warrant Agent Not Responsible for Adjustments or Validity of  Stock   35  Section 4.08.    Statements on Warrants    36  ARTICLE 5 OTHER PROVISIONS RELATING TO RIGHTS OF WARRANTHOLDERS Section 5.01.    No Rights as Stockholders    36  Section 5.02.    Mutilated or Missing Warrant Certificates    36  Section 5.03.    Modification, Waiver and Meetings    37  Section 5.04.    Reports    39  ARTICLE 6 CONCERNING THE WARRANT AGENT AND OTHER MATTERS Section 6.01.    Payment of Certain Taxes    39  Section 6.02.    Change of Warrant Agent    39  Section 6.03.    Compensation; Further Assurances    41  Section 6.04.    Reliance on Counsel    41  Section 6.05.    Proof of Actions Taken    42  Section 6.06.    Correctness of Statements    42  Section 6.07.    Validity of Agreement    42  Section 6.08.    Use of Agents    42  Section 6.09.    Liability of Warrant Agent    42  Section 6.10.    Legal Proceedings    43  Section 6.11.    Other Transactions in Securities of the Company    43  Section 6.12.    Actions as Agent    43  Section 6.13.    Appointment and Acceptance of Agency    44  Section 6.14.    Successors and Assigns    44  Section 6.15.    Notices    44  Section 6.16.    Applicable Law    44  Section 6.17.    Benefits of This Warrant Agreement    44  Section 6.18.    Registered Warrantholders    45  Section 6.19.    Inspection of Agreement    45  Section 6.20.    Headings    45  Section 6.21.    Counterparts    45  ii -------------------------------------------------------------------------------- EXHIBIT A    FORM OF [GLOBAL/CERTIFICATED]          [CAPPED/UNCAPPED] WARRANT    A-1    EXHIBIT B    FORM OF CERTIFICATE OF COMPLIANCE WITH          TRANSFER RESTRICTIONS    B-1    EXHIBIT C    FORM OF COMMON STOCK REQUISITION ORDER    C-1  iii --------------------------------------------------------------------------------     WARRANT AGREEMENT This Warrant Agreement dated as of June 13, 2006, between The Interpublic Group of Companies, Inc., a corporation organized under the laws of Delaware (the “Company”), and LaSalle Bank National Association (the “Warrant Agent”). WITNESSETH THAT: WHEREAS, the Company is authorized to issue warrants exercisable for cash or shares of Common Stock (as defined below) of the Company, or a combination thereof, at the Company’s option, consisting of Capped Warrants and Uncapped Warrants, as provided for herein; WHEREAS, the Company desires that the Warrant Agent act on behalf of the Company, and the Warrant Agent is willing to act, in connection with the issuance, exchange, transfer, substitution and exercise of Warrants; and NOW THEREFORE in consideration of the mutual agreements herein contained, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS Section 1.01. Certain Definitions. As used in this Warrant Agreement, the following terms shall have their respective meanings set forth below: “$” refer to the lawful currency of the United States of America. “Agent Members” has the meaning set forth in Section 2.06(a). “Authentication Order” has the meaning set forth in Section 2.01(b)(iii). “Average Price” with respect to Common Stock or a Unit of Reference Property has the meaning set forth in Section 3.05(c). “Board of Directors” means the board of directors of the Company or any committee of such board of directors duly authorized to exercise the power of such board of directors with respect to the matters provided for in this Warrant Agreement as to which the board of directors is authorized or required to act. “Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Warrant Agent.   1   --------------------------------------------------------------------------------     “Business Day” means a day of the week other than a Saturday, a Sunday or a day which shall be in New York, New York, or in the city in which the principal office of the Warrant Agent is located, a legal holiday or a day on which banking institutions are authorized or required by law to close for business. “Cap Price” means, in respect of the Capped Warrants, $12.36 per Capped Warrant, subject to adjustment pursuant to Article 4 hereof. “Capped Exercise Price” has the meaning set forth in Section 2.01. “Capped Warrants” means warrants of the Company designated as “Capped Warrants” exercisable for shares of Common Stock, cash or a combination thereof, as provided herein, issued pursuant to this Warrant Agreement with the terms, conditions and rights set forth in this Warrant Agreement and the Warrant Certificate relating thereto. “Cash Percentage” has the meaning set forth in Section 3.04. “Certificated Warrant” has the meaning set forth in Section 2.02(b). “Closing Date” means June 13, 2006. “Closing Sale Price” means, in respect of Common Stock or any other security for which a Closing Sale Price must be determined on any date, the closing sale price per share (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions for the principal United States securities exchange on which the Common Stock or such other security is traded or, if the Common Stock or such other security is not listed on a United States national or regional securities exchange, and the Nasdaq National Market is not a United States national securities exchange, as reported by the Nasdaq National Market. If the Common Stock or such other security is not listed for trading on a United States national or regional securities exchange and not reported by the Nasdaq National Market (at a time when the Nasdaq National Market is not a United States national securities exchange) on the relevant date, the Closing Sale Price will be the last quoted bid price for the Common Stock or such other security in the over-the-counter market on the relevant date as reported by the National Quotation Bureau or similar organization. If the Common Stock or such other security is not so quoted, the Closing Sale Price will be the average of the mid-point of the last bid and ask prices for the Common Stock or such other security on the relevant date from each of at least three nationally recognized independent investment banking firms selected by the Company for this purpose. The Closing Sale Price will be determined without reference to extended or after hours trading.   2   --------------------------------------------------------------------------------     “Common Stock” means the common stock, par value $0.10 per share, of the Company authorized at the date of this Warrant Agreement or as such stock may be constituted from time to time. Subject to the provisions of Section 4.03 and Section 4.04, shares issuable upon exercise of Warrants, to the extent elected by the Company as provided herein, shall include only shares of the class designated as Common Stock of the Company as of the date of this Warrant Agreement or shares of any class or classes resulting from any reclassification or reclassifications or change or changes thereof and that have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, and if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion that the total number of shares of such class resulting from all such reclassifications or changes bears to the total number of shares of all such classes resulting from such reclassifications or changes. “Company Order” means a written order signed in the name of the Company by any two officers, at least one of whom must be its Chairman, its Chief Executive Officer, its Chief Financial Officer, its Treasurer, an Assistant Treasurer, or its Controller, and delivered to the Warrant Agent. “Current Market Price” on any day means, in respect of the Common Stock or any other security for which a Current Market Price must be determined in connection with an issuance, distribution or dividend, the average of the Closing Sale Prices of the Common Stock over the 5 consecutive Trading Days ending on the earlier of such day and the day before the Ex-Dividend Date with respect to the issuance, distribution, or dividend requiring such computation. “Daily Net Cash Amount” has the meaning set forth in Section 3.02(b). “Daily Net Share Amount” has the meaning set forth in Section 3.03(b). “Depositary” or “DTC” means The Depository Trust Company, its nominees, and their respective successors. “Early Settlement Amount” has the meaning set forth in Section 3.05(b). “Effective Date” has the meaning set forth in Section 3.05. “Ex-Dividend Date” means, with respect to any dividend, distribution or issuance on the Common Stock, the first date on which the Common Stock trades, regular way, on the Exchange without the right to receive such dividend, distribution or issuance. “Exchange Act” means the Securities Exchange Act of 1934, as amended.   3   --------------------------------------------------------------------------------     “Exercise Date” has the meaning set forth in Section 3.05(i). “Exercise Price” means, for the Capped Warrants, the Capped Exercise Price and, for the Uncapped Warrants, the Uncapped Exercise Price. “Expiration Date” means, for any Warrant, June 15, 2009, regardless of whether such date is a Trading Day. “Fundamental Change” means the consummation of any share exchange, consolidation or merger of the Company pursuant to which the Common Stock will be converted into cash, securities or other property or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of the Company and its Subsidiaries, taken as a whole, to any Person other than a Subsidiary of the Company; provided, however, that a transaction where the holders of more than 50% of all classes of the common equity of the Company immediately prior to the transaction own, directly or indirectly, more than 50% of all classes of common equity of the continuing or surviving corporation or transferee immediately after the event shall not be a Fundamental Change; provided, further, however, that a Fundamental Change shall not be deemed to have occurred if at least 90% of the consideration (excluding cash payments for fractional shares and cash payment pursuant to dissenters’ appraisal rights) in the transaction or transactions constituting the Fundamental Change consists of shares of common stock of a United States company with full voting rights traded on a United States national securities exchange or quoted on the Nasdaq National Market (or which shall be so traded or quoted when issued or exchanged in connection with such Fundamental Change) (such securities being referred to as “Publicly Traded Securities”). “Global Warrant” has the meaning set forth in Section 2.02(b). “Global Warrant Legend” means the legend set forth in Section 2.03. “Global Warrant Underlying Units” means a permanent Global Warrant in fully registered form delivered to and registered in the name of the Unit Agent. “Initial Purchaser” has the meaning set forth in Section 2.05. “Issue Date” means the date of issuance of any Warrants, which shall be the date of authentication of such Warrants pursuant to this Warrant Agreement. “Net Cash Amount” has the meaning set forth in Section 3.02(a). “Net Share Amount” has the meaning set forth in Section 3.03(a). “Offer Expiration Date” has the meaning set forth in Section 4.01(e).   4   --------------------------------------------------------------------------------     “Officer’s Certificate” means a certificate signed by any two officers of the Company, at least one of whom must be its Chairman, its Chief Executive Officer, its Chief Financial Officer, its Treasurer, an Assistant Treasurer, or its Controller. “Opinion of Counsel” means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Notes Issuer or the Company and who shall otherwise be reasonably satisfactory to the Warrant Agent. “Notes Issuer” has the meaning set forth in the Unit Agreement. “Person” means an individual, partnership, firm, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature. “Purchase Agreement” means the Purchase Agreement dated as of June 6, 2006 among the Initial Purchasers named therein, the Notes Issuer, Morgan Stanley Capital Services Inc. and the Company relating to the purchase and a resale by the Initial Purchasers of, among other things, the Warrants. “Purchased Shares” has the meaning set forth in Section 4.01(e). “Relevant Price” has the meaning set forth in Section 3.02(b). “Reference Property” has the meaning set forth in Section 4.03(a). “Resale Restriction Termination Date” means with respect to any Capped Warrant or Uncapped Warrant, as the case may be, the later of (i) the date that is two years after the last original issuance date of the Capped Warrants or the Uncapped Warrants, as applicable, and (ii) the Separation Date, as defined in the Unit Agreement, with respect to such Capped Warrant or Uncapped Warrant. “Restricted Securities” has the meaning set forth in Section 2.03(b)(i). “Securities Act” means the United States Securities Act of 1933, as amended. “Settlement Period” means the period of 30 consecutive Trading Days commencing on, and including, the third scheduled Trading Day immediately following the Expiration Date. “Stock Price” means in respect of a Fundamental Change (i) if such Fundamental Change is a transaction whereby holders of Common Stock receive only cash, such cash amount paid per share of Common Stock, and (ii) otherwise, the Stock Price will be the average of the Closing Sale Prices of Common Stock on the five Trading Days up to, but excluding, the Effective Date.   5   --------------------------------------------------------------------------------     “Subsidiary” means a corporation more than 50% of the outstanding Voting Stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For purposes of this definition, “Voting Stock” means stock which ordinary has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. “Taxes” has the meaning set forth in Section 2.05. “Trading Day” means a day during which trading in securities generally occurs on the New York Stock Exchange (or, if the Common Stock is not traded on the New York Stock Exchange, on the principal other market on which the Common Stock is then traded), other than a day on which a material suspension of or limitation on trading is imposed that affects either the New York Stock Exchange (or, if applicable, such other market) in its entirety or the shares of Common Stock (by reason of movements in price exceeding limits permitted by the relevant market on which the shares are traded or otherwise) or on which any event disrupts or impairs the ability of market participants in general to effect transactions or obtain market values on the New York Stock Exchange (or, if applicable, other such market) for Common Stock. “Trigger Event” means a specified event the occurrence of which entitles the holders of rights, options or Warrants to exercise such rights, options or Warrants. “Transfer” means, for the purposes of Section 2.03(b) and Section 2.03(c), any sale, pledge, transfer or other disposition whatsoever of any Restricted Security. “Uncapped Exercise Price” has the meaning set forth in Section 2.01. “Uncapped Warrants” means warrants of the Company designated as “Uncapped Warrants” exercisable for shares of Common Stock or cash, as provided herein, issued pursuant to this Warrant Agreement with the terms, conditions and rights set forth in this Warrant Agreement and the Warrant Certificate relating thereto. “Unit” has the meaning set forth in the Unit Agreement. “Unit Agent” has the meaning set forth in the Unit Agreement. “Unit Agreement” means the Unit Agreement dated as of the date hereof among the Company, the Warrant Agent, the Notes Issuer specified herein, the Indenture Trustee specified therein and the Unit Agent specified therein.   6   --------------------------------------------------------------------------------     “Unit of Reference Property” has the meaning set forth in Section 4.03(a). “Unit Value” has the meaning set forth in Section 4.03(b). “Vice President” means any vice president, whether or not designated by a number or a word or words added before or after the title “vice president” of the Company. “VWAP” means, in respect of Common Stock on any Trading Day, the volume weighted price per share of such Common Stock as displayed on Bloomberg (or any successor service) page IPG <equity>VAP for the period from 9:30 a.m. to 4:00 p.m., New York City time, on such Trading Day; or, if such price is not available, the volume weighted average price per share as determined by a nationally recognized independent investment banking firm selected by the Company for this purpose. “Warrant” means any of the Capped Warrants or Uncapped Warrants issued pursuant to this Warrant Agreement, and “Warrants” means the Capped Warrants and the Uncapped Warrants collectively. “Warrant Certificate” has the meaning set forth in Section 2.02(a). “Warrant Entitlement” means, for each Warrant, one share of Common Stock, as adjusted pursuant to Article 4 hereof. “Warrant Multiplier” means, for the Capped Warrants or the Uncapped Warrants, initially one (1), as adjusted pursuant to Article 4 hereof. “Warrant Register” has the meaning set forth in Section 2.04(a). “Warrantholder” means such Person in whose name Warrants are registered in the Warrant Register. ARTICLE 2 ISSUANCE, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES Section 2.01. Issuance of Warrants. (a) The aggregate number of Warrants that may be issued and authenticated, and outstanding at any time under this Warrant Agreement is limited to 67,898,967 Warrants, consisting of 29,072,092 Capped Warrants and 38,826,875 Uncapped Warrants. Each Warrant shall entitle the Warrantholder to purchase one share of Common Stock (subject to the Company’s right to settle in cash or a combination of cash and Commons Stock as described in Article 3), at an Exercise Price of $9.89 per Capped Warrant   7   --------------------------------------------------------------------------------   (the “Capped Exercise Price”) and $11.91 per Uncapped Warrant (the “Uncapped Exercise Price”), in each case subject to adjustment. Warrants may only be net exercised and will be settled in cash, Common Stock (and cash in lieu of fractional shares, if any) or in a combination thereof at the Company’s option, as described in Article 3. In the case of the Capped Warrants, the amount of cash paid, or number shares of Common Stock delivered, upon settlement of the Warrants shall be limited by a cap price of $12.36 per Warrant, subject to adjustment as described in Article 3 (the “Cap Price”). All Warrants issued under this Warrant Agreement shall in all respects be equally and ratably entitled to the benefits hereof (other than as to terms specific to the Capped Warrants or Uncapped Warrants as set forth herein), without preference, priority, or distinction on account of the actual time of the issuance and authentication or any other terms thereof. (b)     (i)    Warrants shall be executed on behalf of the Company by any of the Chairman, the Executive Vice President, and any Vice President of the Company under its corporate seal reproduced thereon and attested by its Secretary or any one of its Assistant Secretaries. The signature of any of these officers on Warrants may be manual or facsimile. The seal of the Company may be in the form of a facsimile thereof and may be impressed, affixed, imprinted, or otherwise reproduced on Warrants. Typographical and other minor errors or defects in any such reproduction of the seal or any such signature shall not affect the validity or enforceability of any Warrant that has been duly authenticated and delivered by the Warrant Agent. Unless otherwise provided in the form of Warrant for any series, all Warrants shall be dated as of the Issue Date. (ii)   Warrants bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Warrants or did not hold such offices at the date of such Warrants. (iii)   At any time and from time to time after the execution and delivery of this Warrant Agreement, subject to the aggregate number of Capped and Uncapped Warrants, as applicable, set forth in Section 2.01 above, the Company may deliver Warrants to the Warrant Agent for authentication, together with a Company Order for authentication and delivery (such Company Order, an “Authentication Order”) with respect to such Warrants, and the Warrant Agent shall, upon receipt of such Authentication Order, in accordance with procedures acceptable to the Warrant Agent set forth in the Authentication Order, and subject to the provisions hereof, authenticate and deliver such Warrants to such recipients as may be specified from time to time pursuant to such Authentication Order. The terms of such Warrants shall be determinable under this Warrant Agreement. If provided for in such procedures, such   8   --------------------------------------------------------------------------------   Authentication Order may authorize authentication and delivery of such Warrants pursuant to oral instructions from the Company or its duly authorized agent, which instructions shall be promptly confirmed in writing. No Warrant shall be entitled to any benefit under this Warrant Agreement or be valid or obligatory for any purpose unless there appears on such Warrant a certificate of authentication substantially in the form provided for herein executed by the Warrant Agent by manual or facsimile signature, and such certificate upon any Warrant shall be conclusive evidence, and the only evidence, that such Warrant has been duly authenticated and delivered hereunder. (iv)   The Warrant Agent shall, upon receipt of a Company’s Order, authenticate and deliver for original issue on the Closing Date: (A)  with respect to the Capped Warrants, (1) one or more Global Warrants initially evidencing an aggregate of 3,792,092 Capped Warrants, registered in the name of the Depositary or its nominee and (2) one or more Global Warrants Underlying Units initially evidencing 25,280,000 Capped Warrants, registered in the name of the Notes Issuer; and (B)  with respect to the Uncapped Warrants, (1) one or more Global Warrants initially evidencing zero Uncapped Warrants, registered in the name of the Depositary or its nominee; and (2) one or more Global Warrants Underlying Units initially evidencing 38,826,875 Uncapped Warrants registered in the name of the Notes Issuer. (v)    The Warrant Agent shall, upon receipt of the Global Warrants Underlying Units referred to in clauses (iv)(A)(2) and (iv)(B)(2) above, duly endorsed by the Notes Issuer for transfer of such Global Warrants Underlying Units to the Unit Agent, (A) cancel the Global Warrants Underlying Units referred to in clause (iv)(A)(2) above and authenticate and deliver to the Unit Agent on the Closing Date one or more Global Warrants Underlying Units, initially evidencing 25,280,000 Capped Warrants, registered in the name of the Unit Agent and (B) cancel the Global Warrants Underlying Units referred to in clause (iv)(B)(2) above and authenticate and deliver to the Unit Agent on the Closing Date one or more Global Warrants Underlying Units, initially evidencing 38,826,875 Uncapped Warrants, registered in the name of the Unit Agent. For the avoidance of doubt, (i) the transfer of the Global Warrants Underlying Units referred to in clauses (iv)(A)(2) and (iv)(B)(2) from the Notes Issuer to the Unit Agent referred to in this clause (v) shall not be subject to the transfer restrictions specified in Section 2.03.   9   --------------------------------------------------------------------------------     (vi)  The Warrant Agent shall, in accordance with the Unit Agreement, upon the separation of a Unit into its respective components, or upon the recreation of a Unit from its respective components, appropriately notate each of the Global Warrant and the Global Warrant Underlying Units for the related Capped Warrants or Uncapped Warrants. Section 2.02. Form of Warrant Certificates. (a) Any certificate representing Warrants (each, a “Warrant Certificate”) shall have such insertions as are appropriate or required or permitted by this Warrant Agreement and may have such letters, numbers or other marks of identification and such legends and endorsements, stamped, printed, lithographed or engraved thereon, (i) as the Company may deem appropriate and as are not inconsistent with the provisions of this Warrant Agreement, (ii) such as may be required to comply with this Warrant Agreement, any law or any rule of any securities exchange on which Warrants may be listed, (iii) and such as may be necessary to conform to customary usage. (b)   So long as the Warrants are eligible for book-entry settlement with the Depositary, any Warrants issued hereunder shall be issued initially in the form of a permanent global Warrant Certificate (the “Global Warrant”) in definitive, fully registered form, substantially in the form set forth in Exhibit A hereto, which exhibit is hereby incorporated in and expressly made a part of this Warrant Agreement. Upon issuance, each Global Warrant shall be duly executed by the Company and authenticated by the Warrant Agent as provided herein and deposited with the Unit Agent as custodian for the Depositary. Any Warrants represented by Warrant Certificates in definitive, fully registered form issued to beneficial owners of interests in the Global Warrant (each a “Certificated Warrant”) pursuant to Section 2.06(d) hereof shall be issued in substantially in the form set forth in Exhibit A hereto, which exhibit is hereby incorporated in and expressly made a part of this Warrant Agreement. Any such Warrant Certificate shall be duly executed by the Company and countersigned by the Warrant Agent and delivered, all as hereinafter provided. Section 2.03. Legends; Transfer Restrictions. (a) Any Global Warrant shall bear the following legend (the “Global Warrant Legend”) on the face thereof: “UNLESS THIS GLOBAL WARRANT FOR [CAPPED/UNCAPPED] WARRANTS IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”)*, TO THE INTERPUBLIC GROUP OF COMPANIES, INC. (THE “COMPANY”), THE CUSTODIAN OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO*. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED   10   --------------------------------------------------------------------------------   REPRESENTATIVE OF DTC* (AND ANY PAYMENT IS MADE TO CEDE & CO.* OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC*), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. *, HAS AN INTEREST HEREIN. TRANSFER OF THIS GLOBAL WARRANT FOR [CAPPED/UNCAPPED] WARRANTS SHALL BE LIMITED TO TRANSFERS IN WHOLE, AND NOT IN PART, TO THE COMPANY, DTC*, THEIR SUCCESSORS AND THEIR RESPECTIVE NOMINEES.” (b)     (i)   Every Warrant that bears or is required under this Section 2.03(b) to bear the legend set forth in this Section 2.03(b) (together with any Common Stock issued upon exercise of the Warrants and required to bear the legend set forth in Section 2.03(c), collectively, the “Restricted Securities”) shall be subject to the restrictions on Transfer set forth in this Section 2.03(b) (including the legend set forth below), unless such restrictions on Transfer shall be waived by written consent of the Company, and the holder of each such Restricted Security, by such holder’s acceptance thereof, agrees to be bound by all such restrictions on Transfer. (ii)   Until the Resale Restriction Termination Date with respect to any Warrant, any certificate evidencing such Warrant (and all securities issued in exchange therefor or substitution thereof, other than Common Stock, if any, issued upon exercise thereof that shall bear the legend set forth in Section 2.03(c), if applicable) shall bear a legend in substantially the following form (unless otherwise agreed by the Company in writing, with notice thereof to the Warrant Agent): “THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. _________________________ * Add references to the Unit Agent where indicated if the Global Warrant is a Global Warrant Underlying Units.     11   --------------------------------------------------------------------------------     THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (“QIB”). UNTIL THE RESALE RESTRICTION TERMINATION DATE, AS DEFINED IN THE WARRANT AGREEMENT REFERRED TO HEREIN, THE HOLDER OF THIS SECURITY AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO THE ISSUER OF THIS SECURITY, (B) TO A PERSON IT REASONABLY BELIEVES IS A QIB THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT OR (C) UNLESS THIS SECURITY IS A GLOBAL WARRANT UNDERLYING UNITS, AS DEFINED IN THE WARRANT AGREEMENT, IN ACCORDANCE WITH ANY OTHER EXEMPTION FROM REGISTRATION AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY UNDERSTANDS THAT THE ISSUER OF THIS SECURITY MAY RECEIVE A LIST OF PARTICIPANTS HOLDING POSITIONS IN ITS SECURITIES FROM ONE OR MORE BOOK-ENTRY DEPOSITORIES. ANY TRANSFER IN VIOLATION OF THE FOREGOING WILL BE OF NO FORCE AND EFFECT, WILL BE VOID AB INITIO, AND WILL NOT OPERATE TO TRANSFER ANY RIGHTS TO THE TRANSFEREE, NOTWITHSTANDING ANY INSTRUCTIONS TO THE CONTRARY TO THE ISSUER OF THIS SECURITY, THE WARRANT AGENT OR ANY INTERMEDIARY. IF AT ANY TIME THE ISSUER DETERMINES IN GOOD FAITH OR IS NOTIFIED THAT THE HOLDER OF THIS SECURITY OR A BENEFICIAL INTEREST HEREIN WAS IN BREACH OF ANY OF THE REPRESENTATIONS SET FORTH IN THIS SECURITY, THE ISSUER OR THE WARRANT AGENT MAY DECLARE THE ACQUISITION OF THIS SECURITY OR SUCH INTEREST IN THIS SECURITY VOID, IN THE EVENT OF A BREACH, AT THE TIME GIVEN, AND, IN THE EVENT OF SUCH A DETERMINATION OR NOTICE OF BREACH, AT THE TIME GIVEN OR AT ANY SUBSEQUENT TIME, THE ISSUER OR THE WARRANT AGENT MAY REQUIRE THAT THIS SECURITY OR SUCH INTEREST HEREIN BE TRANSFERRED TO A PERSON DESIGNATED BY IT.” Unless held as a component of a Unit pursuant to the Unit Agreement, any Warrant (or security issued in exchange or substitution therefor) held on or after the Resale Restriction Termination Date may, upon surrender of such Warrant for exchange to the Warrant registrar in accordance with the provisions of this Section 2.03, be exchanged for a new Warrant or Warrants, of like tenor and aggregate principal amount, which shall not bear the restrictive legend required by this Section 2.03.   12   --------------------------------------------------------------------------------     (iii)   Any Warrant that is not held as a component of a Unit and any interest in such Warrant may only be transferred as contemplated in the legend set forth above. Transfers of Warrants held as components of a Unit shall be governed by the Unit Agreement. (iv)   The Company or the Warrant Agent, as applicable may consider the Transfer of any Warrant or any interest therein null and void ab initio and refuse to recognize such Transfer if at any time the Company or the Warrant Agent reasonably determines in good faith that the owner of such Warrant or interest was in breach of any representation or covenant contained in the transfer restrictions set forth in Section 2.03(b)(iii). The Company or the Warrant Agent acting at the direction of the Company, as applicable, may require the Transfer of such Warrant or interest to any Person designated by the Company or the Warrant Agent, as applicable, at a price determined in good faith based upon a reasonable estimation of the prevailing price of such Warrants by an independent third party or, if no such independent third party is available or able to determine a price, as determined by the Company in good faith based upon its reasonable estimation of the prevailing price of such Warrants. Each owner of the Warrants, by acceptance of such Warrants, authorizes the Company or the Warrant Agent to take such action. In any such case, none of the Company, the Warrant Agent, the Initial Purchasers or their respective affiliates shall be responsible for any losses that may be incurred as a result of any required Transfer, avoidance of a Transfer or redemption. (c)   Until the Resale Restriction Termination Date, any stock certificate representing Common Stock issued upon exercise of a Warrant shall bear a legend in substantially the following form (unless such Common Stock has been sold pursuant to the exemption from registration provided by Rule 144 under the Securities Act or pursuant to a registration statement that has been declared effective under the Securities Act, and which continues to be effective at the time of such Transfer or unless otherwise agreed by the Company with written notice thereof to the transfer agent for the Common Stock): “THE SECURITY EVIDENCED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT OF 1933”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER: (1)          REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT OF 1933;   13   --------------------------------------------------------------------------------     (2)          AGREES THAT IT WILL NOT, PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION DATE”) THAT IS TWO YEARS AFTER THE LATER OF JUNE 13, 2006 AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT OF 1933, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT OF 1933 (IF AVAILABLE), OR (D) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT OF 1933 AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER; AND (3)          AGREES THAT IT WILL, PRIOR TO ANY TRANSFER OF THIS SECURITY PURSUANT TO CLAUSE (2)(C) ABOVE BEFORE THE RESALE RESTRICTION TERMINATION DATE FURNISH TO THE ISSUER AND TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS MAY BE REQUIRED TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. Any such Common Stock as to which such restrictions on Transfer shall have expired in accordance with their terms may, upon surrender of the certificates representing such shares of Common Stock for exchange in accordance with the procedures of the transfer agent for the Common Stock, be exchanged for a new certificate or certificates for a like aggregate number of shares of Common Stock, which shall not bear the restrictive legend required by this Section 2.03(c). (d)  Any Warrant that is purchased or owned by the Company or any Affiliate thereof may not be resold by the Company or such Affiliate unless registered under the Securities Act or resold pursuant to an exemption from the registration requirements of the Securities Act in a transaction that results in such Warrants no longer being “restricted securities” (as defined under Rule 144). (e)   Notwithstanding any provision of this Section 2.03 to the contrary, in the event Rule 144(k) as promulgated under the Securities Act (or any successor rule) is amended to change the two-year period under Rule 144(k) (or the corresponding period under any successor rule), from and after receipt by the Warrant Agent of the Officers’ Certificate and Opinion of Counsel provided for in   14   --------------------------------------------------------------------------------   this Warrant Agreement, (i) the reference in the definition of Resale Restriction Termination Date to two years shall be deemed for all purposes hereof to be references to such changed period, and (ii) all corresponding references in the Warrants and any restrictive legends thereon or on the Common Stock shall be deemed for all purposes hereof to be references to such changed period, provided that such changes shall not become effective if they are otherwise prohibited by, or would otherwise cause a violation of, the then-applicable federal securities laws. The provisions of this clause (e) shall not be effective until such time as the Opinion of Counsel and Officers’ Certificate have been received by the Warrant Agent hereunder. This clause (e) shall apply to successive amendments to Rule 144(k) (or any successor rule) changing the holding period thereunder. Section 2.04. Transfer, Exchange and Substitution. (a) Warrants shall be issued in registered form only. The Company shall cause to be kept at the office of the Warrant Agent, and the Warrant Agent shall maintain, a register (the “Warrant Register”) in which, subject to such reasonable regulations as the Company may prescribe, the Company shall provide for the registration of Warrants and transfers, exchanges or substitutions of Warrants as herein provided. All Warrants issued upon any registration of transfer or exchange of or substitution for Warrants shall be valid obligations of the Company, evidencing the same obligations, and entitled to the same benefits under this Warrant Agreement, as Warrants surrendered for such registration of transfer, exchange or substitution. (b)  A Warrantholder may transfer a Warrant only upon surrender of such Warrant for registration of transfer. No such transfer shall be effected until, and the transferee shall succeed to the rights of a Warrantholder only upon, final acceptance and registration of the transfer in the Warrant Register by the Warrant Agent. Prior to the registration of any transfer of a Warrant by a Warrantholder as provided herein, the Company, the Warrant Agent, and any agent of the Company or the Warrant Agent may treat the Person in whose name Warrants are registered as the owner thereof for all purposes and as the Person entitled to exercise the rights represented thereby, any notice to the contrary notwithstanding. (c)   Every Warrant presented or surrendered for registration of transfer or for exchange or substitution shall (if so required by the Company or the Warrant Agent) be duly endorsed, or be accompanied by a duly executed instrument of transfer in form satisfactory to the Company and the Warrant Agent, by the holder thereof or such Warrantholder’s attorney duly authorized in writing. (d)   When Warrants are presented to the Warrant Agent with a request to register the transfer of, or to exchange or substitute, such Warrants, the Warrant Agent shall register the transfer or make the exchange or substitution as requested if its requirements for such transactions and any applicable requirements   15   --------------------------------------------------------------------------------   hereunder are satisfied. To permit registrations of transfers, exchanges and substitutions, the Company shall execute Warrant Certificates at the Warrant Agent’s request and the Warrant Agent shall countersign and deliver such Warrant Certificates. No service charge shall be made for any registration of transfer or exchange of or substitution for Warrants, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer of Warrants. (e)   If less than all Warrants represented by a Certificated Warrant are transferred, exchanged or substituted in accordance with this Warrant Agreement, the Warrant Certificate shall be surrendered to the Warrant Agent and a new Warrant Certificate of the same tenor and for the number of Warrants which were not transferred, exchanged or substituted, registered in such name or names as may be directed in writing by the surrendering Warrantholder, shall be executed by the Company and delivered to the Warrant Agent and the Warrant Agent shall countersign such new Warrant Certificate and shall deliver such new Warrant Certificate to the Person or Persons entitled to receive the same. Section 2.05. Taxes Imposed Upon Receipt of Warrants. The Warrants delivered to ELF Special Financing Ltd. and further delivered by ELF Special Financing Ltd. to one or more initial purchaser(s) (each an “Initial Purchaser”) and by any Initial Purchaser to the initial investors of Units shall be delivered free and clear of and without imposition of any and all present or future taxes, levies, imposts, deductions, charges or withholdings (including any stamp, documentary, transfer or any other excise or property taxes, charges or similar levies), and all liabilities with respect thereto imposed by the United States, or any political subdivision thereof, excluding taxes imposed on the relevant Person’s or entity’s overall net income and franchise taxes imposed in lieu of net income taxes (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”). To the extent that such Taxes are imposed, the Company shall promptly pay all such Taxes. Section 2.06. The Global Warrant. (a) So long as a Global Warrant is registered in the name of the Depositary or its nominee, members of, or participants in, the Depositary (“Agent Members”) shall have no rights under this Warrant Agreement with respect to the Global Warrant held on their behalf by the Depositary or the Warrant Agent as its custodian, and the Depositary may be treated by the Company, the Warrant Agent and any agent of the Company or the Warrant Agent as the absolute owner of such Global Warrant for all purposes. Accordingly, any such owner’s beneficial interest in such Global Warrant will be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Agent Members, and neither the Company nor the Warrant Agent shall have any responsibility with respect to such records maintained by the Depositary or its nominee or its Agent Members. Notwithstanding the foregoing, nothing herein shall (i) prevent the   16   --------------------------------------------------------------------------------   Company, the Warrant Agent or any agent of the Company or the Warrant Agent from giving effect to any written certification, proxy or other authorization furnished by the Depositary or (ii) impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Warrantholder. (b)  Any holder of a Global Warrant registered in the name of the Depositary or its nominee shall, by acceptance of such Global Warrant, agree that transfers of beneficial interests in such Global Warrant may be effected only through a book-entry system maintained by the holder of such Global Warrant (or its agent), and that ownership of a beneficial interest in Warrants represented thereby shall be required to be reflected in book-entry form. (c)  Transfers of a Global Warrant registered in the name of the Depositary or its nominee shall be limited to transfers in whole, and not in part, to the Company, the Depositary, their successors, and their respective nominees. Interests of beneficial owners in a Global Warrant registered in the name of the Depositary or its nominee shall be transferred in accordance with the rules and procedures of the Depositary. (d)  A Global Warrant registered in the name of the Depositary or its nominee shall be exchanged for Certificated Warrants only if (i) the Depositary (x) has notified the Company that it is unwilling or unable to continue as or ceases to be a clearing agency registered under Section 17A of the Exchange Act and (y) a successor to the Depositary registered as a clearing agency under Section 17A of the Exchange Act is not able to be appointed by the Company within 90 days or (ii) the Depositary is at any time unwilling or unable to continue as Depositary and a successor to the Depositary is not able to be appointed by the Company within 90 days. In any such event, a Global Warrant registered in the name of the Depositary or its nominee shall be surrendered to the Warrant Agent for cancellation, and the Company shall execute, and the Warrant Agent shall countersign and deliver, to each beneficial owner identified by the Depositary, in exchange for such beneficial owner’s beneficial interest in such Global Warrant, Certificated Warrants representing, in the aggregate, the number of Warrants theretofore represented by such Global Warrant with respect to such beneficial owner’s respective beneficial interest. Any Certificated Warrant delivered in exchange for an interest in a Global Warrant pursuant to this Section 2.06(d) shall not bear the Global Warrant Legend, but shall bear the legend, required pursuant to Section 2.03, to the extent such Warrants are Restricted Securities. Interests in the Global Warrant may not be exchanged for Certificated Warrants other than as provided in this Section 2.06(d). (e)  Certificated Warrants may be not transferred or exchanged for a beneficial interest in a Global Warrant.   17   --------------------------------------------------------------------------------     (f)  Global Warrants Underlying Units may only be exchanged for Certificated Warrants as described in the Unit Agreement. (g) The holder of a Global Warrant registered in the name of the Depositary or its nominee may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Warrantholder is entitled to take under this Warrant Agreement or the Warrant. Section 2.07. Surrender of Warrant Certificates. Any Warrant Certificate surrendered for registration of transfer, exchange, substitution or exercise of Warrants represented thereby shall, if surrendered to the Company, be delivered to the Warrant Agent, and all Warrant Certificates surrendered or so delivered to the Warrant Agent shall be promptly cancelled by the Warrant Agent and shall not be reissued by the Company and, except as provided in this Article 2 in case of an exchange, transfer or substitution, or Article 3 hereof in case of the exercise of less than all Warrants represented thereby or Section 5.02 hereof in case of mutilation, no Warrant Certificate shall be issued hereunder in lieu thereof. The Warrant Agent shall deliver to the Company from time to time or otherwise dispose of such cancelled Warrant Certificates as the Company may direct. ARTICLE 3 EXERCISE AND SETTLEMENT OF WARRANTS Section 3.01. Exercise on the Expiration Date. (a) (i) Each Warrant shall entitle the Warrantholder only to exercise Warrants represented thereby in accordance with this Article 3 and upon exercise of such Warrants on the Expiration Date, subject to the provisions of Section 3.05 and Article 4, to receive from the Company, without any payment therefor, for each Warrant represented thereby and so exercised, either (a) a number of shares of Common Stock equal to the Net Share Amount, in respect of such Warrant, which number shall not be less than zero (computed using the formula described below), plus cash in lieu of any fractional shares as described below, (b) cash in an amount equal to the Net Cash Amount in respect of such Warrant at the Company’s sole discretion ,or (c) a combination thereof as described in Section 3.04. The Company will notify all Warrantholders of its election to deliver the Net Cash Amount, Net Share Amount or any combination thereof in settlement of the Capped and Uncapped Warrants executed on the Expiration Date, which election shall apply to all Warrants of a particular type, by written notice to the Warrantholders (with a copy to the Warrant Agent) and publication of a press release no later than 10 scheduled Trading Days prior to the Expiration Date. The Company may elect to settle the Capped and Uncapped Warrants for different consideration. Notice of any such election will be irrevocable.   18   --------------------------------------------------------------------------------     (ii)   Subject to Section 3.05, no Warrant shall be exercisable prior to the Expiration Date. On the Expiration Date, all issued and outstanding Warrants shall be automatically exercised. Upon exercise of the Warrants, the Company shall pay cash in an amount equal to the Net Cash Amount, as described below, or deliver a number of shares of Common Stock equal to the Net Share Amount (plus cash in lieu of any fractional shares), as described below, or a combination thereof, as described below, at the Company’s discretion. In connection with such automatic exercise of Warrants, (A) the Company shall determine the Net Share Amount or Net Cash Amount applicable to each Warrant promptly following the last day of the Settlement Period and (B) the Company shall, or shall cause the Warrant Agent to, deliver to the record owner of such Warrants as of 5:00 p.m. (New York City time) on the Expiration Date the relevant Net Share Amount, Net Cash Amount or a combination thereof, as applicable, no later than the third Business Day following the last day of the Settlement Period. Section 3.02. Settlement in Cash. (a) If the Company elects to settle the Capped Warrants or Uncapped Warrants solely in cash, each Warrantholder shall be entitled to receive from the Company, for each Warrant held by such Warrantholder, a cash payment (the “Net Cash Amount”) equal to the sum of the Daily Net Cash Amounts for each Trading Day during the Settlement Period. (b)  For purposes of determining the Net Cash Amount, the “Daily Net Cash Amount” means, in respect of each Capped Warrant and Uncapped Warrant held by a Warrantholder, and each Trading Day during the Settlement Period, an amount of cash (which will in no event be less than zero) equal to: WM x (RP - EP); 30 where, WM = the “Warrant Multiplier” RP = the “Relevant Price” of the Capped Warrants or Uncapped Warrants, as applicable, for such Trading Day, which means: (i) in the case of the Capped Warrants, the lesser of (a) VWAP of the Common Stock on such Trading Day and (b) the Cap Price, and (ii) in the case of the Uncapped Warrants, the VWAP of the Common Stock on such Trading Day; and EP = the “Exercise Price.”     19   --------------------------------------------------------------------------------     Section 3.03. Settlement in Shares. (a) If the Company elects to settle the Capped Warrants or the Uncapped Warrants solely in shares of Common Stock, each Warrantholder shall be entitled to receive from the Company, for each Warrant held by such Warrantholder, a “Net Share Amount” equal to the sum of the Daily Net Share Amounts for each Trading Day during the Settlement Period, together with cash for any fractional shares (calculated on an aggregate basis) valued at the VWAP on the last day of the Settlement Period. (b)  For purposes of determining the Net Share Amount, the “Daily Net Share Amount” means, in respect of each Capped Warrant and Uncapped Warrant held by a Warrantholder, and each Trading Day during the Settlement Period, a number of shares of Common Stock (which will in no event be less than zero) equal to the Daily Net Cash Amount (calculated as described in Section 3.02) for such Trading Day divided by VWAP for such Trading Day. Section 3.04. Settlement in Cash and Shares. If the Company elects to settle the Capped Warrants or the Uncapped Warrants in a combination of cash and shares of Common Stock, at the time the Company gives notice of the settlement method pursuant to Section 3.01(a)(i), the Company will specify a percentage of the Daily Net Share Amount that will be settled in cash (the “Cash Percentage”). If the Company makes such an election, the amount of cash that it will deliver in respect of each Trading Day in the Settlement Period will equal the product of the Cash Percentage and the Daily Net Cash Amount for such Trading Day. The number of shares deliverable in respect of each Trading Day in the Settlement Period will be a percentage of the Daily Net Share Amount equal to 100% minus the Cash Percentage. Section 3.05. Early Settlement Upon a Fundamental Change. (a) If a Fundamental Change occurs prior to the Expiration Date, each Warrantholder will have the right to exercise its Warrants at any time on or after the effective date of such Fundamental Change (the “Effective Date”) until the 30th Trading Day after the Effective Date. Following such 30th Trading Day, any unexercised Warrants will no longer be exercisable until the Expiration Date. The Company shall, on or prior to such 10th scheduled Trading Day immediately preceding the anticipated Effective Date, issue a press release and notify all Warrantholders (with a copy to the Warrant Agent) of the anticipated Effective Date, their rights to exercise their Warrants as set forth in the Warrant Agreement, and whether the Company will settle Warrants tendered for exercise in cash or shares of its Common Stock, or a combination thereof, as set forth in this Section 3.05. In such press release and notice, the Company shall state that any Warrantholder whose Warrants are represented by Global Units must separate such Global Units into Global Warrants and Global Notes in order to exercise such Warrants in connection with a Fundamental Change. The Company shall deliver the same consideration for all Warrants of a particular type, but may settle the Capped Warrants and the   20   --------------------------------------------------------------------------------   Uncapped Warrants for different consideration. Any such notice will be irrevocable. (b)  Any Capped Warrants or Uncapped Warrants exercised in connection with a Fundamental Change during the time period set forth in Section 3.05(a) shall be settled by delivery of an amount of cash, shares of Common Stock or any combination thereof (the “Early Settlement Amount”), at the Company’s election as set forth in Section 3.05(a). The Early Settlement Amount will be determined by reference to the tables below and will be based on the Effective Date of the Fundamental Change and the Stock Price in respect of such Fundamental Change. (c)     (i)    If the Company elects to settle the Capped or the Uncapped Warrants in cash, the Early Settlement Amount for each Warrant shall be the amount determined by reference to the tables below. (ii)   If the Company elects to settle the Capped or the Uncapped Warrants in shares of Common Stock, the Early Settlement Amount for each Warrant will be a number of shares (or, following the Effective Date, a number of Units of Reference Property (as set forth in Section 4.03 below)) equal to the amount determined by reference to the tables below divided by the Average Price for Common Stock or for Unit of Reference Property. If the Company elects to settle Warrants for a combination of cash and shares of Common Stock, the Early Settlement Amount for each Warrant will be (a) an amount of cash equal to the Cash Percentage of the Early Settlement Amount elected by the Company, and (b) a number of shares of Common Stock (or, following the Effective Date, a number of Units of Reference Property) equal to the product of (i) 100% minus the Cash Percentage and (ii) the amount determined by reference to the tables below divided by the Average Price for Common Stock or for Unit of Reference Property. The “Average Price” means (i) with respect to the Common Stock, the average of the VWAP for the Common Stock, and (ii) with respect to a Unit of Reference Property, the average of the Unit Values, determined as set forth in Section 4.03, in each case for the 30-Trading Day Period commencing on the first Trading Day immediately following the Effective Date, as determined promptly by the Company following such 30th Trading Day. (d)  The Company will deliver the Early Settlement Amount, whether in the form of cash, Common Stock (and cash in lieu of fractional shares based on the Average Price), or a combination thereof, on the third Business Day following the 30-Trading Day period commencing on the first Trading Day immediately following the Effective Date, as determined promptly by the Company following such 30th Trading Day.   21   --------------------------------------------------------------------------------     (e)  The Stock Prices set forth in the first row of the table below (i.e., the column headers) and the values referred to in Section 3.05(f) will be adjusted as of any date on which the Exercise Price of Warrants is adjusted and in the same manner. The following table sets forth the Early Settlement Amount per Capped Warrant: Capped Warrants Early Settlement Amount   Stock Price   Effective Date $8.99 $10.00 $11.00 $12.00 $13.00 $14.00 $15.00 $20.00 $25.00 $30.00 $40.00 $50.00 June 6, 2006 $0.00 $0.18 $0.35 $0.52 $0.67 $0.80 $0.92 $1.29 $1.44 $1.50 $1.54 $1.54 June 15, 2007 $0.14 $0.36 $0.59 $0.80 $0.99 $1.15 $1.29 $1.68 $1.80 $1.83 $1.85 $1.85 June 15, 2008 $0.23 $0.53 $0.85 $1.15 $1.42 $1.63 $1.79 $2.11 $2.16 $2.16 $2.16 $2.16 June 15, 2009 $0.00 $0.11 $1.12 $2.13 $2.50 $2.50 $2.50 $2.50 $2.50 $2.50 $2.50 $2.50   (f)   The exact Stock Price and Effective Date may not be set forth on the table above, in which case: (i)    if the Stock Price is between two Stock Prices in the table or the Effective Date is between two Effective Dates in such table, the Early Settlement Amount will be determined by a straight-line interpolation between the Early Settlement Amount set forth for the higher and lower Stock Prices and the two Effective Dates, as applicable, based on a 365-day year; (ii)   if the Stock Price is in excess of $50 per share, subject to adjustment, the Early Settlement Amount shall be the applicable amount under the column for $50 per share (subject to adjustment) determined by a straight-line interpolation between the relevant Effective Dates if the Effective Date is between two Effective Dates in the table based on a 365-day year; and (iii)  if the Stock Price is less than $8.99 per share, subject to adjustment, no Early Settlement Amount will be paid. (g) The Stock Prices set forth in the first row of the table below (i.e., the column headers) and the values referred to in Section 3.05(h) will be adjusted as of any date on which the Exercise Price of Warrants is adjusted and in the same manner. The following table sets forth the Early Settlement Amount per Uncapped Warrant:   22   --------------------------------------------------------------------------------     Uncapped Warrants Early Settlement Amount   Stock Price  Effective Date $8.99 $10.00 $11.00 $12.00 $13.00 $14.00 $15.00 $20.00 $25.00 $30.00 $40.00 $50.00 June  6, 2006 $0.00 $0.58 $1.29 $2.10 $2.99 $3.92 $4.89 $9.85 $14.87 $19.89 $29.93 $39.96 June 15, 2007 $0.00 $0.25 $0.85 $1.60 $2.46 $3.38 $4.35 $9.34 $14.37 $19.40 $29.46 $39.52 June 15, 2008 $0.00 $0.00 $0.40 $1.04 $1.86 $2.78 $3.76 $8.78 $13.83 $18.87 $28.96 $39.05 June 15, 2009 $0.00 $0.00 $0.00 $0.09 $1.10 $2.11 $3.12 $8.18 $13.24 $18.29 $28.41 $38.52   (h)  The exact Stock Price and Effective Date may not be set forth on the table above, in which case: (i)    if the Stock Price is between two Stock Prices in the table or the Effective Date is between two Effective Dates in the table, the Early Settlement Amount will be determined by a straight-line interpolation between the Early Settlement Amount set forth for the higher and lower Stock Prices and the two Effective Dates, as applicable, based on a 365-day year; (ii)   if the Stock Price is in excess of $50 per share, subject to adjustment, the Early Settlement Amount will be the sum of (A) the applicable amount under the column for $50 (subject to adjustment), and (B) the product of the Warrant Multiplier and the difference between the Stock Price and $50 (subject to adjustment) determined by a straight-line interpolation between the relevant Effective Dates if the Effective Date is between two Effective Dates in the table based on a 365-day year; and (iii)  if the Stock Price is less than $8.99 per share, subject to adjustment, no Early Settlement Amount will be paid. (i)   In connection with a Fundamental Change as set forth above, Warrants may be exercised by (i) in the case of Certificated Warrants, surrendering the Warrant Certificate evidencing such Warrants at the principal office of the Warrant Agent (or successor warrant agent), with the Election to Exercise form set forth on the reverse of the Warrant Certificate duly completed and executed, together with any applicable transfer taxes as set forth in Section 3.06 below or (ii) in the case of Warrants represented by a Global Certificate registered in the name of the Depositary or its nominee, complying with appropriate procedures established by the Depositary for the exercise of Warrants. The date on which a Warrantholder complies with the foregoing requirements for   23   --------------------------------------------------------------------------------   exercise is the “Exercise Date” hereunder, unless such date is not a Trading Day or the Warrantholder satisfies the foregoing requirements after 5:00 p.m. New York City time on a Trading Day, in which case the Exercise Date shall be the immediately succeeding Trading Day, except that in no event shall an Exercise Date occur following the Expiration Date. A registered Warrantholder may exercise the full number of Warrants represented by a Warrant Certificate or any number of whole Warrants thereof. If the Company elects to settle payment of the Early Settlement Amount upon exercise of the Warrants as described above in shares of its Common Stock (or Units of Reference Property as described below) and such shares or units are “restricted securities” within the meaning of the Securities Act, the Company shall use its commercially reasonable efforts to register such shares or units to permit the prompt resale of such shares or units by the recipients thereof pursuant to an effective registration statement under the Securities Act. If the Company fails to register such shares or units, no liquidated damages shall be paid or fees assessed. Section 3.06. Delivery of Common Stock. (a) Subject to the provisions of Section 4.07 hereof, if the Company shall have elected to settle Warrants in Common Stock as set forth in Section 3.03 or 3.04 above, the Warrant Agent shall, on or prior to the date required as set forth above, (i) if shares of Common Stock are in book-entry form at the Depositary, deliver Common Stock by electronic transfer (with the assistance of the Company and the transfer agent of Common Stock, if necessary) to such Warrantholder’s account, or any other account as the Warrantholder may designate, at the Depositary or at an Agent Member, or (ii) if shares of Common Stock are not in book-entry form at the Depositary, requisition from the transfer agent of the Common Stock and deliver to or upon the order of such registered Warrantholder a certificate or certificates, in each case with legends thereon as appropriate (as determined by the Company) and for the number of full shares of Common Stock to which such Warrantholder is entitled, registered in such name or names as may be directed by such Warrantholder, in each case together with cash, as provided in Section 3.07 hereof, in respect of any fractional shares, and, if the number of Warrants represented by a Warrant Certificate shall not have been exercised in full, a new Warrant Certificate, countersigned by the Warrant Agent (or successor warrant agent), for the balance of the number of whole Warrants represented by the surrendered Warrant Certificate; provided, however, that the Company shall not be required to pay any tax or taxes that may be payable in respect of any transfer in connection with the issue of any Warrant Certificate in a name other than that of the registered holder of the Warrant Certificate surrendered upon the exercise of a Warrant. (b)  If the Company shall elect to settle the Warrants in shares of Common Stock, each Person in whose name any such certificate for shares of   24   --------------------------------------------------------------------------------   Common Stock is issued shall for all purposes be deemed to have become the holder of record of such shares on the last Trading Day in the period used to determine the Average Price of the Common Stock, in the case of Warrants exercised in connection with a Fundamental Change, or on the last Trading Day of the Settlement Period, in the case of Warrants exercised on the Expiration Date, except that, if either such date is a date when the stock transfer books of the Company are closed, such Person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open. (c)  Promptly after the Warrant Agent shall have taken the action required in above or at such later time as may be mutually agreeable to the Company and the Warrant Agent, the Warrant Agent shall account to the Company with respect to any Warrants exercised. The Company shall reimburse the Warrant Agent for any amounts paid by the Warrant Agent in respect of a fractional share upon such exercise in accordance with Section 3.07 hereof. Section 3.07. No Fractional Shares to Be Issued. Notwithstanding anything to the contrary contained in this Warrant Agreement, the Company shall not be required to issue any fraction of a share of Common Stock or to distribute stock certificates that evidence fractional shares of Common Stock or to issue a Warrant Certificate representing a fractional Warrant upon exercise of any Warrants. If more than one Warrant Certificate shall be surrendered for exercise at one time by the same holder, the number of full shares which shall be issuable upon exercise thereof shall be computed on the basis of the aggregate number of Warrants so surrendered. If any fraction of a share of Common Stock would, except for the provisions of this Section 3.07, be issuable on the exercise of any Warrant or Warrants, the Company shall pay the cash amount contemplated in Section 3.02. The Warrantholders, by their acceptance of the Warrant Certificates, expressly waive their right to receive any fraction of a share of Common Stock or a stock certificate representing a fraction of a share of Common Stock or Warrant Certificate representing a fractional Warrant upon exercise of any Warrant. Section 3.08. Acquisition of Warrants by the Company; Cancellation of Warrants. The Company shall have the right, except as limited by law, to purchase or otherwise to acquire Warrants at such times, in such manner and for such consideration as it may deem appropriate and shall have agreed with the holder of such Warrants. The Warrant Agent shall cancel any Warrant Certificate delivered to it for exercise, in whole or in part, or delivered to it for transfer, exchange, substitution or cancellation and no Warrant Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Warrant Agreement. On request of the Company, the Warrant Agent shall destroy cancelled Warrant Certificates held by it and shall deliver its certificates of destruction to the Company. If the Company shall acquire any of Warrants,   25   --------------------------------------------------------------------------------   such acquisition shall not operate as a repurchase or termination of the right represented by such Warrants unless and until the Warrant Certificates evidencing such Warrants are surrendered to the Warrant Agent for cancellation. Section 3.09. Direction of Warrant Agent. The Company shall be responsible for performing all calculations required in connection with the exercise and settlement of the Warrants and the delivery of cash and/or Common Stock as described in the Article 3. In connection therewith, the Company shall provide prompt written notice to the Warrant Agent of any amounts necessary for the exercise and settlement of the Warrants, including without limitation, the Net Cash Amount, the Net Share Amount and any Early Settlement Amount. Any cash or Common Stock to be delivered to the Warrantholders hereunder shall be delivered to the Warrant Agent no later than the Business Day immediately preceding the date such items are required to be delivered to the Warrantholders. The Warrant Agent shall have no liability for any failure or delay in performing its duties hereunder caused by any failure or delay of the Company in providing such calculations or items to the Warrant Agent. The Warrant Agent shall not be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock or Units of Reference Property which may at any time be issued or delivered upon the exercise of any Warrant, and it makes no representation with respect thereto. The Warrant Agent shall not be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of Common Stock or stock certificates or Units of Reference Property, or to comply with any of the covenants of the Company contained in this Article 3. ARTICLE 4 ADJUSTMENTS Section 4.01. Adjustment of Exercise Price. The Exercise Price and Cap Price for any Warrants shall be subject to adjustment (without duplication) upon the following events: (a)  the issuance of Common Stock as a dividend or distribution on shares of Common Stock, or subdivisions and combinations of Common Stock, in which event the Exercise Price and Cap Price will be adjusted based on the following formula: [fomulap26.jpg] where:   26   --------------------------------------------------------------------------------       P1 =    the Exercise Price or Cap Price, as applicable, in effect in effect immediately after the close of business on the Ex-Dividend Date, or the effective date of such share subdivision or share combination, as the case may be;   P0 =     the Exercise Price or Cap Price, as applicable, in effect immediately prior to the Ex-Dividend Date, or the effective date of such share subdivision or share combination, as the case may be;   OS0 =     the number of shares of Common Stock outstanding immediately prior to the Ex-Dividend Date, or the effective date of such share subdivision or share combination, as the case may be; and   OS1 =     the number of shares of Common Stock that would be outstanding immediately after such event. (b)   the issuance to all holders of Common Stock of certain rights or warrants to purchase Common Stock for a period expiring 60 days or less from the date of issuance of such rights or warrants at less than the Current Market Price of Common Stock as of the announcement date for the issuance of such rights or warrants, in which event the Exercise Price and, in the case of the Capped Warrants, the Cap Price, will be adjusted based on the following formula (provided that the Exercise Price and Cap Price will be readjusted to the extent that such rights or warrants are not exercised prior to their expiration): [formulap27.jpg] where:   P1 =    the Exercise Price or Cap Price, as applicable, in effect immediately after the close of business on the Ex-Dividend Date;   P0 =     the Exercise Price or Cap Price, as applicable, in effect immediately prior to the Ex-Dividend Date;   OS0 =     the number of shares of Common Stock outstanding immediately prior to the Ex-Dividend Date;   Y =     the number of shares of Common Stock equal to the aggregate price payable to exercise such rights divided by the average of the Closing Sale Prices of Common Stock for the 10 consecutive Trading Days prior to the Business Day immediately preceding the announcement of the issuance of such rights or warrants; and   X =     the total number of shares of Common Stock issuable pursuant to such rights or warrants;   27   --------------------------------------------------------------------------------     provided, however, that if such rights or warrants are exercisable only upon the occurrence of certain Triggering Events, then the Exercise Price and Cap Price will not be adjusted until such Triggering Events occur. (c)   the dividend or other distribution to all holders of Common Stock of shares of the Company’s capital stock (other than Common Stock) or evidence of the Company indebtedness, the Company assets or property (excluding (A) any dividend, distribution or issuance covered by clause (a) or (b) above and (B) any dividend or distribution paid exclusively in cash), in which event the Exercise Price and Cap Price will be adjusted based on the following formula: [formulap28.jpg] where:   FMV= fair market value (as determined by the Board of Directors) of the shares of capital stock, evidences of indebtedness, assets or property distributed with respect to each outstanding share of Common Stock on the Ex-Dividend Date for such distribution;   P1 =    the Exercise Price or Cap Price, as applicable, in effect immediately after the close of business on the Ex-Dividend Date;   P0 =     the Exercise Price or Cap Price, as applicable, in effect immediately prior to the Ex-Dividend Date; and   SP0 = the Current Market Price of Common Stock With respect to an adjustment pursuant to this clause (c) where there has been a payment of a dividend or other distribution on Common Stock of shares of capital stock of, or similar equity interests in, a Subsidiary or other business unit of the Company, the Exercise Price and Cap Price instead will be adjusted based on the following formula:         [formula2p28.gif] where:   P1 =    the Exercise Price or Cap Price, as applicable, in effect immediately after the close of business on the Ex-Dividend Date;   P0 =     the Exercise Price or Cap Price, as applicable, in effect immediately prior to the Ex-Dividend Date;   28   --------------------------------------------------------------------------------       MP0 =     the average of the Closing Sale Prices of Common Stock over the 10 consecutive Trading Days commencing on and including the fifth Trading Day after the Ex-Dividend Date; and   FMV = the average of the Closing Sale Price of the capital stock or similar equity interest distributed to holders of Common Stock applicable to one share of Common Stock over the 10 consecutive Trading Days commencing on and including the fifth Trading Day after the Ex-Dividend Date. (d)   dividends or other distributions consisting exclusively of cash to all holders of Common Stock, in which event the Exercise Price and Cap Price will be adjusted based on the following formula: [formula1p29.gif] where:   P1 =    the Exercise Price or Cap Price, as applicable, in effect immediately after the close of business on the Ex-Dividend Date;   P0 =     the Exercise Price or Cap Price, as applicable, in effect immediately prior to the Ex-Dividend Date;   SP0 = the Current Market Price of Common Stock; and   C =     the amount of cash per share the Company pays in such distribution or dividend to holders of Common Stock. (e)   The Company or one or more of its subsidiaries makes purchases of Common Stock pursuant to a tender offer or exchange offer by the Company or one of its subsidiaries for Common Stock to the extent that the cash and value of any other consideration paid per share of Common Stock exceeds the Closing Sale Price per share of Common Stock on the Trading Day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer (the “Offer Expiration Date”), in which event the Exercise Price and Cap Price will be adjusted based on the following formula: [formula2p29.gif] where:   29   --------------------------------------------------------------------------------       P1 =    the Exercise Price or Cap Price, as applicable, in effect immediately on the Trading Day next succeeding the Offer Expiration Date;   P0 =     the Exercise Price or Cap Price, as applicable, in effect on the Offer Expiration Date;   FMV = the fair market value (as determined by the Board of Directors) of the aggregate value of all cash and any other consideration paid or payable for shares validly tendered or exchanged and not withdrawn as of the Offer Expiration Date (the “Purchased Shares”);   OS1 =     the number of shares of Common Stock outstanding immediately after the Offer Expiration Date less any Purchased Shares;   SP1 =     the Closing Sale Price of Common Stock on the Trading Day next succeeding the Offer Expiration Date; and   OS0 =     the number of shares of Common Stock outstanding immediately after the Offer Expiration Date, including any Purchased Shares. (f)   Upon each adjustment of the Exercise Price and Cap Price, as described above, the Warrant Multiplier for each of the Capped Warrants and Uncapped Warrants in effect immediately following effectiveness of such adjustment will be the Warrant Multiplier in effect immediately prior to such adjustment multiplied by a fraction, (i) the numerator of which is the Exercise Price in effect immediately prior to such adjustment and (ii) the denominator of which is the Exercise Price in effect immediately following such adjustment. (g)  To the extent that the Company has a rights plan in effect upon exercise of Warrants for Common Stock, each Warrantholder will receive, in addition to Common Stock (to the extent settled in Common Stock), the rights under the rights plan, unless prior to any exercise, the rights have separated from Common Stock, in which case the Exercise Price and Cap Price will be adjusted at the time of separation as if the Company distributed, to all holders of Common Stock, shares of the Company’s capital stock, evidences of indebtedness or assets as described above, subject to readjustment in the event of the expiration, termination or redemption of such rights. (h)  Except as stated above, the Exercise Price, Cap Price and Warrant Multiplier will not be adjusted for the issuance of Common Stock or any securities convertible into or exchangeable for Common Stock or carrying the right to purchase any of the foregoing.   30   --------------------------------------------------------------------------------     (i)   The Company may from time to time, to the extent permitted by law and subject to applicable rules of The New York Stock Exchange, decrease the Exercise Price (but not the Cap Price), increase the Cap Price (but not the Exercise Price) and/or increase the Warrant Multiplier of the Warrants by any amount. In that case Warrantholders will be given at least 15 days notice of such increase or decrease. The Company may make such decreases to the Exercise Price (but not the Cap Price), in addition to those set forth above, as the Board of Directors deems advisable to avoid or diminish any income tax to holders of Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes. (j)    None of the Exercise Price, Cap Price or Warrant Multiplier will be adjusted: (i)    upon the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on the Company’s securities and the investment of additional optional amounts in shares of Common Stock under any plan; (ii)  upon the issuance of any shares of Common Stock or options or rights or rights to purchase such Common Stock pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Company or any of its subsidiaries; (iii) upon the issuance of any shares of Common Stock pursuant to any option, warrant, right or exercisable, exchangeable or convertible security outstanding as of the Closing Date; (iv) for a change in par value or no par value of Common Stock; or (v) for accumulated and unpaid dividends. (k)   If the Company takes a record of the holders of Common Stock for the purpose of entitling them to receive a dividend or other distribution, and thereafter (and before the dividend or distribution has been paid or delivered to stockholders) legally abandons its plan to pay or deliver such dividend or distribution, then thereafter no adjustment in the Exercise Price, Cap Price or Warrant Multiplier then in effect shall be required by reason of the taking of such record. (l)    Whenever the Exercise Price, the Cap Price or the Warrant Multiplier is adjusted, the Company shall (i) compute the Exercise Price, the Cap Price or the Warrant Multiplier in accordance with this Section 4.01 and prepare and transmit to the Warrant Agent an Officer’s Certificate setting forth the   31   --------------------------------------------------------------------------------   Exercise Price, the Cap Price or the Warrant Multiplier, the method of calculation of the Exercise Price, the Cap Price or the Warrant Multiplier in reasonable detail, and the facts requiring such adjustment and upon which such adjustment is based and (ii) as soon as practicable following the occurrence of an event that requires an adjustment to the Exercise Price, the Cap Price or the Warrant Multiplier (or if the Company is not aware of this occurrence, as soon as practicable after becoming so aware), the Company or, at the request and expense of the Company, the Warrant Agent shall provide a written notice to the holders of the occurrence of such event and a statement setting forth in reasonable detail the method by which the adjustment to the Exercise Price, the Cap Price or the Warrant Multiplier was determined and setting forth the adjusted Exercise Price, the Cap Price or the Warrant Multiplier. Section 4.02. Adjustment of Warrant Multiplier. Upon each adjustment of the Exercise Price pursuant to Section 4.01 above, the Warrant Multiplier in effect prior to the effectiveness of such adjustment shall be adjusted to the number of shares of Common Stock, calculated to the nearest one-hundredth of a share, obtained by (i) multiplying the Warrant Multiplier in effect immediately prior to such adjustment by the Exercise Price in effect prior to such adjustment, and (ii) dividing the product so obtained by the Exercise Price in effect immediately after such adjustment of the Exercise Price. Section 4.03. Recapitalizations, Reclassifications and Changes of Common Stock. (a) In the case of any recapitalization, reclassification or change of Common Stock (other than changes resulting from a subdivision or combination), a consolidation, merger or combination involving the Company, a sale, lease or other transfer to a third party of the consolidated assets of the Company and the Company’s subsidiaries substantially as an entirety, or any statutory share exchange, in each case as a result of which Common Stock would be converted into, or exchanged for, stock, other securities, other property or assets (including cash or any combination thereof) (the “Reference Property”), then, following the effective time of the transaction, (i) the Relevant Price used to determine the Net Cash Amount payable upon exercise of the Warrants on the Expiration Date will be based on the value, determined as set forth below, of the kind and amount of shares or stock, other securities or other property or assets (including cash or any combination thereof) that a holder of one share of Common Stock would have owned or been entitled to receive (such kind and amount of Reference Property per Share of Common Stock, a “Unit of Reference Property”) upon such transaction and (ii) the Daily Net Share Amount used to determine the Net Share Amount payable if the Company elects to settle Warrants exercised on the Expiration Date in shares shall be, in respect of each Warrant and each Trading Day during the Settlement Period a number of Units of Reference Property (which will in no event be less than zero) equal to the Daily Net Cash Amount (calculated as described above) for such Trading Day divided by the Unit Value for such Trading Day. The Company shall pay cash for any fraction of a   32   --------------------------------------------------------------------------------   Unit of Reference Property (calculated on an aggregate basis) valued at the Unit Value at the last day of the Settlement Period. (b)   For the purpose of determining the Relevant Price, the value of a Unit of Reference Property (the “Unit Value”) shall be determined as follows: (i) Any shares of common stock of the successor or purchasing corporation or any other corporation that are traded on a national or regional stock exchange or in the Nasdaq National Market included in such Unit of Reference Property shall be valued as if such shares were “Common Stock” using procedures set forth in the definition of “VWAP” in Section 1.01, provided that the Bloomberg page (or successor page) referred to in such definition shall be to the page for such other corporation; and (ii)   Any other property (other than cash) included in such Unit of Reference Property shall be valued in good faith by the Board of Directors or by a New York Stock Exchange member firm selected by the Board of Directors. (c)   In the event holders of Common Stock have the opportunity to elect the form of consideration to be received in such transaction, the Company will make adequate provision whereby the holders of the Warrants shall have a reasonable opportunity to determine the form of consideration into which all of the Warrants, treated as a single class, shall be exercisable from and after the Effective Date of such transaction, subject to the Company’s option to cash settle exercised Warrants. The determination: (i) will be made for all Warrantholders by holders representing a plurality of the Warrants participating in such determination, (ii) will be subject to any limitations to which all of the holders of Common Stock are subject, including, but not limited to, pro rata reductions applicable to any portion of the consideration payable in such transaction, and (iii) will be conducted in such a manner as to be completed by the date which is the earlier of: (a) the deadline for elections to be made by holders of Common Stock, and (b) two Trading Days prior to the anticipated effective date of such transaction. This provision does not limit the rights of holders or the Company’s rights in the event of a Fundamental Change, including the holders’ right to receive the Early Settlement Amount in connection with the exercise of their Warrants Section 4.04. Consolidation, Merger and Sale of Assets. (a) The Company may, without the consent of the Warrantholders, consolidate with, merge into or sell, lease or otherwise transfer in one transaction or a series of related transactions the consolidated assets of the Company and its subsidiaries substantially as an entirety to any corporation, limited liability company, partnership or trust organized under the laws of the United States or any of its political subdivisions provided that:   33   --------------------------------------------------------------------------------     (i)    the successor assumes all the Company’s obligations under this Warrant Agreement and the Warrants; (ii)  if as a result of such transaction Warrants become exercisable for common stock or other securities issued by a third party, such third party fully and unconditionally guarantees all obligations of the issuer of Warrants or such successor under the Warrants and this Warrant Agreement; and (iii) an Officer’s Certificate and an Opinion of Counsel, each stating that the consolidation, merger or transfer complies with the provisions of this Warrant Agreement, have been delivered to the Warrant Agent. (b)   In case of any such consolidation, merger, sale or conveyance and upon any such assumption by the successor corporation, such successor corporation shall succeed to and be substituted for the Warrants Issuer with the same effect as if it had been named herein as the Warrants Issuer. Such successor corporation thereupon may cause to be signed, and may issue any or all of the Warrants issuable pursuant to this Agreement which theretofore shall not have been signed by the Warrants Issuer; and, upon the order of such successor corporation, instead of the Warrants Issuer, and subject to all the terms, conditions and limitations in this Warrant Agreement prescribed, the Warrant Agent shall authenticate and deliver, as applicable, any Warrants that previously shall have been signed and delivered by the officers of the Warrants Issuer to the Warrant Agent for authentication, and any Warrants which such successor corporation thereafter shall cause to be signed and delivered to the Warrant Agent for such purpose. Section 4.05. Covenant to Reserve Shares for Issuance on Exercise. (a) The Board of Directors has authorized and will reserve for issuance such number of shares of Common Stock as the Board of Directors believes will be issuable upon the exercise of all outstanding Warrants for shares of Common Stock. The Company covenants that all shares of Common Stock that shall be so issuable shall be duly and validly issued, fully paid and non-assessable. If, at the time any Warrants are exercised, the Company does not have reserved for issuance the full number of shares of Common Stock issuable upon settlement of such Warrants, the Company shall settle such Warrants in cash, notwithstanding any notice by the Company to the contrary. (b)  The Company agrees to authorize and direct its current and future transfer agents for the Common Stock and for any shares of the Company’s Common Stock issuable upon the exercise of any of Warrants at all times to reserve for issuance the number of shares of Common Stock specified in Section 4.05(a). The Warrant Agent is hereby authorized to requisition from time to time   34   --------------------------------------------------------------------------------   from any such transfer agent’s stock certificates (or beneficial interests thereof) required to honor outstanding Warrants upon exercise thereof in accordance with the terms of this Warrant Agreement, and the Company agrees to authorize and direct such transfer agents to comply with all such requests of the Warrant Agent and to otherwise comply with the Warrant Agent in connection with the delivery of Common Stock. In connection with any such requisition, the Warrant Agent shall provide such transfer agent with a requisition order in the form of Exhibit C (or as separately agreed between the Warrant Agent and the transfer agent). The Company will supply such transfer agents with duly executed stock certificates for such purposes and will provide or otherwise make available any cash or scrip which may be payable as provided in this Article 4. Promptly after the date of expiration of Warrants, the Warrant Agent shall certify to the Company the aggregate number of Warrants then outstanding, and thereafter no shares shall be required to be reserved in respect of such Warrants. (c)   If permitted or required by the rules of any national securities exchange or over the counter market or other domestic market on which the Common Stock is listed at any time, if any, the Company shall cause to have listed or quoted all shares of Common Stock issued upon exercise of the Capped or Uncapped Warrants on any such exchange or market. Section 4.06. Payment of Taxes on Stock Certificates Issued upon Exercise. The initial issuance of Common Stock upon the exercise of Warrants shall be made without charge to the exercising Warrantholders for any tax in respect of the issuance of such stock certificates, and such stock certificates shall be issued in the respective names of, or in such names as may be directed by, the exercising Warrantholders; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such stock certificate, any Warrant Certificates or other securities in a name other than that of the registered holder of the Warrant Certificate surrendered upon exercise of the Warrant, and the Company shall not be required to issue or deliver such certificates or other securities unless and until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. Section 4.07. Warrant Agent Not Responsible for Adjustments or Validity of Stock. The Warrant Agent shall not at any time be under any duty or responsibility to any Warrantholder to determine whether any facts exist that may require an adjustment of the Exercise Price or Warrant Entitlement, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental agreement provided to be employed, in making the same. The Company shall be responsible for performing all calculations required under this Article 4 in connection with the (i) adjustment of the Exercise Price, the Cap Price and the Warrant Entitlement and   35   --------------------------------------------------------------------------------   (ii) the identification of any Reference Property and the determination of the related Unit Values thereof. The Warrant Agent shall have no liability for any failure or delay in performing its duties hereunder caused by any failure or delay of the Company in providing such calculations to the Warrant Agent. The Warrant Agent shall not be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock or of any securities or property which may at any time be issued or delivered upon the exercise of any Warrant or upon any adjustment pursuant to Article 4, and it makes no representation with respect thereto. The Warrant Agent shall not be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or property or scrip upon the surrender of any Warrant for the purpose of exercise or upon any adjustment pursuant to Article 4, or to comply with any of the covenants of the Company contained in this Article 4. Section 4.08. Statements on Warrants. The form of Warrant Certificate need not be changed because of any adjustment made pursuant to this Article 4, and Warrant Certificates issued after such adjustment may state the same Exercise Price and the same number of shares of Common Stock as are stated in the Warrant Certificates initially issued pursuant to this Warrant Agreement. However, the Company may at any time in its sole discretion (which shall be conclusive) make any change in the form of Warrant Certificate that it may deem appropriate and that does not materially adversely affect the interest of the Warrantholders; and any Warrant Certificates thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant Certificate or otherwise, may be in the form as so changed. ARTICLE 5 OTHER PROVISIONS RELATING TO RIGHTS OF WARRANTHOLDERS Section 5.01. No Rights as Stockholders. Holders of Warrants shall not be entitled, by virtue of being such holders, to vote, to consent, to receive dividends, to receive notice as stockholders with respect to any meeting of stockholders for the election of the Company’s directors or any other matter, or to exercise any rights whatsoever as the Company’s stockholders unless, until and only to the extent such holders become holders of record of shares of Common Stock issued upon settlement of the Warrants. Section 5.02. Mutilated or Missing Warrant Certificates. (a) If any Warrant at any time is mutilated, defaced, lost, destroyed or stolen, then on the terms set forth in this Warrant Agreement, such Warrant may be replaced at the cost of the applicant (including legal fees of the Company) at the office of the Warrant Registrar. The applicant for a new Warrant shall, in the case of any mutilated or defaced Warrant, surrender such Warrant to the Warrant Registrar   36   --------------------------------------------------------------------------------   and, in the case of any lost, destroyed or stolen Warrant, furnish evidence satisfactory to the Company of such loss, destruction or theft, and, in each case, furnish evidence satisfactory to the Company of the ownership and authenticity of the Warrant together with such indemnity as the Company may require. Any such new Warrant Certificate shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant Certificate shall be at any time enforceable by anyone. An applicant for such a substitute Warrant Certificate shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company or the Warrant Agent may prescribe. All Warrant Certificates shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the substitution for lost, stolen, mutilated or destroyed Warrant Certificates, and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the substitution for and replacement of negotiable instruments or other securities without their surrender. (b)   Initially, the Warrant Agent will act as the Warrant Registrar and Warrants may be presented for registration of transfer and exchange at the offices of the Warrant Registrar with a written instruction of transfer in form satisfactory to the Warrant Registrar, duly executed by such Warrantholder or by such Warrantholder’s attorney, duly authorized in writing. Such Warrantholder will also provide a written certificate (substantially in the form of Exhibit B hereto) to the effect that such transfer will comply with the appropriate transfer restrictions applicable to such Warrants. The registered holder of a Warrant will be treated as its owner for all purposes. The Warrant Agent shall be entitled to conclusively rely upon any such certification in connection with the transfer of a Warrant hereunder and shall have no responsibility to monitor or verify whether any such transfer complies with the requirements hereunder or otherwise complies with Securities Act. Section 5.03. Modification, Waiver and Meetings. (a) This Warrant Agreement may be modified or amended by the Company and the Warrant Agent, without the consent of the holder of any Warrant, for the purposes of, among other things: (i)    adding covenants for the benefit of the Warrantholders; (ii)   adding a guarantor or other security for the benefit of the Warrantholders; (iii)  adding additional dates on which Warrantholders may exercise Warrants;   37   --------------------------------------------------------------------------------     (iv)  surrendering any right or power conferred upon the Company; (v)   providing for the settlement upon exercise of Warrants if any reclassification or change of Common Stock or any consolidation, merger or sale of the consolidated assets of the Company and its subsidiaries substantially as an entirety occurs; (vi)  providing for the assumption of the Company’s obligations in the case of a merger, consolidation, conveyance, sale, transfer or lease; (vii) decreasing the Exercise Price, increasing the Warrant Multiplier or, if applicable, increasing the Cap Price in the manner described in this Warrant Agreement; (viii) curing any ambiguity or correcting or supplementing any defective provision contained in this Warrant Agreement; provided that such modification or amendment does not, in the good faith opinion of the Board of Directors, adversely affect the interests of the Warrantholders in any material respect; (ix)  conform any provision contained herein with the “Description of the Warrants” as set forth in the Offering Memorandum dated June 6, 2006; and (x)   adding or modifying any other provisions which the Company may deem necessary or desirable and which will not adversely affect the interests of the Warrantholders. (b)   Modifications and amendments to this Warrant Agreement or to the terms and conditions of Warrants may also be made by the Company and the Warrant Agent, and noncompliance with any provision of the Warrant Agreement or Warrants may be waived, either: (i)    with the written consent of the holders of at least a majority of Warrants at the time outstanding; or (ii)   by the adoption of a resolution at a meeting of Warrantholders at which a quorum is present by at least a majority of Warrants represented at such meeting. (c)   However, no such modification, amendment or waiver may, without the written consent or the affirmative vote of each Warrantholder affected: (i)   change the Expiration Date;     38   --------------------------------------------------------------------------------     (ii)  increase the Exercise Price, decrease the Warrant Multiplier or, if applicable, decrease the Cap Price; (iii) impair the right to institute suit for the enforcement of any payment or delivery with respect to the settlement of any Warrant; (iv) except as otherwise permitted or contemplated by provisions of this Warrant Agreement concerning specified reclassifications or corporate reorganizations, impair or adversely affect the exercise rights of Warrantholders, including any change to the calculation or payment of the Net Share Amount or Net Cash Amount, as applicable; (v)   reduce the percentage of Warrants outstanding necessary to modify or amend this Warrant Agreement or to waive any past default; or (vi) reduce the percentage in Warrants outstanding required for any other waiver under this Warrant Agreement. (d)  The quorum at any meeting called to adopt a resolution will be Persons holding or representing a majority of the Warrants at the time outstanding. Section 5.04. Reports. If, at any time prior to the Resale Restriction Termination Date, the Company is not subject to Section 13 or 15(d) of the Exchange Act, the Company will furnish, or cause to be furnished, promptly upon the request of any Warrantholder, information specified in Rule 144A(d)(4)(i) and (ii) under the Securities Act, to such Warrantholder, or to a prospective transferee of a Warrant or interest in such Warrant designated by such Warrantholder, as the case may be, in connection with the resale pursuant to Rule 144A of such Warrant or such interests by such Warrantholder. ARTICLE 6 CONCERNING THE WARRANT AGENT AND OTHER MATTERS Section 6.01. Payment of Certain Taxes. The Company will from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Warrant Agent in respect of the initial issuance or delivery of shares of Common Stock upon the exercise of Warrants, but the Company shall not be obligated to pay any transfer taxes in respect of Warrants or such shares. Section 6.02. Change of Warrant Agent. (a) The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged from all further duties and liabilities hereunder after giving 60 days’ notice in writing to   39   --------------------------------------------------------------------------------   the Company, except that such shorter notice may be given as the Company shall, in writing, accept as sufficient. If the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor warrant agent in place of the Warrant Agent. If the Company shall fail to make such appointment within a period of 60 days after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated warrant agent or by any holder of Warrants (who shall, with such notice, submit his Warrant Certificate for inspect by the Company), then the holder of any Warrants may apply to any court of competent jurisdiction for the appointment of a successor warrant agent. (b)  The Warrant Agent may be removed by the Company at any time upon 30 days’ written notice to the Warrant Agent; provided, however, that the Company shall not remove the Warrant Agent until a successor warrant agent meeting the qualifications hereof shall have been appointed. (c)   Any successor warrant agent, whether appointed by the Company or by such a court, shall be a corporation or banking association organized, in good standing and doing business under the laws of the United States of America or any state thereof or the District of Columbia, and authorized under such laws to exercise corporate trust powers and subject to supervision or examination by Federal or state authority and having a combined capital and surplus of not less than $50,000,000. The combined capital and surplus of any such successor Warrant Agent shall be deemed to be the combined capital and surplus as set forth in the most recent report of its condition published prior to its appointment, provided that such reports are published at least annually pursuant to law or to the requirements of a Federal or state supervising or examining authority. After appointment, any successor warrant agent shall be vested with all the authority, powers, rights, immunities, duties and obligations of its predecessor warrant agent with like effect as if originally named as warrant agent hereunder, without any further act or deed; but if for any reason it becomes necessary or appropriate, the predecessor warrant agent shall execute and deliver, at the expense of the Company, an instrument transferring to such successor warrant agent all the authority, powers and rights of such predecessor warrant agent hereunder; and upon request of any successor warrant agent, the Company shall make, execute, acknowledge and deliver any and all instruments in writing to more fully and effectually vest in and conform to such successor warrant agent all such authority, powers, rights, immunities, duties and obligations. Upon assumption by a successor warrant agent of the duties and responsibilities hereunder, the predecessor warrant agent shall deliver and transfer, at the expense of the Company, to the successor warrant agent any property at the time held by it hereunder. As soon as practicable after such appointment, the Company shall give notice thereof to the predecessor warrant agent, the registered holders to Warrants and each transfer agent for the shares of its Common Stock. Failure to   40   --------------------------------------------------------------------------------   give such notice, or any defect therein, shall not affect the validity of the appointment of the successor warrant agent. (d)  Any entity into which the Warrant Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party, shall be the successor Warrant Agent under this Warrant Agreement without any further act. In case at the time such successor to the Warrant Agent shall succeed to the agency created by this Warrant Agreement, any of the Warrant Certificates shall have been countersigned but not delivered, any such successor to the Warrant Agent may adopt the countersignature of the original Warrant Agent and deliver such Warrant Certificates so countersigned, and in case at that time any of the Warrant Certificates shall not have been countersigned, any successor to the Warrant Agent may countersign such Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the successor Warrant Agent; and in all such cases Warrant Certificates shall have the full force provided in the in the Warrant Certificates and in this Warrant Agreement. (e)   In case at any time the name of the Warrant Agent shall be changed and at such time any of the Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent may adopt the countersignatures under its prior name and deliver such Warrant Certificates so countersigned; and in case at that time any of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Warrant Certificates either in its prior name or in its changed name; and in all such cases such Warrant Certificates shall have the full force provided in the Warrant Certificates and in this Warrant Agreement. Section 6.03. Compensation; Further Assurances. The Company agrees (i) that it will pay the Warrant Agent reasonable compensation for its services as Warrant Agent hereunder and, except as otherwise expressly provided, will pay or reimburse the Warrant Agent upon demand for all reasonable expenses, disbursements and advances incurred or made by the Warrant Agent in accordance with any of the provisions of this Warrant Agreement (including the reasonable compensation, expenses and disbursements of its agents and counsel) except any such expense, disbursement or advance as may arise from its or any of their negligence or bad faith; and (ii) that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Warrant Agent for the carrying out or performing of the provisions of this Warrant Agreement. Section 6.04. Reliance on Counsel. The Warrant Agent may consult with legal counsel (who may be legal counsel for the Company), and the written opinion of such counsel or any advice of legal counsel subsequently confirmed by a written opinion of such counsel shall be full and complete authorization and   41   --------------------------------------------------------------------------------   protection to the Warrant Agent as to any action taken or omitted by it in good faith and in accordance with such written opinion or advice. Section 6.05. Proof of Actions Taken. Whenever in the performance of its duties under this Warrant Agreement the Warrant Agent shall deem it necessary or desirable that any matter be proved or established by the Company prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of bad faith on the part of the Warrant Agent, be deemed to be conclusively proved and established by an Officer’s Certificate delivered to the Warrant Agent; and such Officer’s Certificate shall, in the absence of bad faith on the part of the Warrant Agent be full warrant to the Warrant Agent for any action taken, suffered or omitted in good faith by it under the provisions of this Warrant Agreement in reliance upon such certificate; but in its discretion the Warrant Agent may in lieu thereof accept other evidence of such fact or matter or may require such further or additional evidence as to it may seem reasonable. Section 6.06. Correctness of Statements. The Warrant Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Warrant Agreement or in the Warrant Certificates (except its countersignature thereof) or be required to verify the same, and all such statements and recitals are and shall be deemed to have been made by the Company only. Section 6.07. Validity of Agreement. The Warrant Agent shall not be under any responsibility in respect of the validity of this Warrant Agreement or the execution and delivery hereof or in respect of the validity or execution of any Warrant Certificates (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Warrant Agreement or in any Warrant Certificate; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Warrant Agreement or any Warrants or as to whether any shares of Common Stock will, when issued, be validly issued and fully paid and nonassessable. Section 6.08. Use of Agents. The Warrant Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents and the Warrant Agent shall not be responsible for the misconduct or negligence of any agent or attorney, provided due care had been exercised in the appointment and continued employment thereof. Section 6.09. Liability of Warrant Agent. The Warrant Agent shall incur no liability or responsibility to the Company or to any holder of Warrants for any action taken in reliance on any notice, resolution, waiver, consent, order,   42   --------------------------------------------------------------------------------   certificate, or other paper, document or instrument believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. The Company agrees to indemnify the Warrant Agent and save it harmless against any and all losses, expenses and liabilities, including judgments, costs and reasonable counsel fees, for anything done or omitted in good faith by the Warrant Agent in the execution of this Warrant Agreement or otherwise arising in connection with this Warrant Agreement, except as a result of the Warrant Agent’s negligence or willful misconduct or bad faith. Section 6.10. Legal Proceedings. The Warrant Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve expense unless the Company or one or more Warrantholders shall furnish the Warrant Agent with reasonable security and indemnity for any costs and expenses which may be incurred, but this provision shall not affect the power of the Warrant Agent to take such action as the Warrant Agent may consider proper, whether with or without any such security or indemnity. Section 6.11. Other Transactions in Securities of the Company. The Warrant Agent in its individual or any other capacity may become the owner of Warrants or other securities of the Company, or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Warrant Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. Section 6.12. Actions as Agent. The Warrant Agent shall act hereunder solely as agent and not in a ministerial or fiduciary capacity, and its duties shall be determined solely by the provisions hereof. The duties and obligations of the Warrant Agent shall be determined solely by the express provisions of the Warrant Agreement, and the Warrant Agent shall not be liable except for the performance of such duties and obligations as are specifically set forth in the Warrant Agreement. No implied covenants or obligations shall be read into the Warrant Agreement against the Warrant Agent. No provision of the Warrant Agreement shall require the Warrant Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. The Warrant Agent shall not be liable for anything that it may do or refrain from doing in good faith in connection with this Warrant Agreement except for its own negligence or willful misconduct or bad faith.   43   --------------------------------------------------------------------------------     Section 6.13. Appointment and Acceptance of Agency. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the instructions set forth in this Warrant Agreement, and the Warrant Agent hereby accepts the agency established by this Warrant Agreement and agrees to perform the same upon the terms and conditions herein set forth. Section 6.14. Successors and Assigns. All the covenants and provisions of this Warrant Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 6.15. Notices. Any notice or demand authorized by this Warrant Agreement to be given or made by the Warrant Agent or by the holder of any Warrant to or on the Company shall be sufficiently given or made if sent by mail first-class, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows: The Interpublic Group of Companies, Inc. 1114 Avenue of the Americas New York, New York 10036   Any notice or demand authorized by this Warrant Agreement to be given or made by the holder of any Warrant or by the Company to or on the Warrant Agent shall be sufficiently given or made if sent by mail first-class, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company), as follows: LaSalle Bank National Association 181 West Madison Street, 32nd Floor Chicago, Illinois 60602 Attention: CDO Trust Services Group – ELF Special Financing Ltd.   Any notice of demand authorized by this Warrant Agreement to be given or made to the holder of any Warrants shall be sufficiently given or made if sent by first-class mail, postage prepaid to the last address of such holder as it shall appear on the Warrant Register. Section 6.16. Applicable Law. The validity, interpretation and performance of this Warrant Agreement and of the Warrant Certificates shall be governed by the law of the State of New York without giving effect to the principles of conflicts of laws thereof. Section 6.17. Benefits of This Warrant Agreement. Nothing in this Warrant Agreement expressed and nothing that may be implied from any of the   44   --------------------------------------------------------------------------------   provisions hereof is intended, or shall be construed, to confer upon, or give to, any Person or corporation other than the parties hereto and the Warrantholders any right, remedy or claim under or by reason of this Warrant Agreement or of any covenant, condition, stipulation, promise or agreement hereof, and all covenants, conditions, stipulations, promises and agreements in this Warrant Agreement contained shall be for the sole and exclusive benefit of the parties hereto and their successors and of the Warrantholders. Section 6.18. Registered Warrantholders. Prior to due presentment for registration of transfer, the Company and the Warrant Agent may deem and treat the Person in whose name any Warrants are registered in the Warrant Register as the absolute owner thereof for all purposes whatever (notwithstanding any notation of ownership or other writing thereon made by anyone other than the Company or the Warrant Agent) and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary or be bound to recognize any equitable or other claim to or interest in any Warrants on the part of any other Person and shall not be liable for any registration of transfer of Warrants that are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration of transfer or with such knowledge of such facts that its participation therein amounts to bad faith. The terms “Warrantholder” and holder of any “Warrants” and all other similar terms used herein shall mean such Person in whose name Warrants are registered in the Warrant Register. Section 6.19. Inspection of Agreement. A copy of this Warrant Agreement shall be available at all reasonable times for inspection by any registered Warrantholder at the principal office of the Warrant Agent (or successor warrant agent). The Warrant Agent may require any such holder to submit his Warrant Certificate for inspection by it before allowing such holder to inspect a copy of this Warrant Agreement. Section 6.20. Headings. The Article and Section headings herein are for convenience only and are not a part of this Warrant Agreement and shall not affect the interpretation thereof. Section 6.21. Counterparts. The Agreement may be executed in any number of counterparts on separate counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument.   45   --------------------------------------------------------------------------------     IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by the parties hereto as of the day and year first above written. The Interpublic Group of Companies, Inc. By: /s/ Nicholas J. Camera Name: Nicholas J. Camera Title:   Senior Vice President, General Counsel and Secretary   LaSalle Bank National Association, as Warrant Agent By: /s/ Theresa Lynch Name: Theresa Lynch Title:   First Vice President     46   --------------------------------------------------------------------------------     EXHIBIT A FORM OF [GLOBAL/CERTIFICATED] WARRANT FOR [CAPPED/UNCAPPED] WARRANTS [FACE]   No. _____     CUSIP No. __________   [“UNLESS THIS GLOBAL WARRANT FOR [CAPPED/UNCAPPED] WARRANTS IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”),* TO THE INTERPUBLIC GROUP OF COMPANIES, INC. (THE “COMPANY”), THE CUSTODIAN OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.* OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC* (AND ANY PAYMENT IS MADE TO CEDE & CO.* OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC*), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,* HAS AN INTEREST HEREIN. TRANSFER OF THIS GLOBAL WARRANT FOR [CAPPED/UNCAPPED] WARRANTS SHALL BE LIMITED TO TRANSFERS IN WHOLE, AND NOT IN PART, TO THE COMPANY, DTC,* THEIR SUCCESSORS AND THEIR RESPECTIVE NOMINEES.”]** THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS   _________________________ * Add references to the Unit Agent where indicated if the Global Warrant is a Global Warrant Underlying Units. ** Bracketed language only appears on Global Warrants held in the name of DTC (or nominee thereof) or the Unit Agent.   A-1   --------------------------------------------------------------------------------   SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (“QIB”). UNTIL THE RESALE RESTRICTION TERMINATION DATE, AS DEFINED IN THE WARRANT AGREEMENT REFERRED TO HEREIN, THE HOLDER OF THIS SECURITY AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO THE ISSUER OF THIS SECURITY, (B) TO A PERSON IT REASONABLY BELIEVES IS A QIB THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT OR (C) UNLESS THIS SECURITY IS A GLOBAL WARRANT UNDERLYING UNITS, AS DEFINED IN THE WARRANT AGREEMENT, IN ACCORDANCE WITH ANY OTHER EXEMPTION FROM REGISTRATION AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY UNDERSTANDS THAT THE ISSUER OF THIS SECURITY MAY RECEIVE A LIST OF PARTICIPANTS HOLDING POSITIONS IN ITS SECURITIES FROM ONE OR MORE BOOK-ENTRY DEPOSITORIES. ANY TRANSFER IN VIOLATION OF THE FOREGOING WILL BE OF NO FORCE AND EFFECT, WILL BE VOID AB INITIO, AND WILL NOT OPERATE TO TRANSFER ANY RIGHTS TO THE TRANSFEREE, NOTWITHSTANDING ANY INSTRUCTIONS TO THE CONTRARY TO THE ISSUER OF THIS SECURITY, THE WARRANT AGENT OR ANY INTERMEDIARY. IF AT ANY TIME THE ISSUER DETERMINES IN GOOD FAITH OR IS NOTIFIED THAT THE HOLDER OF THIS SECURITY OR A BENEFICIAL INTEREST HEREIN WAS IN BREACH OF ANY OF THE REPRESENTATIONS SET FORTH IN THIS SECURITY, THE ISSUER OR THE WARRANT AGENT MAY DECLARE THE ACQUISITION OF THIS SECURITY OR SUCH INTEREST IN THIS SECURITY VOID. IN THE EVENT OF A BREACH, AT THE TIME GIVEN, AND, IN THE EVENT OF SUCH A DETERMINATION OR NOTICE OF BREACH, AT THE TIME GIVEN OR AT ANY SUBSEQUENT TIME, THE ISSUER OR THE WARRANT AGENT MAY REQUIRE THAT THIS SECURITY OR SUCH INTEREST HEREIN BE TRANSFERRED TO A PERSON DESIGNATED BY IT.     A-2   --------------------------------------------------------------------------------     THE INTERPUBLIC GROUP OF COMPANIES, INC. [Designation of [Capped/Uncapped] Warrants] NUMBER OF [CAPPED/UNCAPPED] WARRANTS EVIDENCED BY THIS CERTIFICATE: [UP TO _____].   WARRANT ENTITLEMENT: Initially one share of Common Stock for each Warrant.   WARRANT MULTIPLIER: For the [Capped/Uncapped] Warrants initially one (1).   [CAPPED/UNCAPPED EXERCISE] PRICE PER [CAPPED/UNCAPPED] WARRANT: Initially [$].   [CAP PRICE PER CAPPED WARRANT]: Initially [$].   FORM OF PAYMENT OF EXERCISE PRICE: Not Applicable. Warrants are net exercisable only.   FORM OF SETTLEMENT: Each Warrant shall entitle the Warrantholder, without any payment therefor, to receive for each Warrant either (a) cash in an amount equal to the Net Cash Amount, (b) a number of shares of Common Stock equal to the Net Share Amount plus cash in lieu of any fractional shares, or (c) a combination thereof, in each case at the sole discretion of The Interpublic Group of Companies, Inc. (the “Company”), as described in the Warrant Agreement.   DATES OF EXERCISE: Warrants may only be exercised on the Expiration Date, or earlier in the event of a Fundamental Change.   EXPIRATION DATE: June 15, 2009.   EARLY EXERCISE UPON FUNDAMENTAL CHANGE: If a Fundamental Change occurs prior to the Expiration Date, each Warrantholder will have the right to exercise its Warrants at any time on or after the Effective Date of such Fundamental Change until the 30th Trading Day after such date. Any Warrants exercised in connection with a Fundamental Change shall be settled by delivery of an amount of cash, shares of Common Stock or any combination thereof, in each case at the Company’s election as set forth in the Warrant Agreement. The Early Settlement Amount deliverable by the Company to the Warrantholder shall be determined as specified in the Warrant Agreement. Early Exercise my be accomplished by (i) in the case of Certificated Warrants, surrendering the Warrant Certificate evidencing such Warrants at the principal office of the Warrant Agent   A-3   --------------------------------------------------------------------------------   (or successor warrant agent), with the Election to Exercise form set forth on the reverse hereof duly completed and executed, together with any applicable transfer taxes as set forth in the Warrant Agreement, or (ii) in the case of Warrants represented by a Global Certificate, complying with appropriate procedures established by the Depositary for the exercise of Warrants.   FUNDAMENTAL CHANGE: As specified in the Warrant Agreement.   ADJUSTMENTS: The Warrant Entitlement, Warrant Multiplier[,] [and] [Capped/Uncapped] Exercise Price [and Cap Price] shall be subject to adjustment as specified in the Warrant Agreement.   This Warrant Certificate for [Capped/Uncapped] Warrants [is a Global Warrant Underlying Units and] certifies that __________, or registered assigns, is the Warrantholder of the number of [Capped/Uncapped] Warrants (the “Warrants”) specified on Schedule A hereto, which shall not exceed _______. On the Expiration Date, all issued and outstanding Warrants shall be automatically exercised. In connection with such automatic exercise of Warrants, (A) the Company shall determine the Net Cash Amount, Net Share Amount or combination thereof applicable to each Warrant and (B) the Company shall, or shall cause the Warrant Agent to, deliver to the record owner of such Warrants as of 5:00 p.m. (New York City time) on the Expiration Date the relevant Net Cash Amount, Net Share Amount (plus the amount of cash for any fraction shares) or combination thereof, as applicable, no later than the third Business Day following the last day of the Settlement Period. Warrants will not entitle the Warrantholder to any of the rights of the holders of shares of Common Stock. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof, and such further provisions shall for all purposes have the same effect as though fully set forth in this place. This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent.   A-4   --------------------------------------------------------------------------------     IN WITNESS WHEREOF, The Interpublic Group of Companies, Inc. has caused this instrument to be duly executed. Dated: __________________   THE INTERPUBLIC GROUP OF COMPANIES By:   Name: Title:       Attest   By:                                                                                                          Secretary           Countersigned as of the date above written:       LaSalle Bank National Association, as Warrant Agent   By:                                                                                                     Authorized Officer               A-5   --------------------------------------------------------------------------------     [FORM OF REVERSE OF [GLOBAL/CERTIFICATED] WARRANT FOR [CAPPED/UNCAPPED] WARRANTS] THE INTERPUBLIC GROUP OF COMPANIES, INC. The [Capped/Uncapped] Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of [Capped/Uncapped] Warrants issued by the Company pursuant to a Warrant Agreement, dated as of June 13, 2006 (the “Warrant Agreement”), between the Company and LaSalle Bank National Association (the “Warrant Agent”), and are subject to the terms and provisions contained in the Warrant Agreement, to all of which terms and provisions each Warrantholder consents by acceptance of this Warrant Certificate or a beneficial interest therein. Without limiting the foregoing, all capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Warrant Agreement. A copy of the Warrant Agreement is on file at the Warrant Agent’s Office. The [Capped/Uncapped] Warrants constitute a separate series of Warrants under the Warrant Agreement. The Warrant Agreement and the terms of the [Capped/Uncapped] Warrants are subject to amendment as provided in the Warrant Agreement. This Warrant Certificate shall be governed by, and interpreted in accordance with, the laws of the State of New York.   A-6   --------------------------------------------------------------------------------     [To be attached if Warrant is a Certificated Warrant] Election to Exercise LaSalle Bank National Association 181 West Madison Street, 32nd Floor Chicago, Illinois 60602   Attention: CDO Trust Services Group – ELF Special Financing Ltd.   The undersigned (the “Registered Holder”) hereby irrevocably exercises __________ [Capped/Uncapped] Warrants (the “Exercised Warrants”) in connection with a Fundamental Change and delivers to you herewith a Warrant Certificate or Certificates, registered in the Registered Holder’s name, representing a number of Warrants at least equal to the number of Exercised Warrants. The Registered Holder hereby directs the Warrant Agent (a) to deliver the Early Settlement Amount as follows:   and (b) if the number of Exercised Warrants is less than the number of [Capped/Uncapped] Warrants represented by the enclosed Warrant Certificate, to deliver a Warrant Certificate representing the unexercised [Capped/Uncapped] Warrants to:     Dated:______________________ ______________________________   (Registered Holder)                     By: ______________________________     Authorized Signature     Address:     Telephone:                       A-7   --------------------------------------------------------------------------------     [To Be Attached if Warrant is a Global Warrant] SCHEDULE A SCHEDULE OF INCREASES OR DECREASES IN [CAPPED/UNCAPPED] WARRANTS The initial number of [Capped/Uncapped] Warrants represented by this Global Warrant is __________. In accordance with the Warrant Agreement and the Unit Agreement dated as of June 13, 2006 among the Warrant Issuer, the Notes Issuer and LaSalle Bank National Association, as Unit Agent, as Warrant Agent, as Paying Agent and as Indenture Trustee under the Indenture referred to therein, the following increases or decreases in the number of [Capped/Uncapped] Warrants represented by this certificate have been made:   Date   Amount of increase in number of [Capped/Uncapped] Warrants evidenced by this Global Warrant   Amount of decrease in number of [Capped/Uncapped] Warrants evidenced by this Global Warrant   Number of [Capped/Uncapped] Warrants evidenced by this Global Warrant following such decrease or increase   Signature of authorized signatory                                                           A-8   --------------------------------------------------------------------------------     [To Be Attached if Warrant is a Global or Certificated Warrant] FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers the [Capped/Uncapped] Warrant(s) represented by this Certificate to:       _________________________________ Name, Address and Zip Code of Assignee and irrevocably appoints _________________________   Name of Agent   as its agent to transfer this [Capped/Uncapped] Warrant Certificate on the books of the Warrant Agent.   [Signature page follows]   A-9   --------------------------------------------------------------------------------     Date:                __________     _____________________ Name of Transferee By:   Name: Title:   (Sign exactly as your name appears on the other side of this Certificate) [Omit the following guarantee for transfers from ELF Special Financing Ltd. to LaSalle Bank National Association as Unit Agent] [NOTICE: The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15.]   A-10   --------------------------------------------------------------------------------     EXHIBIT B FORM OF CERTIFICATE OF COMPLIANCE WITH TRANSFER RESTRICTIONS In connection with the sale, assignment and transfer of ____________ [Capped/Uncapped] Warrants by ______________________________ unto ___________________________________ (Please insert social security or other Taxpayer Identification Number of assignee) prior to the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision), the undersigned confirms that such Warrants are being transferred:   [  ] To The Interpublic Group of Companies, Inc. (the “Company”); or   [  ] To a “qualified institutional buyer” in compliance with Rule 144A under the Securities Act of 1933, as amended; or   [  ] Pursuant to and in compliance with another available exemption from the registration requirements of the Securities Act of 1933, as amended. Unless one of the boxes is checked, the Warrant Agent will refuse to register any of the Warrants evidenced by this certificate in the name of any person other than the registered holder thereof.   Date: [__________]   [Insert name of transferee] By:   Name: Title:     B-1   --------------------------------------------------------------------------------     EXHIBIT C FORM OF COMMON STOCK REQUISITION ORDER [Date]   Via Facsimile (201) 680-4616   Mr. Glen Chang Mellon Investor Services LLC 480 Washington Boulevard Jersey City NJ 07310   Re: DWAC Issuance     Control No. _________   Ladies and Gentlemen:   You are hereby authorized to issue and deliver the shares of Common Stock as indicated below via DWAC. The shares are being issued to cover the exercise of Warrants under the Warrant Agreement, dated as of June 13, 2006, between Interpublic Group of Companies, Inc. and LaSalle Bank National Association, as Warrant Agent (the “Warrant Agreement”). Defined terms used but not defined herein have the meaning assigned to them in the Warrant Agreement.     Number of Shares:                                                                                    Original Issue or                    Transfer from Treasury Account     Broker Name:                                                                     Broker’s DTC Number:                                                                     Contact and Phone:                                                                   The Broker will initiate the DWAC transaction on (date).     C-1   --------------------------------------------------------------------------------                     Sincerely,   LASALLE BANK NATIONAL ASSOCIATION, as Warrant Agent   By: _____________________________ Name: Title:     cc: Deborah Bass via facsimile (201-680-4606)   Broker         C-2  

Exhibit 10.1 Second Amended and Restated Loan Agreement between WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL) as Lender and US Collateral Agent and MAD CATZ, INC. as Borrower October 30, 2006 -------------------------------------------------------------------------------- TABLE OF CONTENTS             Page SECTION 1    DEFINITIONS    2 1.1    “Acceptable Liquidation Agreement”    2 1.2    “Accounts”    3 1.3    “Acquisition”    3 1.4    “Approved In-Transit Inventory”    3 1.5    “Availability Reserves”    3 1.6    “Blocked Accounts”    3 1.7    “Borrower”    4 1.8    “Borrower General Security Agreement”    4 1.9    “Business Day”    4 1.10    “Canadian Collateral Agent”    4 1.11    “Code”    4 1.12    “Collateral”    4 1.13    “EBITDA”    4 1.14    “Eligible Accounts”    5 1.15    “Eligible Inventory”    7 1.16    “EMU Legislation”    7 1.17    “Environmental Laws”    7 1.18    “Equipment”    8 1.19    “ERISA”    8 1.20    “ERISA Affiliate”    8 1.21    “Euro”    8 1.22    “Event of Default”    8 1.23    “Excess Availability”    8 1.24    “Exchange Equivalent”    9 1.25    “Financing Agreements”    9 1.26    “Fiscal Quarter”    9 1.27    “GAAP”    9 1.28    “Gameshark Software”    9 1.29    “Hazardous Materials”    9 1.30    “Information Certificates”    10 1.31    “Intellectual Property Security Agreements”    10 1.32    “Interest Rate”    10 1.33    “Inventory”    10 1.34    “Lender”    10 1.35    “Letter of Credit Accommodations”    11 1.36    “Lien”    11 1.37    “Material Adverse Change”    11 1.38    “Material Adverse Effect”    11 1.39    “Maximum Credit”    11 1.40    “Maximum Letter of Credit Facility”    11 --------------------------------------------------------------------------------           Page 1.41    “MCC”    12 1.42    “MCE”    12 1.43    “MCII”    12 1.44    “MCIA”    12 1.45    “Net Amount of Eligible Accounts”    12 1.46    “Net Orderly Liquidation Value”    12 1.47    “Obligations”    12 1.48    “Obligor”    13 1.49    “Participating Member State”    13 1.50    “Payment Account”    13 1.51    “Permitted Inter-Company Debt”    13 1.52    “Person”    13 1.53    “Pounds Sterling”    14 1.54    “PPSA”    14 1.55    “Prime Rate”    14 1.56    “Records”    14 1.57    “Renewal Date”    14 1.58    “Revolving Loans”    14 1.59    “Royalty Reserve”    14 1.60    “Royalty Reserve Report”    14 1.61    “Software”    15 1.62    “Software Inventory”    15 1.63    “Solvent”    15 1.64    “Spot Rate”    15 1.65    “UCC”    15 1.66    “United Kingdom”    15 1.67    “US Collateral Agent”    16 1.68    “US Reference Bank”    16 1.69    “Value”    16 SECTION 2    CREDIT FACILITIES    16 2.1    Revolving Loans    16 2.2    Letter of Credit Accommodations    18 2.3    Availability Reserves    20 SECTION 3    INTEREST AND FEES    20 3.1    Interest    20 3.2    Commitment Fee    20 3.3    Closing Fee    20 3.4    Servicing Fee    21 3.5    Unused Line Fee    21 3.6    Currency of Payments    21 SECTION 4    CONDITIONS PRECEDENT    21 4.1    Conditions Precedent to Revolving Loans and Letter of Credit Accommodations    21   - ii - --------------------------------------------------------------------------------           Page SECTION 5    COLLECTION AND ADMINISTRATION    22 5.1    Borrower’s Loan Account    22 5.2    Statements    22 5.3    Collection of Accounts    22 5.4    Payments    23 5.5    Authorization to Make Revolving Loans    24 5.6    Use of Proceeds    24 SECTION 6    COLLATERAL REPORTING AND COVENANTS    24 6.1    Collateral Reporting    24 6.2    Accounts Covenants    25 6.3    Inventory Covenants    26 6.4    Equipment Covenants    27 6.5    Power of Attorney    27 6.6    Right to Cure    28 6.7    Access to Premises    28 SECTION 7    REPRESENTATIONS AND WARRANTIES    29 7.1    Corporate Existence, Power and Authority; Subsidiaries    29 7.2    Financial Statements; No Material Adverse Change    29 7.3    Chief Executive Office; Collateral Locations and License Agreements    30 7.4    Priority of Liens; Title to Properties    30 7.5    Tax Returns    30 7.6    Litigation    30 7.7    Compliance with Other Agreements and Applicable Laws    31 7.8    Bank Accounts    31 7.9    Accuracy and Completeness of Information    31 7.10    Employee Benefits    31 7.11    Environmental Compliance    32 7.12    Survival of Warranties; Cumulative    33 SECTION 8    AFFIRMATIVE AND NEGATIVE COVENANTS    33 8.1    Maintenance of Existence    33 8.2    New Collateral Locations    33 8.3    Compliance with Laws, Regulations, Etc.    34 8.4    Payment of Taxes and Claims    35 8.5    Insurance    35 8.6    Financial Statements and Other Information    36 8.7    Sale of Assets, Consolidation, Merger, Amalgamation, Dissolution, Etc.    37 8.8    Encumbrances    38 8.9    Indebtedness    38 8.10    Loans, Investments, Guarantees, Etc.    39 8.11    Dividends and Redemptions    40 8.12    Transactions with Affiliates    40 8.13    EBITDA    40 8.14    Intellectual Property    41 8.15    Additional Bank Accounts    41   - iii - --------------------------------------------------------------------------------           Page 8.16    Compliance with ERISA    41 8.17    Costs and Expenses    42 8.18    Further Assurances    42 8.19    Change of Control    43 8.20    Software Expenditures    43 SECTION 9    EVENTS OF DEFAULTS AND REMEDIES    43 9.1    Events of Default    43 9.2    Remedies    45 SECTION 10    JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW    47 10.1    Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver    47 10.2    Waiver of Notices    48 10.3    Amendments and Waivers    49 10.4    Waiver of Counterclaims    49 10.5    Indemnification    49 SECTION 11    TERM OF AGREEMENT; MISCELLANEOUS    50 11.1    Term    50 11.2    Notices    51 11.3    Partial Invalidity    51 11.4    Successors    51 11.5    Entire Agreement    51 11.6    Headings    52 11.7    Judgment Currency    52 11.8    Amended and Restatement; No Novation    52 11.9    Confirmation of Existing Security    52   - iv - -------------------------------------------------------------------------------- INDEX TO EXHIBITS AND SCHEDULES   Exhibit A    Information Certificates of Borrower and Obligors Exhibit B    Closing Checklist Schedule 7.3    License Agreements Schedule 7.4    Existing Liens Schedule 7.7    Non-Compliance Schedule 7.8    Bank Accounts Schedule 8.6(g)            Form of Compliance Certificate Schedule 8.9    Existing Indebtedness Schedule 8.10    Existing Loans, Advances and Guarantees Schedule 8.13    EBITDA [The exhibits and schedules listed above have been omitted. A copy of the omitted exhibits and schedules will be furnished to the Securities and Exchange Commission upon its request.] -------------------------------------------------------------------------------- SECOND AMENDED AND RESTATED LOAN AGREEMENT This Second Amended and Restated Loan Agreement dated as of October 30, 2006 (this “Agreement”) is entered into by and between Wachovia Capital Finance Corporation (Central), formerly known as Congress Financial Corporation (Central), an Illinois corporation (as lender, “Lender”; and as US collateral agent, “US Collateral Agent”), and Mad Catz, Inc., a Delaware corporation (“Borrower”). W I T N E S S E T H: WHEREAS Lender entered into certain financing arrangements with Borrower pursuant to which Lender made loans and provided other financial accommodations to Borrower on the terms and conditions set forth in a loan agreement dated September 25, 2000 (the “Original Loan Agreement”) made between Lender, US Collateral Agent and Borrower; AND WHEREAS Lender, US Collateral Agent and Borrower amended the Original Loan Agreement and, for ease of reference, restated such amended Original Loan Agreement in a first amended and restated loan agreement dated September 5, 2001 (the “First Amended and Restated Loan Agreement”) between Lender, US Collateral Agent and Borrower; AND WHEREAS Lender, US Collateral Agent and Borrower amended or extended, as the case may be, the First Amended and Restated Loan Agreement pursuant to: (a) an amending agreement dated June 18, 2002; (b) a second amending agreement dated January 22, 2003; (c) a renewal/extension letter dated July 23, 2003; (d) an acknowledgment letter dated September 22, 2003; (e) a renewal/extension letter dated July 27, 2004; (f) an amending and extension letter dated August 31, 2005; (g) a third amending agreement dated August 9, 2006; (h) an extension letter dated September 20, 2006; (i) an extension letter dated September 28, 2006; and (j) an extension letter dated October 16, 2006, (the foregoing amendments and extensions together with the First Amended and Restated Loan Agreement, the “Loan Agreement”); -------------------------------------------------------------------------------- AND WHEREAS Lender, US Collateral Agent and Borrower have, without novation, agreed to amend and restate the Loan Agreement as hereinafter provided; AND WHEREAS Borrower, each Obligor, Lender and US Collateral Agent have confirmed to each other that the security, guarantees and other agreements provided by Borrower and each Obligor in connection with the Loan Agreement remain in full force and effect, and continue as security for the indebtedness and the obligations of Borrower and each Obligor to Lender under this Agreement and the other Financing Agreements; NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1 DEFINITIONS All terms used herein which are defined in Article 1 or Article 9 of the UCC shall have the meanings given therein unless otherwise defined in this Agreement. All references to the plural herein shall also mean the singular and to the singular shall also mean the plural unless the context otherwise requires. All references to Borrower, Lender and US Collateral Agent pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their respective successors and assigns. The words “hereof”, “herein”, “hereunder”, “this Agreement” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not any particular provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. The word “including” when used in this Agreement shall mean “including, without limitation”. References herein to any statute or any provision thereof include such statute or provision as amended, revised, re-enacted, and/or consolidated from time to time and any successor statute thereto. An Event of Default shall exist or continue or be continuing until such Event of Default is waived in accordance with Section 10.3 hereof or is cured in a manner satisfactory to Lender, if such Event of Default is capable of being cured as determined by Lender. Any accounting term used herein unless otherwise defined in this Agreement shall have the meanings customarily given to such term in accordance with GAAP. The term “US Dollars” and the sign “$” mean lawful money of the United States of America. The term “Canadian Dollars” and the sign “CDN$” mean lawful money of Canada. For purposes of this Agreement, the following terms shall have the respective meanings given to them below:   1.1 “Acceptable Liquidation Agreement” “Acceptable Liquidation Agreement” shall mean, with respect to any license of intellectual property between Borrower, as licensee, and the licensor of such intellectual property which pertains to any Collateral, (i) an agreement in form and substance satisfactory to Lender or (ii) an amendment to such license agreement in form and substance satisfactory to Lender, in each case permitting Lender to exercise its rights under this Agreement with respect to such Collateral.   - 2 - -------------------------------------------------------------------------------- 1.2 “Accounts” “Accounts” shall mean all present and future rights of Borrower, MCE and MCC to payment for goods sold or leased or for services rendered, which are not evidenced by instruments or chattel paper, and whether or not earned by performance.   1.3 “Acquisition” “Acquisition” shall mean any transaction whereby Borrower will acquire assets, shares or other equity interest, or a combination thereof, of a business identified by Borrower as a strategic acquisition target pursuant to terms and conditions acceptable to Lender and in respect of which Borrower has received the prior written consent of Lender.   1.4 “Approved In-Transit Inventory” “Approved In-Transit Inventory” shall mean Inventory that is owned and insured by Borrower and is in transit from and is under the control of MCIA to premises located in North America or Europe that are owned or controlled by Borrower and in respect of which Lender has received sufficient documentation, including bills of lading and shipping contracts, in each case assigned to Lender, to confirm the foregoing; provided that the maximum value of such Inventory does not exceed $6,000,000 at any time during the month of November and does not exceed $4,000,000 at any time other than during the month of November.   1.5 “Availability Reserves” “Availability Reserves” shall mean, as of any date of determination, the Royalty Reserve and such amounts as Lender may from time to time establish and revise reducing the amount of Revolving Loans and Letter of Credit Accommodations which would otherwise be available to Borrower under the lending formula(s) provided for herein: (a) to reflect events, conditions, contingencies or risks (including anticipated seasonal variations in dilution of Accounts) which, as determined by Lender, do or may affect either (i) the Collateral or any other property which is security for the Obligations or its value, (ii) the assets, business or prospects of Borrower or any Obligor or (iii) the Liens and other rights of Lender and/or US Collateral Agent in the Collateral (including the enforceability, perfection and priority thereof) or (b) to reflect Lender’s belief that any collateral report or financial information furnished by or on behalf of Borrower or any Obligor to Lender is or may have been incomplete, inaccurate or misleading in any material respect or (c) to reflect outstanding Letter of Credit Accommodations as provided in Section 2.2 hereof or (d) in respect of any state of facts which Lender determines constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default (including rents or other payments due and unpaid or which Lender reasonably expects will not be paid when due).   1.6 “Blocked Accounts” “Blocked Accounts” shall have the meaning set forth in Section 5.3 hereof.   - 3 - -------------------------------------------------------------------------------- 1.7 “Borrower” “Borrower” shall have the meaning set forth in the preamble hereof. 1.8 “Borrower General Security Agreement” “Borrower General Security Agreement” shall mean the amended and restated general security agreement dated November 30, 2001 given by Borrower (and certain U.S. affiliates of Borrower named therein) in favor of US Collateral Agent in respect of the Obligations, as it now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.   1.9 “Business Day” “Business Day” shall mean a day (other than a Saturday, Sunday or statutory holiday in Ontario, Illinois or New York) on which Lender’s Chicago and Toronto office, the U.S. Reference Bank’s main office and banks in New York City and Toronto are open for business in the normal course.   1.10 “Canadian Collateral Agent” “Canadian Collateral Agent” shall mean Wachovia Capital Finance Corporation (Canada), formerly known as Congress Financial Corporation (Canada), in its capacity as collateral agent for Lender, and its successors and assigns.   1.11 “Code” “Code” shall mean the Internal Revenue Code of 1986, as the same now exists or may from time to time hereafter be amended, modified, recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto.   1.12 “Collateral” “Collateral” shall mean, collectively, “Collateral” as such term is defined in the Borrower General Security Agreement and in the Intellectual Property Security Agreements and all assets and undertakings of each Obligor in respect of which Lender and/or US Collateral Agent and/or Canadian Collateral Agent is or has been granted a Lien pursuant to any Financing Agreement.   1.13 “EBITDA” “EBITDA” shall mean, as to any Person, with respect to any period, an amount equal to the net income of such Person for such period determined in accordance with GAAP, plus or minus, to the extent deducted or added in determining such net income for such period, and without duplication: (a) interest paid or payable or received or receivable; (b) income taxes paid or payable or refunds received or receivable in respect of income taxes; and   - 4 - -------------------------------------------------------------------------------- (c) depreciation and amortization expenses.   1.14 “Eligible Accounts” “Eligible Accounts” shall mean Accounts created by Borrower, MCE or MCC which are and continue to be acceptable to Lender based on the criteria set forth below. In general, Accounts shall be Eligible Accounts if: (a) such Accounts arise from the actual and bona fide sale and delivery of goods by Borrower, MCE or MCC or rendition of services by Borrower, MCE or MCC in the ordinary course of their respective businesses which transactions are completed in accordance with the terms and provisions contained in any documents related thereto; (b) such Accounts are not unpaid more than ninety (90) days after the date of the original invoice for them and are not unpaid more than sixty (60) days past the due date thereof; (c) such Accounts comply with the terms and conditions contained in Section 6.2(c) of this Agreement; (d) such Accounts do not arise from sales on consignment, guaranteed sale, sale and return, sale on approval, or other terms under which payment by the account debtor may be conditional or contingent; (e) the chief executive office of the account debtor with respect to such Accounts is located in Canada, the United States of America or the United Kingdom or, if the chief executive office of the account debtor is not located in Canada, the United States of America or the United Kingdom, the Account is payable in Canadian Dollars, US Dollars, Pounds Sterling or Euro, and, at Lender’s option, if: (i) the account debtor has delivered to Borrower, MCE or MCC, as applicable, an irrevocable letter of credit issued or confirmed by a bank satisfactory to Lender and payable only in the United States of America in the currency in which the Account is denominated, sufficient to cover such Account, in form and substance satisfactory to Lender and, if required by Lender, the original of such letter of credit has been delivered to Lender or Lender’s agent and the issuer thereof notified of the assignment of the proceeds of such letter of credit to Lender, or (ii) such Account is subject to credit insurance payable to Lender issued by an insurer and on terms and in an amount acceptable to Lender, or (iii) such Account is otherwise acceptable in all respects to Lender (subject to such lending formula with respect thereto as Lender may determine); (f) such Accounts do not consist of progress billings, bill and hold invoices or retainage invoices, except as to bill and hold invoices, unless Lender shall have received an agreement in writing from the account debtor, in form and substance satisfactory to Lender, confirming the unconditional obligation of the account debtor to take the goods related thereto and pay such invoice; (g) the account debtor with respect to such Accounts has not asserted a counterclaim, defense or dispute and does not have, and does not engage in transactions which may give rise to, any right of setoff against such Accounts (but the portion of the Accounts of such account debtor in excess of the amount at any time and from time to time owed by Borrower, MCE or   - 5 - -------------------------------------------------------------------------------- MCC, as applicable, to such account debtor or claimed owed by such account debtor may be deemed Eligible Accounts); (h) there are no facts, events or occurrences which would impair the validity, enforceability or collectability of such Accounts or reduce the amount payable or delay payment thereunder; (i) such Accounts are subject to the first priority, valid and perfected Lien of Lender and/or US Collateral Agent and any goods giving rise thereto are not, and were not at the time of the sale thereof, subject to any Liens except those permitted in this Agreement; (j) neither the account debtor nor any officer or employee of the account debtor with respect to such Accounts is an officer, employee or agent of or affiliated with Borrower, MCE or MCC directly or indirectly by virtue of family membership, ownership, control, management or otherwise; (k) the account debtors with respect to such Accounts are not any foreign government, the United States of America, any State, political subdivision, department, agency or instrumentality thereof, unless, if the account debtor is the United States of America, any State, political subdivision, department, agency or instrumentality thereof, upon Lender’s request, the Federal Assignment of Claims Act of 1940, as amended or any similar State or local law, if applicable, has been complied with in a manner satisfactory to Lender or a letter of credit has been provided with respect thereto on terms and conditions satisfactory to Lender; (l) there are no proceedings or actions which are threatened or pending against the account debtors with respect to such Accounts which might result in any material adverse change in any such account debtor’s financial condition; (m) such Accounts of a single account debtor or its affiliates do not constitute more than twenty-five percent (25%) of all otherwise Eligible Accounts or, with respect to each of Electronics Boutique/Gamestop and Walmart, such Accounts do not constitute more than forty percent (40%) or such higher percentage as may be agreed by Lender of all otherwise Eligible Accounts or, with respect to such other account debtors as may from time to time be approved in writing by Lender on a case by case basis, such Accounts do not constitute more than such percentage in excess of twenty-five percent (25%) as may be agreed by Lender of all otherwise Eligible Accounts of such account debtor (but in each case the portion of the Accounts not in excess of such percentage may be deemed Eligible Accounts); (n) such Accounts are not owed by an account debtor who has Accounts unpaid more than ninety (90) days after the date of the original invoice for them which constitute more than fifty percent (50%) of the total Accounts of such account debtor; (o) such Accounts are owed by account debtors whose total indebtedness to Borrower, MCE or MCC does not exceed the credit limit with respect to such account debtors as determined by Lender from time to time (but the portion of the Accounts not in excess of such credit limit may still be deemed Eligible Accounts); and   - 6 - -------------------------------------------------------------------------------- (p) such Accounts are owed by account debtors deemed creditworthy at all times by Lender, as determined by Lender. General criteria for Eligible Accounts may be established and revised from time to time by Lender. Any Accounts which are not Eligible Accounts shall nevertheless be part of the Collateral and subject to the Lien of Lender and/or US Collateral Agent.   1.15 “Eligible Inventory” “Eligible Inventory” shall mean Inventory consisting of finished goods held for resale in the ordinary course of the business of Borrower or MCE and raw materials (including electronic chips) for such finished goods, in each case which are acceptable to Lender in its absolute discretion based on the criteria set forth below. In general, Eligible Inventory shall not include (a) work-in-process; (b) components which are not part of finished goods; (c) spare parts for equipment; (d) packaging and shipping materials; (e) supplies used or consumed in Borrower’s or MCE’s business; (f) Inventory at premises which are not owned and controlled by Borrower or MCE, unless US Collateral Agent has received an agreement in writing from the person in possession of such Inventory and/or the owner or operator of such premises in form and substance satisfactory to US Collateral Agent acknowledging US Collateral Agent’s first priority Lien in the Inventory, waiving or subordinating Liens by such person against the Inventory and permitting US Collateral Agent access to, and the right to remain on, the premises so as to exercise US Collateral Agent’s rights and remedies and otherwise deal with the Collateral, or unless such Inventory is Approved In-Transit Inventory; (g) Inventory subject to a Lien in favor of any person other than US Collateral Agent and/or Lender except those permitted in this Agreement; (h) bill and hold goods; (i) unserviceable, obsolete or slow moving Inventory; (j) Inventory which is not subject to the first priority, valid and perfected Lien of US Collateral Agent and/or Lender; (k) damaged and/or obsolete and/or defective Inventory; (1) Inventory purchased or sold on consignment and (m) Inventory subject to a license agreement or other arrangement with a third party which, in Lender’s determination, restricts the ability of Lender to exercise its rights under this Agreement with respect to such Inventory unless such third party has entered into an Acceptable Liquidation Agreement or Lender has otherwise agreed to allow such Inventory to be eligible in Lender’s sole discretion. General criteria for Eligible Inventory may be established and revised from time to time by Lender. Any Inventory which is not Eligible Inventory shall nevertheless be part of the Collateral and subject to the Lien of Lender and/or US Collateral Agent. 1.16 “EMU Legislation” “EMU Legislation” shall mean legislative measures of the Council of European Union for the introduction of, change over to or operation of the Euro. 1.17 “Environmental Laws” “Environmental Laws” shall mean with respect to any Person all federal (United States of America and Canada), state, provincial, district, local, municipal and foreign laws, statutes, rules, regulations, ordinances, orders, directives, permits, licenses and consent decrees relating to health, safety, hazardous, dangerous or toxic substances, waste or material, pollution and   - 7 - -------------------------------------------------------------------------------- environmental matters, as now or at any time hereafter in effect, applicable to such Person and/or its business and facilities (whether or not owned by it), including laws relating to emissions, discharges, releases or threatened releases of pollutants, contamination, chemicals, or hazardous, toxic or dangerous substances, materials or wastes into the environment (including ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals, or hazardous, toxic or dangerous substances, materials or wastes.   1.18 “Equipment” “Equipment” shall mean all of Borrower’s now owned and hereafter acquired equipment, machinery, computers and computer hardware and software (whether owned or licensed), vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located.   1.19 “ERISA” “ERISA” shall mean the United States Employee Retirement Income Security Act of 1974, as the same now exists or may hereafter from time to time be amended, modified, recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto.   1.20 “ERISA Affiliate” “ERISA Affiliate” shall mean any person required to be aggregated with Borrower or any of its subsidiaries under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.   1.21 “Euro” “Euro” means the single currency to which the Participating Member States of the European Union have converted.   1.22 “Event of Default” “Event of Default” shall mean the occurrence or existence of any event or condition described in Section 9.1 hereof.   1.23 “Excess Availability” “Excess Availability” shall mean the amount in US Dollars, as determined by Lender, calculated at any time, equal to: (a) the lesser of: (i) the amount of the Revolving Loans available to Borrower as of such time (based on the applicable lending formulas multiplied by the Net Amount of Eligible Accounts, the Value of Eligible Inventory and Net Orderly Liquidation Value, as determined by Lender) and subject to the sublimits and Availability Reserves from time to time established by Lender hereunder and (ii) the Maximum Credit, minus (b) the sum of: (i) the amount of all then outstanding and unpaid Obligations with respect to Revolving   - 8 - -------------------------------------------------------------------------------- Loans, plus (ii) the aggregate amount of all due but unpaid tax obligations, and trade payables of Borrower, MCE, MCC and MCII that are past due more than sixty (60) days.   1.24 “Exchange Equivalent” “Exchange Equivalent” shall mean in respect of any amount (the “original amount”) expressed in Canadian Dollars (the “original currency”), the amount expressed in US Dollars (the “new currency”) which the Lender would be required to pay in Toronto on the date specified using the Bank of Canada noon rate on such date (or, if no date is specified, on the date on which such amount is being determined), in order to purchase the original amount of the original currency in the new currency, in accordance with the Lender’s usual foreign exchange practice.   1.25 “Financing Agreements” “Financing Agreements” shall mean, collectively, this Agreement, the Borrower General Security Agreement, the Intellectual Property Security Agreements and all notes, guarantees, security agreements and other agreements, documents and instruments now or at any time hereafter executed and/or delivered by Borrower or any Obligor in connection with this Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.   1.26 “Fiscal Quarter” “Fiscal Quarter” shall mean any of the following three (3) month periods in any fiscal year of Borrower: April 1 to June 30, July 1 to September 30, October 1 to December 31 and January 1 to March 31.   1.27 “GAAP” “GAAP” shall mean generally accepted accounting principles in Canada or the United States of America, as applicable, as in effect from time to time as set forth in the opinions and pronouncements of the relevant Canadian or American public and private accounting boards and institutes which are applicable to the circumstances as of the date of determination consistently applied.   1.28 “Gameshark Software” “Gameshark Software” shall mean the video game enhancement software sold by Borrower and certain Obligors that enables video game players to access and take full advantage of the secret codes, short cuts, hints and cheats incorporated by video game publishers into their video game offerings.   1.29 “Hazardous Materials” “Hazardous Materials” shall mean any hazardous, toxic or dangerous substances, materials and wastes, including hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, biological substances, polychlorinated biphenyls, pesticides, herbicides and any other   - 9 - -------------------------------------------------------------------------------- kind and/or type of pollutants or contaminants (including materials which include hazardous constituents), sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes and including any other substances, materials or wastes that are or become regulated under any Environmental Law (including any that are or become classified as hazardous or toxic under any Environmental Law).   1.30 “Information Certificates” “Information Certificates” shall mean, collectively, the Information Certificates of Borrower and each Obligor constituting Exhibit A hereto, each containing material information with respect to such Person, its business and assets provided by or on behalf of such Persons to Lender in connection with the preparation of this Agreement and the other Financing Agreements and the financing arrangements provided for herein.   1.31 “Intellectual Property Security Agreements” “Intellectual Property Security Agreements” shall mean, collectively, (i) the Trademark Security Agreement dated as of September 25, 2000 and executed by Borrower in favor of US Collateral Agent, (ii) the Patent Security Agreement dated as of September 25, 2000 and executed by Borrower in favor of US Collateral Agent, and (iii) the Copyright Security Agreement dated as of September 25, 2000 and executed by Borrower in favor of US Collateral Agent, as each now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.   1.32 “Interest Rate” “Interest Rate” shall mean, as to the non-contingent Obligations, a rate of one quarter of one percent (0.25%) per annum in excess of the Prime Rate; provided that the Interest Rate shall mean, at Lender’s option, without notice, the rate of three and one-quarter percent (3.25%) per annum in excess of the Prime Rate: (i) on the non-contingent Obligations for (A) the period from and after the date of termination hereof until such time as Lender has received full and final payment of all such Obligations, and (B) the period from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing as determined by Lender (notwithstanding entry of any judgment against Borrower) and (ii) on the Revolving Loans at any time outstanding in excess of the amounts available to Borrower under Section 2 hereof (whether or not such excess(es), arise or are made with or without Lender’s knowledge or consent and whether made before or after an Event of Default).   1.33 “Inventory” “Inventory” shall mean all of Borrower’s and MCE’s now owned and hereafter existing or acquired raw materials, work in process, finished goods and all other inventory of whatsoever kind or nature, wherever located.   1.34 “Lender” “Lender” shall have the meaning set forth in the preamble hereof.   - 10 - -------------------------------------------------------------------------------- 1.35 “Letter of Credit Accommodations” “Letter of Credit Accommodations” shall mean the letters of credit, merchandise purchase or other guarantees denominated in Canadian Dollars or US Dollars which are from time to time either (a) issued or opened by Lender for the account of Borrower or any Obligor or (b) with respect to which Lender has agreed to indemnify the issuer or guaranteed to the issuer the performance by Borrower or any Obligor of its obligations to such issuer.   1.36 “Lien” “Lien” shall mean any mortgage, deed of trust, pledge, fixed or floating charge, lien, security interest, hypothec or encumbrance or security arrangement of any nature whatsoever, whether arising by written or oral agreement or by operation of law, including but not limited to any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security.   1.37 “Material Adverse Change” “Material Adverse Change” shall mean, where used in relation to the affairs of Borrower or any Obligor, a change in the business, operations or capital of Borrower or such Obligor, as applicable, that, in the opinion of Lender, has or could be expected to have a Material Adverse Effect.   1.38 “Material Adverse Effect” “Material Adverse Effect” shall mean (i) a material adverse effect on the property or assets of Borrower, any Obligor, their respective subsidiaries or the business or operations of any of them or all of them, taken as a whole, (ii) a material adverse effect on the condition or prospects, financial or otherwise, of Borrower, any Obligor and their respective subsidiaries or any of them or all of them, taken as a whole, (iii) a material adverse effect on the ability of Borrower or any Obligor to perform and discharge any of its obligations under the Financing Agreements, or (iv) a material adverse effect on the priority, effectiveness or enforceability of any Lien granted by Borrower or any Obligor in favor of Canadian Collateral Agent, Lender and/or US Collateral Agent or the ability of Lender, Canadian Collateral Lender and/or US Collateral Agent to enforce any Obligation or realize upon any Collateral or any other property securing the Obligations.   1.39 “Maximum Credit” “Maximum Credit” shall mean the amount of $35,000,000.   1.40 “Maximum Letter of Credit Facility” “Maximum Letter of Credit Facility” shall mean the amount of $1,000,000.   - 11 - -------------------------------------------------------------------------------- 1.41 “MCC” “MCC” shall mean 1328158 Ontario Inc., a corporation incorporated under the laws of the Province of Ontario.   1.42 “MCE” “MCE” shall mean Mad Catz Europe Limited, a company incorporated and existing under the laws of England and Wales.   1.43 “MCII” “MCII” means Mad Catz Interactive, Inc., a corporation existing under the federal laws of Canada.   1.44 “MCIA” “MCIA” shall mean Mad Catz Interactive Asia Limited, a company incorporated under the laws of Hong Kong.   1.45 “Net Amount of Eligible Accounts” “Net Amount of Eligible Accounts” shall mean the gross amount in US Dollars of Eligible Accounts less (a) sales, excise or similar taxes included in the amount thereof and (b) returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed with respect to such Eligible Accounts; provided that the amounts deducted under clause (a) shall not duplicate items for which Availability Reserves have been established by Lender.   1.46 “Net Orderly Liquidation Value” “Net Orderly Liquidation Value” shall mean the amount in US Dollars to be realized from any orderly liquidation of Inventory, net of all liquidation costs, including deductions for all commissions and taxes, as evidenced by an appraisal of such Inventory conducted, at the cost of Borrower by Hilco Appraisal Services, LLC or such other appraiser as is acceptable to Lender, such appraisal to be in form, scope and methodology acceptable to Lender and addressed to Lender or upon which Lender is permitted to rely.   1.47 “Obligations” “Obligations” shall mean any and all Revolving Loans, Letter of Credit Accommodations and all other obligations, liabilities and indebtedness of every kind, nature and description owing by Borrower to Lender, US Collateral Agent, Canadian Collateral Agent and/or their respective affiliates, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under this Agreement and the other Financing Agreements, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any proceeding with respect to Borrower under the United States Bankruptcy   - 12 - -------------------------------------------------------------------------------- Code or any similar statute in any jurisdiction (including the payment of interest and other amounts which would accrue and become due but for the commencement of such proceeding, whether or not such amounts are allowed or allowable in whole or in part in such proceeding), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and however acquired by Lender, US Collateral Agent and/or their respective affiliates.   1.48 “Obligor” “Obligor” shall mean any guarantor, endorser, acceptor, surety or other person liable on or with respect to the Obligations or who is the owner of any property which is security for the Obligations, other than Borrower.   1.49 “Participating Member State” “Participating Member State” shall mean each state so described in any EMU Legislation.   1.50 “Payment Account” “Payment Account” shall have the meaning set forth in Section 5.3 hereof.   1.51 “Permitted Inter-Company Debt” “Permitted Inter-Company Debt” shall mean indebtedness owing by Borrower to any Obligor, by any Obligor to Borrower and/or by any Obligor to another Obligor provided that: (a) such indebtedness is incurred in the ordinary course of business of Borrower and/or such Obligor, as applicable, consistent with past practice; (b) all promissory notes and security agreements (if any) executed by Borrower or any Obligor in respect of such indebtedness shall be assigned to US Collateral Agent in form and content satisfactory to US Collateral Agent; and (c) if requested by Lender, such indebtedness is subordinated and postponed pursuant to subordination agreements in form and content satisfactory to Lender.   1.52 “Person” “Person” or “person” shall mean any individual, sole proprietorship, partnership, limited partnership, corporation (including any corporation which elects subchapter S status under the Internal Revenue Code of 1986, as amended), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality or political subdivision thereof.   - 13 - -------------------------------------------------------------------------------- 1.53 “Pounds Sterling” “Pounds Sterling” shall mean, at any time of determination, the then official currency of the United Kingdom.   1.54 “PPSA” “PPSA” shall mean the Personal Property Security Act (Ontario).   1.55 “Prime Rate” “Prime Rate” shall mean the rate from time to time publicly announced by the U.S. Reference Bank, or its successors, as its prime rate, whether or not such announced rate is the best rate available at such bank.   1.56 “Records” “Records” shall mean all of Borrower’s and each Obligor’s present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of Borrower or any Obligor with respect to the foregoing maintained with or by any other person).   1.57 “Renewal Date” “Renewal Date” shall have the meaning given to such term in Section 11.1(a).   1.58 “Revolving Loans” “Revolving Loans” shall mean the loans now or hereafter made by Lender to or for the benefit of Borrower on a revolving basis (involving advances, repayments and readvances) as set forth in Section 2.1 hereof.   1.59 “Royalty Reserve” “Royalty Reserve” shall mean an amount equal to all accrued and unpaid royalty obligations owing by Borrower and MCE as set forth on the most recent Royalty Reserve Report, adjusted up or down as of any date of determination by Lender in its sole discretion based on Lender’s findings that such royalty obligations owing by Borrower and/or MCE have increased or decreased since the date of such Royalty Reserve Report.   1.60 “Royalty Reserve Report” “Royalty Reserve Report” shall mean a report for the period since the date hereof (for the initial report) or the date of the last such report (for subsequent reports) delivered in accordance with Section 6.1 hereof which shall set forth (i) each license of intellectual property for which   - 14 - -------------------------------------------------------------------------------- Borrower and/or MCE is licensee and for which it pays royalties, (ii) the licensor of each such license, (iii) the aggregate accrued and unpaid royalty obligations owing under each such license and (iv) the date such accrued and unpaid royalty obligations are due under each such license. Each Royalty Reserve Report shall be certified by the chief financial officer of the Borrower as being complete and accurate.   1.61 “Software” “Software” shall mean all software and computer programs (regardless of form or format, DVD, disc or otherwise) and all packaging, containers, artwork, end-user guides or instructions, user manuals and related materials concerning the use and operation of such software and computer programs other than Gameshark Software.   1.62 “Software Inventory” “Software Inventory” shall mean all Eligible Inventory consisting of Software.   1.63 “Solvent” “Solvent” shall mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person; (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities (such as litigation, guarantees and pension plan liabilities) at any time shall be computed as the amount which, in light of all the facts and circumstances existing at the time, represents the amount which can be reasonably be expected to become an actual or matured liability.   1.64 “Spot Rate” “Spot Rate” shall mean, with respect to a currency, the rate quoted by the US Reference Bank as the spot rate for the purchase by the US Reference Bank of such currency with another currency at approximately 10:00 a.m. (Charlotte, North Carolina time) on the date two (2) Business Days prior to the date as of which the foreign exchange computation is made.   1.65 “UCC” “UCC” shall mean the Uniform Commercial Code.   1.66 “United Kingdom” “United Kingdom” shall mean the United Kingdom of Great Britain and Northern Ireland.   - 15 - -------------------------------------------------------------------------------- 1.67 “US Collateral Agent” “US Collateral Agent” shall mean Wachovia Capital Finance Corporation (Central), formerly known as Congress Financial Corporation (Central), in its capacity as collateral agent for itself, as Lender, and its successors and assigns.   1.68 “US Reference Bank” “US Reference Bank” shall mean Wachovia Bank, National Association or its successors, or such other major bank in the United States as Lender may from time to time designate in its discretion.   1.69 “Value” “Value” shall mean, as determined by Lender, with respect to Inventory, the lower of (a) cost computed on a first-in-first-out basis in accordance with GAAP and (b) net realizable value. SECTION 2 CREDIT FACILITIES 2.1 Revolving Loans (a) Subject to and upon the terms and conditions contained herein, Lender agrees to make Revolving Loans to Borrower from time to time in amounts requested by Borrower up to the amount equal to the lesser of:     (i) the Maximum Credit; and     (ii) the sum of:     (A) seventy-five percent (75%) of the Net Amount of Eligible Accounts; plus     (B) the lesser of :     (1) (X) for any date of determination during the period from and including January 1 of any year to and including July 31 of such year, the lesser of (i) eighty-five percent (85%) of Net Orderly Liquidation Value of Eligible Inventory (excluding Software Inventory) and (ii) fifty-five percent (55%) of the Value of Eligible Inventory (excluding Software Inventory); or (Y) for any date of determination during the period from and including August 1 of any year to and including December 31 of such year, sixty percent (60%) of the Value of Eligible Inventory (excluding Software Inventory); and   - 16 - --------------------------------------------------------------------------------   (2) $15,000,000 (less the amount, if any, determined in accordance with Section 2.1(a)(ii)(C) below), plus     (C) the lesser of (i) twenty-five percent (25%) of the Value of Software Inventory, (ii) eighty-five percent (85%) of Net Orderly Liquidation Value of Software Inventory and (iii) $1,000,000, minus     (D) any Availability Reserves. (b) Lender may, in its discretion, from time to time, upon not less than five (5) days prior written notice to Borrower, (i) reduce the lending formula with respect to Eligible Accounts to the extent that Lender determines that: (A) the dilution with respect to the Accounts for any period (based on the ratio of (1) the aggregate amount of reductions in Accounts other than as a result of payments in cash to (2) the aggregate amount of total sales) has increased in any material respect or may be reasonably anticipated to increase in any material respect above historical levels or as a result of seasonal variations, or (B) the general creditworthiness of account debtors has declined or (ii) reduce the lending formula(s) with respect to Eligible Inventory to the extent that Lender determines that: (A) the number of days of the turnover of the Inventory for any period has changed in any material respect or (B) the Net Orderly Liquidation Value of the Eligible Inventory, or any category thereof, has decreased, or (C) the nature and quality of the Inventory has deteriorated. In determining whether to reduce the lending formula(s), Lender may consider events, conditions, contingencies or risks which are also considered in determining Eligible Accounts, Eligible Inventory or in establishing Availability Reserves. (c) Except in Lender’s discretion, the aggregate amount of the Revolving Loans and the Letter of Credit Accommodations outstanding at any time shall not exceed the Maximum Credit. In the event that the outstanding amount of any component of the Revolving Loans, or the aggregate amount of the outstanding Revolving Loans and Letter of Credit Accommodations, exceeds the amounts available under the lending formulas, the sublimits for Letter of Credit Accommodations set forth in Section 2.2(d) hereof or the Maximum Credit, as applicable, such event shall not limit, waive or otherwise affect any rights of Lender in that circumstance or on any future occasions and Borrower shall, upon demand by Lender, which may be made at any time or from time to time, immediately repay to Lender the entire amount of any such excess(es) for which payment is demanded. (d) For purposes only of applying the sublimit on Revolving Loans based on Eligible Inventory pursuant to Section 2.1(a)(ii)(B)(2) hereof, Lender may treat the then undrawn amounts of outstanding Letter of Credit Accommodations for the purpose of purchasing Eligible Inventory as Revolving Loans to the extent Lender is in effect basing the issuance of the Letter of Credit Accommodations on the Value of the Eligible Inventory being purchased with such Letter of Credit Accommodations. In determining the actual amounts of such Letter of Credit Accommodations to be so treated for purposes of the sublimit, the outstanding Revolving Loans   - 17 - -------------------------------------------------------------------------------- and Availability Reserves shall be attributed first to any components of the lending formulas in Section 2.1(a) hereof that are not subject to such sublimit, before being attributed to the components of the lending formulas subject to such sublimit.   2.2 Letter of Credit Accommodations (a) Subject to and upon the terms and conditions contained herein, at the request of Borrower, Lender agrees to provide or arrange for Letter of Credit Accommodations for the account of Borrower containing terms and conditions acceptable to Lender and the issuer thereof. Any payments made by Lender to any issuer thereof and/or related parties in connection with the Letter of Credit Accommodations shall constitute additional Revolving Loans to Borrower pursuant to this Section 2. (b) In addition to any charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations, Borrower shall pay to Lender a letter of credit fee at a rate equal to one and one-quarter percent (1.25%) per annum on the daily outstanding balance of the Letter of Credit Accommodations for the immediately preceding month (or part thereof), payable in arrears as of the first day of each succeeding month, except that Borrower shall pay to Lender such letter of credit fee, at Lender’s option, without notice, at a rate equal to three and three-quarters percent (3.75%) per annum on such daily outstanding balance for: (i) the period from and after the date of termination hereof until Lender has received full and final payment of all Obligations (notwithstanding entry of a judgment against Borrower) and (ii) the period from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing as determined by Lender. Such letter of credit fee shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed and the obligation of Borrower to pay such fee shall survive the termination of this Agreement. (c) No Letter of Credit Accommodations shall be available unless on the date of the proposed issuance of any Letter of Credit Accommodations, the Revolving Loans available to Borrower (subject to the Maximum Credit, the Maximum Letter of Credit Facility and any Availability Reserves) are equal to or greater than: (i) if the proposed Letter of Credit Accommodation is for the purpose of purchasing Eligible Inventory and all negotiable documents of title with respect to such Eligible Inventory have been consigned to the issuer of the Letter of Credit Accommodation, the sum of (A) the percentage equal to one hundred (100%) percent minus the then applicable percentage set forth in Section 2.1(a)(ii)(B) above of the Value of such Eligible Inventory, plus (B) freight, taxes, duty and other amounts which Lender estimates must be paid in connection with such Inventory upon arrival and for delivery to one of Borrower’s locations for Eligible Inventory within the United States of America and (ii) if the proposed Letter of Credit Accommodation is for any other purpose, an amount equal to one hundred (100%) percent of the face amount thereof and all other commitments and obligations made or incurred by Lender with respect thereto. Effective on the issuance of each Letter of Credit Accommodation, an Availability Reserve shall be established in the applicable amount set forth in Section 2.2(c)(i) or Section 2.2(c)(ii) hereof. (d) Except in Lender’s discretion, the amount of all outstanding Letter of Credit Accommodations and all other commitments and obligations made or incurred by Lender in connection therewith shall not at any time exceed the Maximum Letter of Credit Facility. At any   - 18 - -------------------------------------------------------------------------------- time an Event of Default exists or has occurred and is continuing, upon Lender’s request, Borrower will either furnish cash collateral to secure the reimbursement obligations to the issuer in connection with any Letter of Credit Accommodations or furnish cash collateral to US Collateral Agent for the Letter of Credit Accommodations, and in either case, the Revolving Loans otherwise available to Borrower shall not be reduced as provided in Section 2.2(c) hereof to the extent of such cash collateral. (e) Borrower shall indemnify and hold Lender harmless from and against any and all losses, claims, damages, liabilities, costs and expenses which Lender may suffer or incur in connection with any Letter of Credit Accommodations and any documents, drafts or acceptances relating thereto, including, but not limited to, any losses, claims, damages, liabilities, costs and expenses due to any action taken by any issuer or correspondent with respect to any Letter of Credit Accommodation. Borrower assumes all risks with respect to the acts or omissions of the drawer under or beneficiary of any Letter of Credit Accommodation and for such purposes the drawer or beneficiary shall be deemed Borrower’s agent. Borrower assumes all risks for, and agrees to pay, all foreign, Federal, State and local taxes, duties and levies relating to any goods subject to any Letter of Credit Accommodations or any documents, drafts or acceptances thereunder. Borrower hereby releases and holds Lender harmless from and against any acts, waivers, errors, delays or omissions, whether caused by Borrower, by any issuer or correspondent or otherwise with respect to or relating to any Letter of Credit Accommodation. The provisions of this Section 2.2(e) shall survive the payment of Obligations and the termination of this Agreement. (f) Nothing contained herein shall be deemed or construed to grant Borrower any right or authority to pledge the credit of Lender in any manner. Lender shall have no liability of any kind with respect to any Letter of Credit Accommodation provided by an issuer other than Lender unless Lender has duly executed and delivered to such issuer the application or a guarantee or indemnification in writing with respect to such Letter of Credit Accommodation. Borrower shall be bound by any interpretation made by Lender, or any other issuer or correspondent under or in connection with any Letter of Credit Accommodation or any documents, drafts or acceptances thereunder, notwithstanding that such interpretation may be inconsistent with any instructions of Borrower. Lender shall have the sole and exclusive right and authority to, and Borrower shall not at any time while an Event of Default exists, (A) approve or resolve any questions of non-compliance of documents, (B) give any instructions as to acceptance or rejection of any documents or goods, (C) execute any and all applications for steamship or airway guarantees, indemnities or delivery orders, (D) grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents, or (E) agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letter of Credit Accommodations, or documents, drafts or acceptances thereunder or any letters of credit included in the Collateral. Lender may take such actions either in its own name or in Borrower’s name. (g) Any rights, remedies, duties or obligations granted or undertaken by Borrower to any issuer or correspondent in any application for any Letter of Credit Accommodation, or any other agreement in favor of any issuer or correspondent relating to any Letter of Credit Accommodation, shall be deemed to have been granted or undertaken by Borrower to Lender.   - 19 - -------------------------------------------------------------------------------- Any duties or obligations undertaken by Lender to any issuer or correspondent in any application for any Letter of Credit Accommodation, or any other agreement by Lender in favor of any issuer or correspondent relating to any Letter of Credit Accommodation, shall be deemed to have been undertaken by Borrower to Lender and to apply in all respects to Borrower.   2.3 Availability Reserves All Revolving Loans otherwise available to Borrower pursuant to the lending formulas and subject to the Maximum Credit, the Maximum Letter of Credit Facility and other applicable limits hereunder shall be subject to Lender’s continuing right to establish and revise Availability Reserves, upon not less than five (5) days’ prior written notice to Borrower. SECTION 3 INTEREST AND FEES   3.1 Interest (a) Borrower shall pay to Lender interest on the outstanding principal amount of the non-contingent Obligations at the applicable Interest Rate. (b) Interest shall be payable by Borrower to Lender monthly in arrears not later than the first day of each calendar month and shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed. The interest rate shall increase or decrease by an amount equal to each increase or decrease in the Prime Rate effective on the first day of the month after any change in such Prime Rate is announced. The increase or decrease shall be based on the Prime Rate in effect on the last day of the month in which any such change occurs. All interest accruing hereunder on and after an Event of Default or termination hereof shall be payable on demand. In no event shall charges constituting interest payable by Borrower to Lender exceed the maximum amount or the rate permitted under any applicable law or regulation, and if any part or provision of this Agreement is in contravention of any such law or regulation, such part or provision shall be deemed amended to conform thereto.   3.2 Commitment Fee Borrower shall pay to Lender annually a commitment fee in an amount equal to $10,000 per annum while this Agreement is in effect and for so long thereafter as any of the Obligations are outstanding, which fee shall be fully earned as of and payable in advance on the first day of the thirteenth month following the date of closing under the Original Loan Agreement and on each anniversary of such date thereafter.   3.3 Closing Fee Borrower shall pay to Lender as a closing fee the amount of $35,000, which shall be fully earned as of and payable on the date hereof.   - 20 - -------------------------------------------------------------------------------- 3.4 Servicing Fee Borrower shall pay to Lender a monthly servicing fee in an amount equal to $1,000 per month in respect of Lender’s services for each month (or part thereof) while this Agreement remains in effect and for so long thereafter as any of the Obligations are outstanding, which monthly fee shall be fully earned as of and payable in advance on the date of closing hereof and on the first day of each month thereafter.   3.5 Unused Line Fee Borrower shall pay to Lender a monthly unused line fee at a rate equal to one-quarter of one percent (0.25%) per annum calculated on the amount by which the Maximum Credit exceeds the average daily principal balance of the outstanding Revolving Loans and Letter of Credit Accommodations during the immediately preceding month (or part thereof) during which this Agreement is in effect and for so long thereafter as any of the Obligations are outstanding, which fee shall be payable on the first day of each month.   3.6 Currency of Payments Unless otherwise specified by Lender, all interest, fees and other payments by Borrower hereunder shall be in the currency in which such Obligations are denominated. SECTION 4 CONDITIONS PRECEDENT   4.1 Conditions Precedent to Revolving Loans and Letter of Credit Accommodations This Agreement shall not be effective until each of the agreements or actions set out in the Closing Checklist attached hereto as Exhibit B have been executed, delivered or completed, as the case may be, to the satisfaction of Lender or waived in writing (in whole or in part) by Lender in its sole discretion and each of the following is a condition precedent to Lender continuing to make Revolving Loans and/or provide Letter of Credit Accommodations to Borrower hereunder: (a) all representations and warranties contained in this Agreement and in the other Financing Agreements shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of the making of each such Revolving Loan or providing each such Letter of Credit Accommodation and after giving effect thereto, except with respect to those representations and warranties that were or are expressly made as of a particular date and except to the extent that there are changes with respect to matters referenced in such representations and warranties after the date thereof that do not and will not otherwise cause a Default or Event of Default hereunder, and (b) no Event of Default and no event or condition which, with notice or passage of time or both, would constitute an Event of Default, shall exist or have occurred and be continuing on and as of the date of the making of such Revolving Loan or providing each such Letter of Credit Accommodation or after giving effect thereto.   - 21 - -------------------------------------------------------------------------------- SECTION 5 COLLECTION AND ADMINISTRATION   5.1 Borrower’s Loan Account Lender shall maintain one or more loan account(s) on its books in which shall be recorded (a) all Revolving Loans, Letter of Credit Accommodations and other Obligations and the Collateral, (b) all payments made by or on behalf of Borrower and (c) all other appropriate debits and credits as provided in this Agreement, including fees, charges, costs, expenses and interest. All entries in the loan account(s) shall be made in accordance with Lender’s customary practices as in effect from time to time.   5.2 Statements Lender shall render to Borrower each month a statement setting forth the balance in Borrower’s loan account(s) maintained by Lender for Borrower pursuant to the provisions of this Agreement, including principal, interest, fees, costs and expenses. Each such statement shall be subject to subsequent adjustment by Lender but shall, absent manifest errors or omissions, be considered correct and deemed accepted by Borrower and conclusively binding upon Borrower as an account stated except to the extent that Lender receives a written notice from Borrower of any specific exceptions of Borrower thereto within thirty (30) days after the date such statement has been mailed by Lender. Until such time as Lender shall have rendered to Borrower a written statement as provided above, the balance in Borrower’s loan account(s) shall be presumptive evidence of the amounts due and owing to Lender by Borrower.   5.3 Collection of Accounts (a) Borrower shall establish and maintain, at its expense, blocked accounts (“Blocked Accounts”), with such banks as are acceptable to Lender into which Borrower shall, in accordance with Lender’s instructions, promptly deposit all payments on Accounts and all payments constituting proceeds of Inventory or other Collateral in the identical form in which such payments are made, whether by cash, check or other manner. Upon the occurrence and during the continuation of an Event of Default, Lender may, and Borrower shall upon Lender’s request, direct Borrower’s, MCE’s and MCC’s account debtors to directly remit all payment on Accounts to the Blocked Accounts. The banks at which the Blocked Accounts are established shall enter into an agreement, in form and substance satisfactory to Lender, providing that all items received or deposited in the Blocked Accounts are the property of Lender, that the depository bank has no lien upon, or right to setoff against, the Blocked Accounts, the items received for deposit therein, or the funds from time to time on deposit therein and that the depository bank will wire, or otherwise transfer, in immediately available funds, on a daily basis, all funds received or deposited into the Blocked Accounts to such bank account of Lender as Lender may from time to time designate for such purpose (“Payment Account”). Borrower agrees that all payments made to such Blocked Accounts or other funds received and collected by Lender, whether on the Accounts or as proceeds of Inventory or other Collateral or otherwise shall be the security of Lender and/or US Collateral Agent. (b) For purposes of calculating the amount of the Revolving Loans available to Borrower, such payments will be applied (conditional upon final collection) to the Obligations   - 22 - -------------------------------------------------------------------------------- on the Business Day of receipt by Lender of immediately available funds in a Payment Account provided such payments and notice thereof are received in accordance with Lender’s usual and customary practices as in effect from time to time and within sufficient time to credit Borrower’s loan account on such day, and if not, then on the next Business Day. For the purposes of calculating interest on the Obligations, such payments or other funds received will be applied (conditional upon final collection) to the Obligations on the date of receipt of immediately available funds by Lender in the applicable Payment Account provided such payments or other funds and notice thereof are received in accordance with Lender’s usual and customary practices as in effect from time to time and within sufficient time to credit Borrower’s loan account on such day, and if not, then on the next Business Day. If Lender receives funds in a Payment Account at any time at which no Obligations are outstanding or in excess of such outstanding Obligations, Lender shall transfer such funds to Borrower at such account as Borrower may direct; provided that Borrower shall, at Lender’s request, deposit such funds to an account maintained at the bank at which the Payment Accounts are maintained and, prior to such transfer, shall execute and deliver to Lender a cash collateral agreement in form and substance satisfactory to Lender providing to Lender and/or US Collateral Agent a first priority Lien over such account. (c) Borrower and all of its U.S., U.K. and Canadian affiliates and subsidiaries, and the shareholders, directors, employees and/or agents of Borrower and each such affiliate and subsidiary shall, acting as trustee for Lender, receive, as the security of Lender and/or US Collateral Agent, any monies, checks, notes, drafts or any other payment relating to and/or proceeds of Accounts or other Collateral which come into their possession or under their control and immediately upon receipt thereof, shall deposit or cause the same to be deposited in the Blocked Accounts, or remit the same or cause the same to be remitted, in kind, to Lender, but in no event shall any of the foregoing monies, checks, notes, drafts or any other such payment be commingled with Borrower’s other funds. Borrower agrees to reimburse Lender on demand for any amounts owed or paid to any bank at which a Blocked Account is established or any other bank or person involved in the transfer of funds to or from the Blocked Accounts arising out of Lender’s payments to, or indemnification of, such bank or person (other than to the extent that such amount arises directly from Lender’s or such other party’s negligence or willful misconduct). The obligation of Borrower to reimburse Lender for such amounts pursuant to this Section 5.3 shall survive the termination of this Agreement.   5.4 Payments All Obligations shall be payable to the Payment Accounts as provided in Section 5.3 or such other place as Lender may designate from time to time. Lender may apply payments received or collected from Borrower or for the account of Borrower (including the monetary proceeds of collections or of realization upon any Collateral) to such of the Obligations, whether or not then due, in such order and manner as Lender determines. Payments and collections received in any currency other than US Dollars or Canadian Dollars will be accepted and/or applied at the sole discretion of Lender. At Lender’s option, all principal, interest, fees, costs, expenses and other charges provided for in this Agreement or the other Financing Agreements may be charged directly to the loan account(s) of Borrower. Borrower shall make all payments to Lender on the Obligations free and clear of, and without deduction or withholding for or on account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,   - 23 - -------------------------------------------------------------------------------- withholding, restrictions or conditions of any kind. If after receipt of any payment of, or proceeds of Collateral applied to the payment of, any of the Obligations, Lender is required to surrender or return such payment or proceeds to any Person for any reason, then the Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Agreement shall continue in full force and effect as if such payment or proceeds had not been received by Lender. Borrower shall be liable to pay to Lender, and does hereby indemnify and hold Lender harmless for the amount of any payments or proceeds surrendered or returned. This Section 5.4 shall remain effective notwithstanding any contrary action which may be taken by Lender in reliance upon such payment or proceeds. This Section 5.4 shall survive the payment of the Obligations and the termination of this Agreement.   5.5 Authorization to Make Revolving Loans Lender is authorized to make the Revolving Loans and provide the Letter of Credit Accommodations based upon telephonic instructions or instructions sent by courier, telecopier or by e-mail received from anyone purporting to be an officer of Borrower or other authorized person or, at the discretion of Lender, if such Revolving Loans are necessary to satisfy any Obligations. All requests for Revolving Loans or Letter of Credit Accommodations hereunder shall specify the date on which the requested advance is to be made or Letter of Credit Accommodations established (which day shall be a Business Day) and the amount of the requested Revolving Loan. Requests received after 11:00 a.m. Chicago time on any day shall be deemed to have been made as of the opening of business on the immediately following Business Day. All Revolving Loans and Letter of Credit Accommodations under this Agreement shall be conclusively presumed to have been made to, and at the request of and for the benefit of, Borrower when deposited to the credit of Borrower or otherwise disbursed or established in accordance with the instructions of Borrower or in accordance with the terms and conditions of this Agreement.   5.6 Use of Proceeds All Revolving Loans made or Letter of Credit Accommodations provided by Lender to Borrower pursuant to the provisions hereof shall be used by Borrower only for general operating, working capital and other proper corporate purposes of Borrower not otherwise prohibited by the terms hereof. SECTION 6 COLLATERAL REPORTING AND COVENANTS   6.1 Collateral Reporting Borrower shall provide Lender with the following documents in a form satisfactory to Lender: (a) on a regular basis as required by Lender, a schedule of Accounts, sales made, credits issued and cash received; (b) on a monthly basis within twenty (20) days after each month end or more frequently as Lender may request, (i) perpetual inventory reports, (ii) inventory reports by category, including a separate itemized detailed breakdown of all Inventory that is in transit, (iii) agings of accounts payable and (iv) a Royalty Reserve Report, (c) upon Lender’s request, (i) copies of customer statements and credit memos, remittance advices and reports, and copies of deposit slips and bank statements, (ii) copies of shipping and   - 24 - -------------------------------------------------------------------------------- delivery documents, and (iii) copies of purchase orders, invoices and delivery documents for Inventory and Equipment acquired by Borrower and MCE; (d) agings of accounts receivable on a monthly basis within twenty (20) days after each month end or more frequently as Lender may request; (e) no later than thirty (30) days after the end of each fiscal year of Borrower, financial projections for the next fiscal year, prepared on a monthly basis; and (f) such other reports as to the Collateral as Lender or US Collateral Agent shall reasonably request from time to time. If any of Borrower’s records or reports of the Collateral are prepared or maintained by an accounting service, contractor, shipper or other agent, Borrower hereby irrevocably authorizes such service, contractor, shipper or agent to deliver such records, reports, and related documents to Lender and to follow Lender’s instructions with respect to further services at any time that an Event of Default exists.   6.2 Accounts Covenants (a) Borrower shall notify Lender promptly of: (i) any material delay in any of Borrower’s, MCE’s or MCC’s performance of any of its obligations to any account debtor or the assertion of any claims, offsets, defenses or counterclaims by any account debtor, or any disputes with account debtors, or any settlement, adjustment or compromise thereof, (ii) all material adverse information in Borrower’s knowledge relating to the financial condition of any account debtor and (iii) any event or circumstance which, to Borrower’s knowledge, would cause Lender to consider any then existing Accounts as no longer constituting Eligible Accounts. No credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor without Lender’s consent, except in the ordinary course of Borrower’s, MCE’s or MCC’s business in accordance with practices and policies previously disclosed in writing to Lender. So long as no Event of Default exists, Borrower, MCE or MCC shall settle, adjust or compromise any claim, offset, counterclaim or dispute with any account debtor. At any time that an Event of Default exists, Lender shall, at its option, have the exclusive right to settle, adjust or compromise any claim, offset, counterclaim or dispute with account debtors or grant any credits, discounts or allowances. (b) Without limiting the obligation of Borrower to deliver any other information to Lender, Borrower shall promptly report to Lender any return of Inventory by any one account debtor if the Inventory so returned in such case has a value in excess of $250,000. At any time that Inventory is returned, reclaimed or repossessed, the Account (or portion thereof) which arose from the sale of such returned, reclaimed or repossessed Inventory shall not be deemed an Eligible Account. In the event any account debtor returns Inventory when an Event of Default exists, Borrower shall, upon Lender’s request, (i) hold the returned Inventory in trust for Lender, (ii) segregate all returned Inventory from all of its other property, (iii) dispose of the returned Inventory solely according to Lender’s instructions, and (iv) not issue any credits, discounts or allowances with respect thereto without Lender’s prior written consent. (c) With respect to each Account: (i) the amounts shown on any invoice delivered to Lender or schedule thereof delivered to Lender shall be true and complete in all material respects, (ii) no payments shall be made thereon except payments immediately delivered to Lender pursuant to the terms of this Agreement, (iii) no credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor except as reported to Lender in accordance with this Agreement and except for credits, rebates, price protection   - 25 - -------------------------------------------------------------------------------- programs, early payment incentives, discounts, allowances or extensions made or given in the ordinary course of Borrower’s, MCE’s or MCC’s business in accordance with practices and policies previously disclosed to Lender, (iv) there shall be no setoffs, deductions, contras, defenses, counterclaims or disputes existing or asserted with respect thereto except as reported to Lender in accordance with the terms of this Agreement, (v) none of the transactions giving rise thereto will violate any applicable federal, state or provincial laws or regulations applicable to Borrower or any Obligor, all documentation relating thereto will be legally sufficient under such laws and regulations and all such documentation will be legally enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors’ rights and the discretion of the court as to the granting of equitable remedies. (d) Lender shall have the right at any time or times, in Lender’s name or in the name of a nominee of Lender, to verify the validity, amount or any other matter relating to any Account or other Collateral, by mail, telephone, facsimile transmission or otherwise. (e) Borrower shall deliver or cause to be delivered to US Collateral Agent, with appropriate endorsement and assignment, with full recourse to Borrower, all chattel paper and instruments which Borrower now owns or may at any time acquire immediately upon Borrower’s receipt thereof, except as US Collateral Agent may otherwise agree. (f) US Collateral Agent may, at any time or times that an Event of Default exists, (i) notify any or all account debtors that the Accounts have been assigned to US Collateral Agent and that US Collateral Agent has a Lien therein and Lender may direct any or all accounts debtors to make payment of Accounts directly to US Collateral Agent, (ii) extend the time of payment of, compromise, settle or adjust for cash, credit, return of merchandise or otherwise, and upon any terms or conditions, any and all Accounts or other obligations included in the Collateral and thereby discharge or release the account debtor or any other party or parties in any way liable for payment thereof without affecting any of the Obligations, (iii) demand, collect or enforce payment of any Accounts or such other obligations, but without any duty to do so, and US Collateral Agent shall not be liable for its failure to collect or enforce the payment thereof nor for the negligence of its agents or attorneys with respect thereto and (iv) take whatever other action US Collateral Agent may deem necessary or desirable for the protection of its interests. At any time that an Event of Default exists, at US Collateral Agent’s request, all invoices and statements sent to any account debtor shall state that the Accounts and such other obligations have been assigned to US Collateral Agent and are payable directly and only to US Collateral Agent and Borrower shall deliver to Lender such originals of documents evidencing the sale and delivery of goods or the performance of services giving rise to any Accounts as US Collateral Agent may require.   6.3 Inventory Covenants With respect to the Inventory: (a) Borrower shall at all times maintain inventory records satisfactory to Lender, keeping correct and accurate records itemizing and describing the kind, type, quality and quantity of Inventory, Borrower’s cost therefor and daily withdrawals therefrom and additions thereto; (b) Borrower shall conduct a physical count of the Inventory at least once each year, but at any time or times as Lender may request while an Event of Default exists, and promptly following such physical inventory shall supply Lender with a report in the   - 26 - -------------------------------------------------------------------------------- form and with such specificity as may be satisfactory to Lender concerning such physical count; (c) Borrower shall not, and shall cause MCE not to, remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Lender, except for sales of Inventory in the ordinary course of Borrower’s or MCE’s business and except to move Inventory directly from one location set forth or permitted herein to another such location; (d) Borrower shall, at its expense, at Lender’s request but, no more than once in any three (3) month period if an Event of Default does not exist, and at any time or times as Lender may request after and while Event of Default exists, deliver or cause to be delivered to Lender written reports or appraisals as to the Inventory in form, scope and methodology acceptable to Lender and by an appraiser acceptable to Lender, addressed to Lender or upon which Lender is expressly permitted to rely; (e) Borrower shall, and shall cause MCE to, produce, use, store and maintain the Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) Borrower assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory; (g) Borrower shall not, and shall cause MCE not to, sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate Borrower or MCE to repurchase such Inventory, except in the ordinary course of business or unless such Inventory is not Eligible Inventory; (h) Borrower shall, and shall cause MCE to, keep the Inventory in good and marketable condition; and (i) Borrower shall not, and shall cause MCE not to, without prior written notice to Lender, acquire or accept any Inventory on consignment or approval.   6.4 Equipment Covenants With respect to the Equipment: (a) upon US Collateral Agent’s request, Borrower shall, at its expense, at any time or times as US Collateral Agent may request while an Event of Default exists, deliver or cause to be delivered to US Collateral Agent written reports or appraisals as to the Equipment in form, scope and methodology reasonably acceptable to Lender and by an appraiser acceptable to US Collateral Agent; (b) Borrower shall keep the Equipment in good order, repair, running and marketable condition (ordinary wear and tear excepted); (c) Borrower shall use the Equipment with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with all applicable laws; (d) the Equipment is and shall be used in Borrower’s business and not for personal, family, household or farming use; (e) Borrower shall not remove any Equipment from the locations set forth or permitted herein, except to the extent necessary to have any Equipment repaired or maintained in the ordinary course of the business of Borrower or to move Equipment directly from one location set forth or permitted herein to another such location and except for the movement of motor vehicles used by or for the benefit of Borrower in the ordinary course of business; (f) the Equipment is now and shall remain personal property and Borrower shall not permit any of the Equipment to be or become a part of or affixed to real property; and (g) Borrower assumes all responsibility and liability arising from the use of the Equipment.   6.5 Power of Attorney Borrower hereby irrevocably designates and appoints US Collateral Agent (and all persons designated by Lender) as Borrower’s true and lawful attorney-in-fact, and authorizes   - 27 - -------------------------------------------------------------------------------- US Collateral Agent, in Borrower’s or US Collateral Agent’s name, to: (a) at any time while an Event of Default exits (i) demand payment on Accounts or other proceeds of Inventory or other Collateral, (ii) enforce payment of Accounts by legal proceedings or otherwise, (iii) exercise all of Borrower’s rights and remedies to collect any Account or other Collateral, (iv) sell or assign any Account upon such terms, for such amount and at such time or times as Lender deems advisable, (v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and release any Account, (vii) prepare, file and sign Borrower’s name on any proof of claim in bankruptcy or other similar document against an account debtor, (viii) notify the post office authorities to change the address for delivery of Borrower’s mail to an address designated by US Collateral Agent, and open and dispose of all mail addressed to Borrower, and (ix) do all acts and things which are necessary, in US Collateral Agent’s determination, to fulfill Borrower’s obligations under this Agreement and the other Financing Agreements and (b) at any time to (i) take control in any manner of any item of payment or proceeds thereof, (ii) have access to any lockbox or postal box into which Borrower’s mail is deposited, (iii) endorse Borrower’s name upon any items of payment or proceeds thereof and deposit the same in US Collateral Agent’s account for application to the Obligations, (iv) endorse Borrower’s name upon any chattel paper, document, instrument, invoice, or similar document or agreement relating to any Account or any goods pertaining thereto or any other Collateral, (v) sign Borrower’s name on any verification of Accounts and notices thereof to account debtors and (vi) execute in Borrower’s name and file any UCC, PPSA or other financing statements or amendments thereto. Borrower hereby releases US Collateral Agent and its officers, employees and designees from any liabilities arising from any act or acts under this power of attorney and in furtherance thereof, whether of omission or commission, except as a result of US Collateral Agent’s own gross negligence or willful misconduct as determined pursuant to a final non-appealable order of a court of competent jurisdiction.   6.6 Right to Cure US Collateral Agent may, at its option, (a) cure any default by Borrower under any agreement with a third party or pay or bond on appeal any judgment entered against Borrower, (b) discharge taxes or Liens at any time levied on or existing with respect to the Collateral and (c) pay any amount, incur any expense or perform any act which, in US Collateral Agent’s judgment, is necessary or appropriate to preserve, protect, insure or maintain the Collateral and the rights of US Collateral Agent and/or Lender with respect thereto. US Collateral Agent may add any amounts so expended to the Obligations and charge Borrower’s account therefor, such amounts to be repayable by Borrower on demand. US Collateral Agent shall be under no obligation to effect such cure, payment or bonding and shall not, by doing so, be deemed to have assumed any obligation or liability of Borrower. Any payment made or other action taken by US Collateral Agent under this Section 6.6 shall be without prejudice to any right to assert an Event of Default hereunder and to proceed accordingly.   6.7 Access to Premises From time to time as requested by US Collateral Agent, at the cost and expense of Borrower, (a) US Collateral Agent or its designee shall have complete access to all of Borrower’s premises during normal business hours and after reasonable notice to Borrower, or at any time and without notice to Borrower if an Event of Default exists, for the purposes of inspecting,   - 28 - -------------------------------------------------------------------------------- verifying and auditing the Collateral and all of Borrower’s books and records, including the Records, and (b) Borrower shall promptly furnish to US Collateral Agent such copies of such books and records or extracts therefrom as US Collateral Agent may request, and (c) US Collateral Agent or its designee may use during normal business hours such of Borrower’s personnel, equipment, supplies and premises as may be necessary for the foregoing and if an Event of Default exists for the collection of Accounts and realization of other Collateral. SECTION 7 REPRESENTATIONS AND WARRANTIES Borrower hereby represents and warrants to Lender the following (which shall survive the execution and delivery of this Agreement), the truth and accuracy of which are a continuing condition of the making of Revolving Loans and providing Letter of Credit Accommodations by Lender to Borrower:   7.1 Corporate Existence, Power and Authority; Subsidiaries Borrower and each Obligor has been duly incorporated or organized and is validly existing under the laws of its jurisdiction of incorporation or organization, as the case may be, and is duly qualified or registered as a foreign or extra-provincial corporation in all provinces, states or other jurisdictions where the nature and extent of the business transacted by it or the ownership of assets makes such qualification necessary, except for those jurisdictions in which the failure to so qualify or register would not have a Material Adverse Effect. The execution, delivery and performance of this Agreement, the other Financing Agreements and the transactions contemplated hereunder and thereunder are all within Borrower’s and each Obligor’s corporate powers, have been duly authorized and are not in contravention of law or the terms of Borrower’s or any Obligor’s certificate of incorporation, by-laws, or other organizational documentation, or any indenture, agreement or undertaking to which Borrower or any Obligor is a party or by which Borrower or any Obligor or their respective property are bound except to the extent that certain Collateral may not be assignable by law. This Agreement and the other Financing Agreements constitute legal, valid and binding obligations of Borrower enforceable in accordance with their respective terms, except as the same is limited by bankruptcy, insolvency or similar laws affecting creditors’ rights generally, and the discretion of the court as to the granting of equitable remedies. Borrower does not have any subsidiaries except as set forth on the Information Certificates.   7.2 Financial Statements; No Material Adverse Change All financial statements relating to Borrower or any Obligor which have been or may hereafter be delivered by or on behalf of Borrower or any Obligor to Lender have been or will be prepared in accordance with GAAP and fairly present in all material respects the financial condition and the results of operations of Borrower or such Obligor as at the dates and for the periods set forth therein. Except as disclosed in any interim financial statements furnished by or on behalf of Borrower or any Obligor to Lender prior to the date of this Agreement, there has been no Material Adverse Change of Borrower or any Obligor, since the date of the most recent audited financial statements furnished by or on behalf of Borrower or any Obligor to Lender prior to the date of this Agreement.   - 29 - -------------------------------------------------------------------------------- 7.3 Chief Executive Office; Collateral Locations and License Agreements The chief executive office of Borrower and Borrower’s Records concerning Accounts are located only at the address set forth below and its only other places of business and the only other locations of Collateral, if any, are the addresses set forth in the Information Certificates, subject to the right of Borrower to establish new locations in accordance with Section 8.2 below. The Information Certificates correctly identify the chief executive office of each Obligor and all other places of business and other locations, if any, at which any Obligor maintains any Collateral. The Information Certificates also correctly identify any of such locations which are not owned by Borrower or any Obligor and sets forth the owners and/or operators thereof and to the best of Borrower’s knowledge, the holders of any mortgages on such locations. Schedule 7.3 hereof lists each license agreement to which Borrower and/or MCE is a party.   7.4 Priority of Liens; Title to Properties The Liens granted to US Collateral Agent, Lender and/or Canadian Collateral Agent under this Agreement and the other Financing Agreements constitute valid and perfected first priority Liens in and upon the Collateral subject only to the Liens indicated on Schedule 7.4 hereto (except to the extent that Lender requires the discharge thereof prior to the advance of the initial Revolving Loans hereunder) and the other Liens permitted under Section 8.8 hereof. Borrower and each Obligor has good and marketable title to all of its properties and assets subject to no Liens of any kind, except those granted to US Collateral Agent, Lender and/or Canadian Collateral Agent and such others as are specifically listed on Schedule 7.4 hereof (except to the extent that Lender requires the discharge thereof prior to the advance of the initial Revolving Loans hereunder) or permitted under Section 8.8 hereto.   7.5 Tax Returns Borrower and each Obligor has filed, or caused to be filed, in a timely manner all tax returns, reports and declarations which are required to be filed by it (without requests for extension except as previously disclosed in writing to Lender). All information in such tax returns, reports and declarations is complete and accurate in all material respects. Borrower and each Obligor has paid or caused to be paid all taxes due and payable or claimed due and payable in any assessment received by it, except taxes the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to Borrower and each Obligor and with respect to which adequate reserves have been set aside on its books. Adequate provision has been made for the payment of all accrued and unpaid federal, state, county, local, foreign and other taxes whether or not yet due and payable and whether or not disputed.   7.6 Litigation Except as set forth on the Information Certificates, there is no present investigation by any governmental agency pending, or to the best of Borrower’s knowledge threatened, against or affecting Borrower or any Obligor, their assets or business and there is no action, suit, proceeding or claim by any Person pending, or to the best of Borrower’s knowledge threatened, against Borrower or any Obligor or their assets or goodwill, or against or affecting   - 30 - -------------------------------------------------------------------------------- any transactions contemplated by this Agreement, which if adversely determined against Borrower or any such Obligor would result in any Material Adverse Change in, or would have a Material Adverse Effect on, Borrower or any Obligor.   7.7 Compliance with Other Agreements and Applicable Laws Except as disclosed in Schedule 7.7 hereto, neither Borrower nor any Obligor is in default in any material respect under, or in violation in any material respect of any of the terms of, any agreement, contract, instrument, lease or other commitment to which it is a party or by which it or any of its assets are bound and Borrower and each Obligor is in compliance in all material respects with all applicable provisions of laws, rules, regulations, licenses, permits, approvals and orders of any foreign, federal, state, provincial or local governmental authority.   7.8 Bank Accounts All of the deposit accounts, investment accounts or other accounts in the name of or used by Borrower or any Obligor maintained at any bank or other financial institution are set forth on Schedule 7.8 hereto, subject to the right of Borrower or any Obligor to establish new accounts in accordance with Section 8.15 hereof.   7.9 Accuracy and Completeness of Information All information furnished in writing by or on behalf of Borrower or any Obligor to Lender or US Collateral Agent in connection with this Agreement or any of the other Financing Agreements or any transaction contemplated hereby or thereby, including all information on the Information Certificates is true and correct in all material respects on the date as of which such information is dated or certified and does not omit any material fact necessary in order to make such information not misleading. Since March 31, 2006, no event or circumstance has occurred which has had or could reasonably be expected to have a Material Adverse Effect on Borrower or any Obligor which has not been fully and accurately disclosed to Lender in writing.   7.10 Employee Benefits (a) Borrower has not engaged in any transaction in connection with which Borrower or any of its ERISA Affiliates could be subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code, including any accumulated funding deficiency described in Section 7.10(c) hereof and any deficiency with respect to vested accrued benefits described in Section 7.10(d) hereof. (b) No liability to the Pension Benefit Guaranty Corporation has been or is expected by Borrower to be incurred with respect to any employee benefit plan of Borrower or any of its ERISA Affiliates. There has been no reportable event (within the meaning of Section 4043(b) of ERISA) or any other event or condition with respect to any employee pension benefit plan of Borrower or any of its ERISA Affiliates which presents a risk of termination of any such plan by the Pension Benefit Guaranty Corporation.   - 31 - -------------------------------------------------------------------------------- (c) Full payment has been made of all amounts which Borrower or any of its ERISA Affiliates is required under Section 302 of ERISA and Section 412 of the Code to have paid under the terms of each employee benefit plan as contributions to such plan as of the last day of the most recent fiscal year of such plan ended prior to the date hereof, and no accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, exists with respect to any employee benefit plan, including any penalty or tax described in Section 7.10(a) hereof and any deficiency with respect to vested accrued benefits described in Section 7.10(d) hereof. (d) The current value of all vested accrued benefits under all employee benefit plans maintained by Borrower that are subject to Title IV of ERISA does not exceed the current value of the assets of such plans allocable to such vested accrued benefits, including any penalty or tax described in Section 7.10(a) hereof and any accumulated funding deficiency described in Section 7.10(c) hereof. The terms “current value” and “accrued benefit” have the meanings specified in ERISA. (e) Neither Borrower nor any of its ERISA Affiliates is or has ever been obligated to contribute to any “multiemployer plan” (as such term is defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.   7.11 Environmental Compliance (a) Neither Borrower nor any Obligor has generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on or off its premises (whether or not owned by it) in any manner which at any time violates in any material respect any applicable Environmental Law or any license, permit, certificate, approval or similar authorization thereunder and the operations of Borrower and each Obligor comply in all material respects with all Environmental Laws and all licenses, permits, certificates, approvals and similar authorizations thereunder. (b) There has been no investigation, proceeding, complaint, order, directive, claim, citation or notice by any governmental authority or any other person nor is any pending, or to the best of Borrower’s knowledge threatened, with respect to any non-compliance with or violation of the requirements of any Environmental Law by Borrower or any Obligor or the release, spill or discharge, threatened or actual, of any Hazardous Material or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter, which affects Borrower or any Obligor or their business, operations or assets or any properties at which Borrower or any Obligor has transported, stored or disposed of any Hazardous Materials. (c) Neither Borrower nor any Obligor has any material liability (contingent or otherwise) in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials. (d) Borrower and each Obligor has all licenses, permits, certificates, approvals or similar authorizations required to be obtained or filed in connection with the operations of   - 32 - -------------------------------------------------------------------------------- Borrower and each Obligor under any Environmental Law and all of such licenses, permits, certificates, approvals or similar authorizations are valid and in full force and effect.   7.12 Survival of Warranties; Cumulative All representations and warranties contained in this Agreement or any of the other Financing Agreements shall survive the execution and delivery of this Agreement and shall be deemed to have been made again to Lender on the date of each additional borrowing or other credit accommodation hereunder, except with respect to, and to the extent that, such representations and warranties are expressly made as of a particular date or there are changes with respect to the matters referenced in such representations and warranties after the date made that do not and will not otherwise cause a Default or Event of Default hereunder and such representations and warranties shall be conclusively presumed to have been relied on by Lender regardless of any investigation made or information possessed by Lender. The representations and warranties set forth herein shall be cumulative and in addition to any other representations or warranties which Borrower or any Obligor shall now or hereafter give, or cause to be given, to Lender. SECTION 8 AFFIRMATIVE AND NEGATIVE COVENANTS   8.1 Maintenance of Existence Borrower shall, and shall cause each Obligor to, at all times preserve, renew and keep in full, force and effect its corporate existence and rights and franchises with respect thereto and maintain in full force and effect all permits, licenses, trademarks, tradenames, approvals, authorizations, leases and contracts necessary to carry on the business as presently or proposed to be conducted. Borrower shall give Lender thirty (30) days prior written notice of any proposed change in its or any Obligor’s corporate name, which notice shall set forth the new name and Borrower shall deliver to Lender a certified copy of the Articles of Amendment (or other similar document appropriate for the particular jurisdiction) of Borrower or such Obligor providing for the name change immediately following its filing.   8.2 New Collateral Locations Borrower or any Obligor may open any new location within Canada and continental United States of America provided Borrower (a) gives US Collateral Agent thirty (30) days prior written notice of the intended opening of any such new location and (b) Borrower or such Obligor, as applicable, executes and delivers, or causes to be executed and delivered, to US Collateral Agent such agreements, documents, and instruments as US Collateral Agent may deem necessary or desirable to protect its or Lender’s interests in the Collateral at such location, including UCC, PPSA and other financing statements and such other evidence as US Collateral Agent may require for the perfection of US Collateral Agent’s or Lender’s first priority Liens where required by US Collateral Agent.   - 33 - -------------------------------------------------------------------------------- 8.3 Compliance with Laws, Regulations, Etc. (a) Borrower shall, and shall cause each Obligor to, at all times, comply in all material respects with all laws, rules, regulations, licenses, permits, approvals and orders applicable to it and duly observe all requirements of any federal, state, provincial or local governmental authority, including all statutes, rules, regulations, orders, permits and stipulations relating to environmental pollution and employee health and safety, including all of the Environmental Laws except for any matter that Borrower or an Obligor is contesting in good faith by appropriate proceedings diligently pursued and which is not reasonably expected to have a Material Adverse Effect on Borrower or any Obligor. (b) Borrower shall, and shall cause each Obligor to, establish and maintain, at its expense, a system to assure and monitor its continued compliance with all Environmental Laws in all of its operations, which system shall include annual reviews of such compliance by employees or agents of Borrower or such Obligor, as applicable, who are familiar with the requirements of the Environmental Laws. Copies of all environmental surveys, audits, assessments, feasibility studies and results of remedial investigations shall be promptly furnished, or caused to be furnished, by Borrower to Lender. Borrower shall, and shall cause each Obligor to, take prompt and appropriate action to respond to any non-compliance with any of the Environmental Laws and shall regularly report to Lender on such response. (c) Borrower shall give both oral and written notice to Lender immediately upon Borrower’s receipt of any notice of, or Borrower’s otherwise obtaining knowledge of, (i) the occurrence of any event involving the release, spill or discharge, threatened or actual, of any Hazardous Material or (ii) any investigation, proceeding, complaint order, directive, claims, citation or notice with respect to: (A) any non-compliance with or violation of any Environmental Law by Borrower or any Obligor or (B) the release, spill or discharge, threatened or actual, of any Hazardous Material or (C) the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials that does not comply with Environmental Laws, or (D) the violation of any other environmental, health or safety matter, which may have a Material Adverse Effect on Borrower or any Obligor or their business, operations or assets or any properties at which Borrower or any Obligor transported, stored or disposed of any Hazardous Materials. (d) Without limiting the generality of the foregoing, whenever Lender determines that there is non-compliance, or any condition which requires any action by or on behalf of Borrower or any Obligor in order to avoid any material non-compliance, with any Environmental Law, Borrower shall, at Lender’s request and Borrower’s expense: (i) cause an independent environmental engineer acceptable to Lender to conduct such tests of the site where Borrower’s or Obligor’s non-compliance or alleged non-compliance with such Environmental Laws has occurred and prepare and deliver to Lender a report as to such non-compliance setting forth the results of such tests, a proposed plan for responding to any environmental problems described therein, and an estimate of the costs thereof and (ii) provide to Lender a supplemental report of such engineer whenever the scope of such non-compliance, or Borrower’s or Obligor’s response thereto or the estimated costs thereof, shall change in any material respect.   - 34 - -------------------------------------------------------------------------------- (e) Borrower shall indemnify and hold harmless Lender, US Collateral Agent and their respective directors, officers, employees, agents, invitees, representatives, successors and assigns (collectively, “Indemnified Persons”), from and against any and all losses, claims, damages, liabilities, costs, and expenses (including legal fees and expenses) incurred by any Indemnified Person, directly or indirectly arising out of or attributable to the use, generation, manufacture, reproduction, storage, release, threatened release, spill, discharge, disposal or presence of a Hazardous Material, including the costs of any required or necessary repair, cleanup or other remedial work with respect to any property of Borrower or any Obligor and the preparation and implementation of any closure, remedial or other required plans; provided that such indemnity shall not apply to the extent that any such cost incurred by an Indemnified Person arises from the willful misconduct or gross negligence of any Indemnified Person. (f) All covenants and indemnifications in this Section 8.3 shall survive the payment of the Obligations and the termination of this Agreement.   8.4 Payment of Taxes and Claims Borrower shall, and shall cause each Obligor to, duly pay and discharge all taxes, assessments, contributions and governmental charges upon or against it or its properties or assets, except for taxes, assessments, contributions or governmental charges the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to Borrower or such Obligor and with respect to which adequate reserves have been set aside on its books. Borrower shall be liable for any tax or penalties imposed on Lender as a result of the financing arrangements provided for herein and Borrower agrees to indemnify and hold Lender harmless with respect to the foregoing, and to repay to Lender on demand the amount thereof, and until paid by Borrower such amount shall be added and deemed part of the Revolving Loans; provided, that, nothing contained herein shall be construed to require Borrower to pay any income or franchise taxes attributable to the income of Lender from any amounts charged or paid hereunder to Lender. The foregoing indemnity shall survive the payment of the Obligations and the termination of this Agreement.   8.5 Insurance Borrower shall, at all times, and shall cause each Obligor to, maintain with financially sound and reputable insurers insurance with respect to the Collateral against loss or damage and all other insurance of the kinds and in the amounts customarily insured against or carried by corporations of established reputation engaged in the same or similar businesses and similarly situated. Said policies of insurance shall be satisfactory to Lender as to form, amount and insurer. Borrower shall furnish certificates, policies or endorsements to Lender as Lender shall require as proof of such insurance, and, if Borrower fails to do so, Lender is authorized, but not required, to obtain such insurance at the expense of Borrower. All policies shall provide for at least thirty (30) days prior written notice to Lender of any cancellation or reduction of coverage and that Lender may act as attorney for Borrower in obtaining, and at any time an Event of Default exists or has occurred and is continuing, adjusting, settling, amending and canceling such insurance. Borrower shall cause Lender to be named as a loss payee and an additional insured (but without any liability for any premiums) under such insurance policies and Borrower shall obtain non-contributory lender’s loss payable endorsements to all insurance   - 35 - -------------------------------------------------------------------------------- policies in form and substance satisfactory to Lender. Such lender’s loss payable endorsements shall specify that the proceeds of such insurance shall be payable to Lender as its interests may appear and further specify that Lender shall be paid regardless of any act or omission by Borrower or any of its affiliates. At its option, Lender may apply any insurance proceeds received by Lender at any time to the cost of repairs or replacement of Collateral and/or to payment of the Obligations, whether or not then due, in any order and in such manner as Lender may determine or hold such proceeds as cash collateral for the Obligations.   8.6 Financial Statements and Other Information (a) Borrower shall keep proper books and records in which true and complete entries shall be made of all dealings or transactions of or in relation to the Collateral and the business of Borrower and its subsidiaries (if any) in accordance with GAAP and Borrower shall furnish or cause to be furnished to Lender: (i) within forty-five (45) days after the end of each fiscal month, monthly unaudited financial statements of Borrower, and unaudited consolidating financial statements of MCII (including in each case balance sheets, statements of income and loss, statements of cash flow and statements of shareholders’ equity), all in reasonable detail, fairly presenting in all material respects the financial position and the results of the operations of MCII, Borrower and their respective subsidiaries, if any, as of the end of and through such fiscal month and (ii) within one hundred and forty (140) days after the end of each fiscal year of MCII, audited consolidated financial statements of MCII, Borrower and their respective subsidiaries, if any (including in each case balance sheets, statements of income and loss, statements of changes in financial position and statements of shareholders’ equity), and the accompanying notes thereto, all in reasonable detail, fairly presenting in all material respects the financial position and the results of the operations of the applicable Person and its subsidiaries as of the end of and for such fiscal year, together with the unqualified opinion of independent chartered accountants, which accountants shall be an independent accounting firm selected by MCII and reasonably acceptable to Lender, that such financial statements have been prepared in accordance with GAAP, and present fairly in all material respects the results of operations and financial condition of the applicable Person and its subsidiaries as of the end of and for the fiscal year of MCII then ended; and (iii) no later than thirty (30) days after the end of each fiscal year of Borrower, annual financial projections for the next fiscal year of Borrower, which shall be approved by Lender (which approval shall not be unreasonably withheld or delayed) and shall include a projected balance sheet, income statement and statement of cash flow, prepared on a monthly basis for such fiscal year, proposed budgets for operating and capital expenditures, acquisitions and related financing costs for Borrower, details of all management salaries and bonuses, projections with respect to projected total consolidated EBITDA of MCII for such fiscal year (and, if so approved by Lender, such projections shall form the basis of a new Schedule 8.13 for purposes of the EBITDA covenant in Section 8.13) and such other information as may be requested by Lender. (b) Borrower shall promptly notify Lender in writing of the details of (i) any material loss, damage, investigation, action, suit, proceeding or claim relating to the Collateral or any other property which is security for the Obligations or any loss, damage, investigation, action, suit, proceeding or claim which would result in any Material Adverse Change in Borrower or any Obligor and (ii) the occurrence of any Event of Default or event which, with the passage of time or giving of notice or both, would constitute an Event of Default.   - 36 - -------------------------------------------------------------------------------- (c) Borrower shall promptly after the sending or filing thereof furnish or cause to be furnished to Lender copies of all reports which Borrower or any Obligor sends to its shareholders generally and copies of all reports and registration statements which Borrower or any Obligor files with any securities commission or securities exchange. (d) Borrower shall furnish or cause to be furnished to Lender such budgets, forecasts, projections and other information respecting the Collateral and the business of Borrower, as Lender may, from time to time, reasonably request and Lender is hereby authorized to deliver a copy of any financial statement or any other information relating to the business of Borrower to any court or other government agency as required by law or to any participant or assignee or prospective participant or assignee, provided that each such participant or assignee executes a confidentiality agreement acceptable to Lender which confidentiality agreement shall in any event provide that such participant or assignee shall maintain the confidential nature of such information in the same manner as such information is required to be maintained by Lender. Borrower hereby irrevocably authorizes and directs all accountants or auditors to deliver to Lender, at Borrower’s expense, copies of the financial statements of Borrower and any reports or management letters prepared by such accountants or auditors on behalf of Borrower and to disclose to Lender such information as they may have regarding the business of Borrower, subject to any applicable confidentiality restrictions in favor of third parties or any legal privileges that have not been waived and which are not within the control of Borrower to waive. Any documents, schedules, invoices or other papers delivered to Lender may be destroyed or otherwise disposed of by Lender one (1) year after the same are delivered to Lender, except as otherwise designated by Borrower to Lender in writing. (e) Borrower shall within five (5) days after the end of each month provide a certificate of the chief financial officer of Borrower, in form and content satisfactory to Lender, certifying that Borrower has paid in full (i) all rent and other amounts due and payable with respect to any premises leased or occupied by Borrower or any Obligor during such month; and (ii) all payments and other amounts due and payable with respect to any employee benefit plan or pursuant to any material contract during such month. (f) Notwithstanding the foregoing, or any other provision in any Financing Agreement, Borrower and Obligors shall not be required to disclose any information reports or other documents or material to the extent that such disclosure would breach any applicable laws and the ability to avoid such breach is not within the control of Borrower or any Obligor. (g) Borrower shall, within thirty (30) days after the end of each month, provide a compliance certificate, in substantially the form attached hereto as Schedule 8.6(g), to Lender with respect to compliance by Borrower with the financial covenants set forth in Section 8.13 and 8.20 and such other matters relating to Borrower as Lender may from time to time request.   8.7 Sale of Assets, Consolidation, Merger, Amalgamation, Dissolution, Etc. Borrower shall not and shall ensure that each Obligor does not, directly or indirectly, without the prior written consent of Lender, (a) merge or amalgamate with any other Person or permit any other Person to merge or amalgamate with it, or (b) sell, assign, lease, transfer, abandon or otherwise dispose of any shares or indebtedness to any other Person or any   - 37 - -------------------------------------------------------------------------------- of its assets to any other Person (except for (i) sales of Inventory in the ordinary course of business and (ii) the disposition of worn-out or obsolete Equipment or Equipment no longer used in the business of Borrower so long as (A) if an Event of Default exists, any proceeds are paid to Lender and (B) such sales do not involve Equipment having an aggregate fair market value in excess of $250,000 for all such Equipment disposed of in any fiscal year of Borrower), or (c) form or acquire any subsidiaries, or (d) wind up, liquidate or dissolve or (e) agree to do any of the foregoing. Notwithstanding the foregoing, nothing in this Agreement or in any of the Financing Agreements shall prohibit MCII from selling or issuing its securities, and unless an Event of Default has occurred and is continuing, none of the proceeds resulting from any such sale or issuance of securities, whether in the form of cash or otherwise, shall constitute security for any of the Obligations or any obligation of any Obligor under any Financing Agreement.   8.8 Encumbrances Borrower shall not, and shall ensure that each Obligor does not, create, incur, assume or suffer to exist any Lien of any nature whatsoever on any of its assets or properties, including the Collateral, except (a) Liens of Canadian Collateral Agent, Lender and/or US Collateral Agent; (b) Liens securing the payment of taxes, either not yet overdue or the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to Borrower or any Obligor, as applicable, and with respect to which adequate reserves have been set aside on its books; (c) non-consensual statutory Liens (other than Liens securing the payment of taxes) arising in the ordinary course of Borrower’s or any Obligor’s business, as applicable, to the extent: (i) such Liens secure indebtedness which is not overdue or (ii) such Liens secure indebtedness relating to claims or liabilities which are fully insured and being defended at the sole cost and expense and at the sole risk of the insurer or being contested in good faith by appropriate proceedings diligently pursued and available to Borrower or such Obligor, as applicable, in each case prior to the commencement of foreclosure or other similar proceedings and with respect to which adequate reserves have been set aside on its books; (d) zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of real property which do not interfere in any material respect with the use of such real property or ordinary conduct of the business of Borrower or such Obligor, as applicable, as presently conducted thereon or materially impair the value of the real property which may be subject thereto; (e) purchase money security interests in Equipment (including capital leases) and purchase money mortgages on real estate not to exceed, individually, $250,000 and, in the aggregate, $1,000,000 at anytime outstanding for Borrower and Obligors so long as such security interests and mortgages do not apply to any property of Borrower or any Obligor other than the Equipment or real estate so acquired, and the indebtedness secured thereby does not exceed the cost of the Equipment or real estate so acquired, as the case may be; (f) the Liens set forth on Schedule 7.4 hereto (except to the extent that Lender requires the discharge thereof prior to the advance of the initial Revolving Loans pursuant to this Agreement); and (g) Liens to secure Permitted Inter-Company Debt.   8.9 Indebtedness Borrower shall not, and shall ensure that each Obligor does not, incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any obligations or indebtedness, except (a) the Obligations; (b) trade obligations and normal accruals in the   - 38 - -------------------------------------------------------------------------------- ordinary course of business not past due more than sixty (60) days, or with respect to which Borrower or an Obligor, as applicable, is contesting in good faith the amount or validity thereof by appropriate proceedings diligently pursued and available to Borrower or such Obligor, as applicable, and with respect to which adequate reserves have been set aside on its books; (c) purchase money indebtedness (including capital leases) to the extent not incurred or secured by Liens (including capital leases) in violation of any other provision of this Agreement; (d) the indebtedness set forth on Schedule 8.9 hereto; and (e) Permitted Inter-Company Debt; provided that, (i) Borrower or Obligor, as applicable, may only make regularly scheduled payments of principal and interest in respect of such indebtedness in accordance with the terms of the agreement or instrument evidencing or giving rise to such indebtedness as in effect on the date of this Agreement, subject to any subordination agreement among Lender, Borrower and the holder of any such indebtedness; (ii) Borrower or Obligor, as applicable, shall not directly or indirectly, (A) amend, modify, alter or change the terms of such indebtedness or any agreement, document or instrument related thereto as in effect on the date hereof, or (B) redeem, retire, defease, purchase or otherwise acquire such indebtedness, or set aside or otherwise deposit or invest any sums for such purpose, and (iii) Borrower shall furnish to Lender all notices or demands in connection with such indebtedness received by or on behalf of Borrower or any Obligor, as applicable, promptly after the receipt thereof, or sent by or on behalf of Borrower or any Obligor, as applicable, concurrently with the sending thereof, as the case may be.   8.10 Loans, Investments, Guarantees, Etc. Borrower shall not, and shall ensure that each Obligor does not, directly or indirectly, make any loans or advance money or property to any person, or invest in (by capital contribution, dividend or otherwise) or purchase or repurchase the shares or indebtedness or all or a substantial part of the assets or property of any person, or guarantee, assume, endorse, or otherwise become responsible for (directly or indirectly) the indebtedness, performance, obligations or dividends of any Person or agree to do any of the foregoing, except (a) endorsement of instruments for collection or deposit in the ordinary course of business; and (b) investments in: (i) short-term direct obligations of the Canadian Government or the United States Government, (ii) negotiable certificates of deposit issued by any bank satisfactory to Lender, payable to the order of Borrower or to bearer and delivered to Lender, and (iii) commercial paper rated Al or P1; provided, that, as to any of the foregoing, unless waived in writing by Lender, Borrower shall take such actions as are deemed necessary by US Collateral Agent to perfect the Lien of US Collateral Agent and/or Lender in such investments; and (c) Acquisitions; and (d) travel advances, employee relocation loans and other employee loans and advances in the ordinary course of business of Borrower; and (e) the loans, advances and other guarantees set forth on Schedule 8.10 hereto; and (f) loans that constitute Permitted Inter-Company Debt; provided, that, as to such loans, advances and guarantees, (i) Borrower shall not, and shall ensure that each Obligor does not, directly or indirectly, (A) amend, modify, alter or change the terms of such loans, advances or guarantees or any agreement, document or instrument related thereto, or (B) as to such guarantees, redeem, retire, defease, purchase or otherwise acquire the obligations arising pursuant to such guarantees, or set aside or otherwise deposit or invest any sums for such purpose, and (ii) Borrower shall furnish to Lender all notices or demands in connection with such loans, advances or guarantees or other indebtedness subject to such guarantees either received by Borrower or on its behalf, promptly after the receipt   - 39 - -------------------------------------------------------------------------------- thereof, or sent by Borrower or on its behalf, concurrently with the sending thereof, as the case may be.   8.11 Dividends and Redemptions Borrower shall be entitled from time to time to pay such dividends or redeem or repurchase shares if Borrower has Excess Availability of not less than $500,000 after giving effect to each such payment of dividends, redemption amount or repurchase amount and if no Event of Default exists at the time of, or will occur as a result of, any such payment of dividends, redemption amount or repurchase amount. Except as expressly permitted pursuant to the preceding sentence, Borrower shall not, directly or indirectly, declare or pay any dividends on account of any shares of Borrower now or hereafter outstanding, or set aside or otherwise deposit or invest any sums for such purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of any class (or set aside or otherwise deposit or invest any sums for such purpose) for any consideration other than common shares or apply or set apart any sum, or make any other distribution (by reduction of capital or otherwise) in respect of any such shares or agree to do any of the foregoing.   8.12 Transactions with Affiliates Borrower shall not, and shall not permit any Obligor to, directly or indirectly, (a) purchase, acquire or lease any property from, or sell, transfer or lease any property to, any officer, director, agent or other person affiliated with Borrower or such Obligor, except in the ordinary course of and pursuant to the reasonable requirements of Borrower’s or such Obligor’s business and upon fair and reasonable terms no less favorable to Borrower or such Obligor than Borrower or such Obligor would obtain in a comparable arm’s length transaction with an unaffiliated person or (b) make any payments of management, consulting or other fees for management or similar services, or of any indebtedness owing to any officer, employee, shareholder, director or other person affiliated with Borrower or such Obligor except (i) payments in respect of Permitted Inter-Company Debt provided that such payments are permitted pursuant to, and made in accordance with, the terms of the applicable subordination agreement executed by Borrower and/or such Obligor, as applicable, in favor of Lender in respect thereof and (ii) reasonable compensation to officers, employees and directors for services rendered to Borrower or such Obligor in the ordinary course of business.   8.13 EBITDA Borrower shall cause MCII to maintain consolidated EBITDA as follows: (a) for the Fiscal Quarter ending September 30, 2006, consolidated EBITDA for such Fiscal Quarter shall not be less than negative (-) $406,000; (b) for the Fiscal Quarter ending December 31, 2006, consolidated EBITDA for such Fiscal Quarter and the Fiscal Quarter ending September 30, 2006 shall not be less than $5,547,000 in the aggregate; (c) for the Fiscal Quarter ending March 31, 2007, consolidated EBITDA on a trailing four (4) Fiscal Quarter basis shall not be less than $3,496,000; and   - 40 - -------------------------------------------------------------------------------- (d) at the end of each subsequent Fiscal Quarter thereafter, consolidated EBITDA on a trailing four (4) Fiscal Quarter basis shall not be less than the amount of seventy-five percent (75%) of the projected total consolidated EBITDA as set out on Schedule 8.13 delivered to and approved by Lender pursuant to Section 8.6(a) and, if Borrower and Lender cannot agree on such Schedule 8.13, in amounts and for periods as determined by Lender in its sole discretion.   8.14 Intellectual Property In the event Borrower or any Obligor obtains or applies for any material intellectual property rights or obtains any material licenses with respect thereto, Borrower shall immediately notify Lender thereof and shall provide to Lender copies of all written materials including, but not limited to, applications and licenses with respect to such intellectual property rights. At US Collateral Agent’s request, Borrower shall promptly execute and deliver to US Collateral Agent an intellectual property security agreement granting to US Collateral Agent a perfected Lien in such intellectual property rights in form and substance satisfactory to US Collateral Agent.   8.15 Additional Bank Accounts Borrower shall not, and shall ensure that each Obligor does not, directly or indirectly, open, establish or maintain any deposit account, investment account or any other account with any bank or other financial institution, other than the Blocked Accounts and the accounts set forth in Schedule 7.8 hereto, except: (a) as to any new or additional Blocked Accounts and other such new or additional accounts which contain any Collateral or proceeds thereof, with the prior written consent of Lender and subject to such conditions thereto as Lender may establish, and (b) as to any accounts used by Borrower or any Obligor to make payments of payroll, taxes or other obligations to third parties, after prior written notice to Lender.   8.16 Compliance with ERISA (a) Borrower shall not with respect to any “employee benefit plans” maintained by Borrower or any of its ERISA Affiliates: (i) terminate any of such employee benefit plans so as to incur any liability to the Pension Benefit Guaranty Corporation established pursuant to ERISA, (ii) allow or suffer to exist any prohibited transaction involving any of such employee benefit plans or any trust created thereunder which would subject Borrower or such ERISA Affiliate to a tax or penalty or other liability on prohibited transactions imposed under Section 4975 of the Code or ERISA, (iii) fail to pay to any such employee benefit plan any contribution which it is obligated to pay under Section 302 of ERISA, Section 412 of the Code or the terms of such plan, (iv) allow or suffer to exist any accumulated funding deficiency, whether or not waived, with respect to any such employee benefit plan, (v) allow or suffer to exist any occurrence of a reportable event or any other event or condition which presents a material risk of termination by the Pension Benefit Guaranty Corporation of any such employee benefit plan that is a single employer plan, which termination could result in any liability to the Pension Benefit Guaranty Corporation or (vi) incur any withdrawal liability with respect to any multiemployer pension plan.   - 41 - -------------------------------------------------------------------------------- (b) As used in this Section 8.16, the terms “employee benefit plans”, “accumulated funding deficiency” and “reportable event” shall have the respective meanings assigned to them in ERISA, and the term “prohibited transaction” shall have the meaning assigned to it in Section 4975 of the Code and ERISA.   8.17 Costs and Expenses Borrower shall pay to Lender on demand all costs, expenses, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of the Obligations, Lender’s and US Collateral Agent’s rights in the Collateral, this Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including: (a) all costs and expenses of filing or recording (including UCC and PPSA financing statement and other similar filing and recording fees and taxes, documentary taxes, intangibles taxes and mortgage recording taxes and fees, if applicable); (b) all insurance premiums, appraisal fees and search fees; (c) costs and expenses of remitting loan proceeds, collecting checks and other items of payment, and establishing and maintaining the Blocked Accounts and Payment Accounts, together with Lender’s customary charges and fees with respect thereto; (d) charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations; (e) costs and expenses of preserving and protecting the Collateral; (f) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the Liens of US Collateral Agent and/or Lender, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Agreement and the other Financing Agreements or defending any claims made or threatened against US Collateral Agent and/or Lender arising out of the transactions contemplated hereby and thereby (including preparations for and consultations concerning any such matters); (g) all out-of-pocket expenses and costs heretofore and from time to time hereafter incurred by Lender during the course of periodic field examinations of the Collateral and Borrower’s operations, plus a per diem charge at the rate of $750 per person per day for Lender’s examiners in the field and office; and (h) the fees and disbursements of counsel (including legal assistants) to Lender and/or US Collateral Agent in connection with any of the foregoing.   8.18 Further Assurances At the request of Lender at any time and from time to time, Borrower shall, at its expense, duly execute and deliver, or cause to be duly executed and delivered, such further agreements, documents and instruments, and do or cause to be done such further acts as may be necessary or proper to evidence, perfect, maintain and enforce the Liens of US Collateral Agent, Lender and/or Canadian Collateral Agent and the priority thereof in the Collateral and to otherwise effectuate the provisions or purposes of this Agreement or any of the other Financing Agreements. Lender may at any time and from time to time request a certificate from an officer of Borrower representing that all conditions precedent to the making of Revolving Loans and providing Letter of Credit Accommodations contained herein are satisfied. In the event of such request by Lender, Lender may, at its option, cease to make any further Revolving Loans or provide any further Letter of Credit Accommodations until Lender has received such certificate and, in addition, Lender has determined that such conditions are satisfied. Where permitted by   - 42 - -------------------------------------------------------------------------------- law, Borrower hereby authorizes Lender to execute and file one or more UCC, PPSA or other financing statements or notices signed only by Lender or US Collateral Agent’s representative.   8.19 Change of Control Borrower shall promptly provide Lender with written notice if, at any time, any person shall own more than twenty percent (20%) of the outstanding voting securities of MCII.   8.20 Software Expenditures Borrower shall not, and shall ensure that each Obligor does not, make or incur any expenditures with respect to the development of Software during any fiscal year of Borrower in the aggregate in respect of Borrower and each Obligor in excess of $1,000,000 without the prior written consent of Lender. SECTION 9 EVENTS OF DEFAULTS AND REMEDIES   9.1 Events of Default The occurrence or existence of any one or more of the following events are referred to herein individually as an “Event of Default”, and collectively as “Events of Default”: (a) (i) Borrower fails to pay when due any of the Obligations or the Borrower or any Obligor fails to pay when due any amount owing under any Financing Agreement, or (ii) Borrower or any Obligor fails to perform any of the material terms, covenants, conditions or provisions contained in this Agreement or any of the other Financing Agreements (other than as described in Section 9.1(a)(i)), or (iii) Borrower or any Obligor fails to perform any of the terms, covenants, conditions or provisions contained in this Agreement or any other Financing Agreement (other than as described in Section 9.1(a)(i) or Section 9.1(a)(ii)) and such failure continues for more than ten (10) days after the Borrower receives written notice thereof from Lender; (b) any representation, warranty or statement of fact made by Borrower or Obligor to Lender in this Agreement, the other Financing Agreements or any other agreement, schedule, confirmatory assignment or otherwise shall when made or deemed made be false or misleading in any material respect; (c) any Obligor (i) revokes, terminates or fails to perform any of the material terms, covenants, conditions or provisions of any guarantee, endorsement or other agreement of such party in favor of Lender, Canadian Collateral Agent or US Collateral Agent; or (ii) revokes, terminates or fails to perform any of the terms, covenants, conditions or provisions of any guarantee, endorsement or other agreement of such party in favor of Lender, Canadian Collateral Agent or US Collateral Agent (other than as described in Section 9.1(c)(i)) and such default continues for more than ten (10) days after Borrower receives written notice thereof from Lender;   - 43 - -------------------------------------------------------------------------------- (d) any judgment for the payment of money is rendered against Borrower or any Obligor in excess of $2,000,000 in the aggregate and shall remain undischarged or unvacated for a period in excess of thirty (30) days or execution shall at any time not be effectively stayed, or any judgment other than for the payment of money, or injunction, attachment, garnishment or execution is rendered against Borrower or any Obligor or any of their assets; (e) any Obligor (being a natural person or a general partner of an Obligor which is a partnership) dies or Borrower or any Obligor, which is a partnership, limited liability company, limited partnership, limited liability partnership or a corporation, dissolves or suspends or discontinues doing business; (f) Borrower or any Obligor becomes insolvent, makes an assignment for the benefit of creditors proposes to make, makes or sends notice of a bulk sale (as defined by applicable laws of the United States of America or Canada) or calls a meeting of its creditors or principal creditors; (g) a petition, case or proceeding under the bankruptcy laws of the United States, Canada or similar laws of any foreign jurisdiction now or hereafter in effect or under any insolvency, arrangement, reorganization, moratorium, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity) is filed or commenced against Borrower or any Obligor or all or any part of its properties and such petition or application is not dismissed within sixty (60) days after the date of its filing or Borrower or any Obligor shall file any answer admitting or not contesting such petition or application or indicates its consent to, acquiescence in or approval of, any such action or proceeding or the relief requested is granted sooner; (h) a petition, case or proceeding under the bankruptcy laws of the United States, Canada or similar laws of any foreign jurisdiction now or hereafter in effect or under any insolvency, arrangement, reorganization, moratorium, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at a law or equity) is filed or commenced by Borrower or any Obligor for all or any part of its property including if Borrower or any Obligor shall:     (i) apply for or consent to the appointment of a receiver, trustee or liquidator of it or of all or a substantial part of its property and assets; or     (ii) be unable, or admit in writing its inability, to pay its debts as they mature, or commit any other act of bankruptcy; or     (iii) make a general assignment for the benefit of creditors; or     (iv) file a voluntary petition or assignment in bankruptcy or a proposal seeking a reorganization, compromise, moratorium or arrangement with its creditors; or     (v) take advantage of any insolvency or other similar law pertaining to arrangements, moratoriums, compromises or reorganizations, or admit the   - 44 - --------------------------------------------------------------------------------   material allegations of a petition or application filed in respect of it in any bankruptcy, reorganization or insolvency proceeding; or     (vi) take any corporate action for the purpose of effecting any of the foregoing; (i) any default by Borrower or any Obligor under any agreement, document or instrument relating to any indebtedness for borrowed money owing to any person other than Lender, or any capitalized lease obligations, contingent indebtedness in connection with any guarantee, letter of credit, indemnity or similar type of instrument in favor of any person other than Lender, in any case in an amount in excess of $1,000,000, which is not remedied within ten (10) days after Borrower receives written notice thereof from Lender; (j) any material default by Borrower or any Obligor under any material contract, lease, license or other obligation to any person other than Lender, any other default by Borrower or any Obligor under any material contract, lease, license or other obligation to any person other than Lender if such default continues for more than ten (10) days after Borrower receives written notice thereof from Lender, or any termination of, or failure to renew or extend, any material lease for real property occupied by Borrower; (k) any change in the ownership of Borrower or any Obligor (other than MCII) unless previously approved in writing by Lender; (l) charging of Borrower or any Obligor under any criminal statute, or commencement or threatened commencement of criminal or civil proceedings against Borrower or any Obligor, pursuant to which statute or proceedings the penalties or remedies sought or available include forfeiture of any of the property of Borrower or such Obligor; (m) a Material Adverse Change in Borrower or any Obligor after the date hereof; (n) an event of default under any of the other Financing Agreements; or (o) a breach of, or failure to comply with, any material term of any intercreditor agreement or subordination agreement with respect to Borrower or any Obligor by any party thereto other than Lender, or any breach of, or failure to comply with, any other term of any inter-creditor agreement or subordination agreement with respect to Borrower or any Obligor by any party thereto other than Lender if such default continues for more than ten (10) days after Borrower receives notice thereof from Lender.   9.2 Remedies (a) At any time while an Event of Default exists Lender and US Collateral Agent shall have all rights and remedies provided in this Agreement, the other Financing Agreements, the UCC, PPSA and other applicable law, all of which rights and remedies may be exercised without notice to or consent by Borrower or any Obligor, except as such notice or consent is expressly provided for hereunder or required by applicable law. All rights, remedies and powers granted to Lender hereunder, under any of the other Financing Agreements, the UCC, PPSA or either applicable law, are cumulative, not exclusive and enforceable, in Lender’s and US Collateral Agent’s discretion, alternatively, successively, or concurrently on any one or more   - 45 - -------------------------------------------------------------------------------- occasion, and shall include the right to apply to a court of equity for an injunction to restrain a breach or threatened by Borrower of this Agreement or any of the other Financing Agreements. Lender and/or US Collateral Agent may, at any time or times, proceed directly against Borrower or any Obligor to collect the Obligations without prior recourse to the Collateral. (b) Without limiting the foregoing, at any time an Event of Default exists, Lender may, in its discretion and without limitation, (i) accelerate the payment of all Obligations and demand immediate payment thereof to Lender (provided, that, upon the occurrence of any Event of Default described in Sections 9.1(g) and 9.1(h), all Obligations shall automatically become immediately due and payable), (ii) with or without judicial process or the aid or assistance of others, enter upon any premises on or in which any of the Collateral may be located and take possession of the Collateral or complete processing, manufacturing and repair of all or any portion of the Collateral and carry on the business of Borrower, (iii) require Borrower, at Borrower’s expense, to assemble and make available to US Collateral Agent any part or all of the Collateral at any place and time designated by US Collateral Agent, (iv) collect, foreclose, receive, appropriate, setoff and realize upon any and all Collateral, (v) remove any or all of the Collateral from any premises on or in which the same may be located for the purpose of effecting the sale, foreclosure or other disposition thereof or for any other purpose, (vi) sell, lease, transfer, assign, deliver or otherwise dispose of any and all Collateral (including entering into contracts with respect thereto, public or private sales at any exchange, broker’s board, at any office of US Collateral Agent or elsewhere) at such prices or terms as US Collateral Agent may deem reasonable, for cash, upon credit or for future delivery, with US Collateral Agent having the right to purchase the whole or any part of the Collateral at any such public sale, all of the foregoing being free from any right or equity of redemption of Borrower, which right or equity of redemption is hereby expressly waived and released by Borrower, (vii) borrow money and use the Collateral directly or indirectly in carrying on Borrower’s business or as security for loans or advances for any such purposes, (viii) grant extensions of time and other indulgences, take and give up security, accept compositions, grant releases and discharges, and otherwise deal with Borrower, debtors of Borrower, sureties and others as US Collateral Agent may see fit without prejudice to the liability of Borrower or US Collateral Agent’s right to hold and realize the Lien created under any Financing Agreement, and/or (ix) terminate this Agreement. If any of the Collateral is sold or leased by US Collateral Agent upon credit terms or for future delivery, the Obligations shall not be reduced as a result thereof until payment therefor is finally collected by US Collateral Agent. If notice of disposition of Collateral is required by law, five (5) days prior notice by US Collateral Agent to Borrower designating the time and place of any public sale or the time after which any private sale or other intended disposition of Collateral is to be made, shall be deemed to be reasonable notice thereof and Borrower waives any other notice. In the event US Collateral Agent institutes an action to recover any Collateral or seeks recovery of any Collateral by way of pre-judgment remedy, Borrower waives the posting of any bond which might otherwise be required. (c) Lender may apply the cash proceeds of Collateral actually received by US Collateral Agent from any sale, lease, foreclosure or other disposition of the Collateral to payment of the Obligations, in whole or in part and in such order as Lender may elect, whether or not then due. Borrower shall remain liable to Lender for the payment of any deficiency with interest at the highest rate provided for herein and all costs and expenses of collection or enforcement, including legal costs and expenses.   - 46 - -------------------------------------------------------------------------------- (d) Without limiting the foregoing, upon the occurrence of an Event of Default or an event which with notice or passage of time or both would constitute an Event of Default, and while such Event of Default or event is continuing, Lender may, at its option, without notice, (i) cease making Revolving Loans or arranging Letter of Credit Accommodations or reduce the lending formulas or amounts of Revolving Loans and Letter of Credit Accommodations available to Borrower and/or (ii) terminate any provision of this Agreement providing for any future Revolving Loans or Letter of Credit Accommodations to be made by Lender to Borrower. (e) Borrower shall pay all costs, charges and expenses incurred by Lender, US Collateral Agent or any nominee or agent of Lender or US Collateral Agent, whether directly or for services rendered (including reasonable auditor’s costs and legal expenses) in enforcing this Agreement or any other Financing Agreement and in enforcing or collecting Obligations and all such expenses together with any money owing as a result of any borrowing permitted hereby shall be a charge on the proceeds of realization and shall be secured hereby. SECTION 10 JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW   10.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver (a) The validity, interpretation and enforcement of this Agreement and the other Financing Agreements and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of California (without giving effect to principles of conflicts of law) except to the extent that the law of another jurisdiction is specified in a Financing Agreement to be the governing law for that Financing Agreement. (b) Borrower, Lender and US Collateral Agent irrevocably consent and submit to the non-exclusive jurisdiction of the courts of California and waive any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agree that any dispute with respect to any such matters shall be heard only in the courts described above (except that Lender and/or US Collateral Agent shall have the right to bring any action or proceeding against Borrower or its property in the courts of any other jurisdiction which Lender and/or US Collateral Agent deems necessary or appropriate in order to realize on the Collateral or to otherwise enforce its rights against Borrower or its property). (c) To the extent permitted by law, Borrower hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth on the signature pages hereof and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the US mails, or, at Lender’s or US Collateral Agent’s option, by service upon Borrower in any other manner provided under the rules of any such courts. Within thirty (30)   - 47 - -------------------------------------------------------------------------------- days after such service, Borrower shall appear in answer to such process, failing which Borrower shall be deemed in default and judgment may be entered by Lender or US Collateral Agent against Borrower for the amount of the claim and other relief requested. (d) BORROWER AND LENDER AND US COLLATERAL AGENT EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER AND US COLLATERAL AGENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER, LENDER AND/OR US COLLATERAL AGENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. (e) Neither Lender nor US Collateral Agent shall have any liability to Borrower (whether in tort, contract, equity or otherwise) for losses suffered by Borrower or any Obligor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Agreement or any other Financing Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Lender and US Collateral Agent, that the losses were the result of acts or omissions constituting gross negligence or willful misconduct. In any such litigation, each of Lender and US Collateral Agent shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of this Agreement or any other Financing Agreement. (f) Borrower hereby expressly waives all rights and notice and hearing of any kind prior to the exercise of rights by Lender or US Collateral Agent while an Event of Default exists, to repossess the Collateral with judicial process or to replevy, attach or levy upon the Collateral or other security for the Obligations. Borrower waives the posting of any bond otherwise required of Lender or US Collateral Agent in connection with any judicial process or proceeding to obtain possession of, replevy, attach or levy upon the Collateral or other security for the Obligations, to enforce any judgment or other court order entered in favor of Lender or US Collateral Agent, or to enforce by specific performance, temporary restraining order, preliminary or permanent injunction, this Agreement or any other Financing Agreement.   10.2 Waiver of Notices Borrower hereby expressly waives demand, presentment, protest and notice of protest and notice of dishonor with respect to any and all instruments and commercial paper, included in or evidencing any of the Obligations or the Collateral, and any and all other demands and notices of any kind or nature whatsoever with respect to the Obligations, the Collateral and   -48 - -------------------------------------------------------------------------------- this Agreement, except such as are expressly provided for herein. No notice to or demand on Borrower or any Obligor which Lender or US Collateral Agent may elect to give shall entitle Borrower or any Obligor to any other or further notice or demand in the same, similar or other circumstances.   10.3 Amendments and Waivers Neither this Agreement nor any provision hereof shall be amended, modified, waived or discharged orally or by course of conduct, but only by a written agreement signed by an authorized officer of Lender and US Collateral Agent, and as to amendments, as also signed by an authorized officer of Borrower. Neither Lender nor US Collateral Agent shall, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of its rights, powers and/or remedies unless such waiver shall be in writing and signed by an authorized officer of Lender or US Collateral Agent, as applicable. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Lender or US Collateral. Agent of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Lender or US Collateral Agent would otherwise have on any future occasion, whether similar in kind or otherwise.   10.4 Waiver of Counterclaims Borrower waives all rights to interpose any claims, deductions, setoffs or counterclaims of any nature (other than compulsory counterclaims) in any action or proceeding with respect to this Agreement, the Obligations, the Collateral or any matter arising therefrom or relating hereto or thereto.   10.5 Indemnification Borrower shall indemnify and hold Lender, US Collateral Agent and their respective directors, agents, employees and counsel, harmless from and against any and all losses, claims, damages, liabilities, costs or expenses imposed on, incurred by or asserted against any of them in connection with any litigation, investigation, claim or proceeding commenced or threatened related to the negotiation, preparation, execution, delivery, enforcement, performance or administration of this Agreement, any other Financing Agreements, or any undertaking or proceeding related to any of the transactions contemplated hereby or any act, omission, event or transaction related or attendant thereto, including amounts paid in settlement, court costs, and the fees and expenses of counsel. To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section may be unenforceable because it violates any law or public policy, Borrower shall pay the maximum portion which it is permitted to pay under applicable law to Lender and US Collateral Agent in satisfaction of indemnified matters under this Section. The foregoing indemnity shall survive the payment of the Obligations and the termination of this Agreement. To the extent that any person that is entitled to the benefit of the indemnity set forth in this Section is not a party hereto, Lender shall hold the benefit to which such person is entitled hereunder in trust for and on behalf of such person. Notwithstanding the foregoing, Borrower shall have no obligation hereunder to the extent of any liability resulting from the negligence or willful misconduct of Lender or other Person referred to herein or with respect to Hazardous   - 49 - -------------------------------------------------------------------------------- Materials deposited on any property after it is no longer owned, possessed or controlled by Borrower or any Obligor. SECTION 11 TERM OF AGREEMENT; MISCELLANEOUS   11.1 Term (a) This Agreement and the other Financing Agreements are effective as of the respective dates thereof set forth on the respective first pages thereof and shall continue in full force and effect for a term ending on October 30, 2009 (the “Termination Date”), unless sooner terminated pursuant to the terms hereof. Lender or Borrower may terminate this Agreement and the other Financing Agreements effective on the Termination Date by giving to the other party prior written notice; provided, that, this Agreement and all other Financing Agreements must be terminated simultaneously. Upon the effective date of termination of the Financing Agreements, Borrower shall pay to Lender, in full, all outstanding and unpaid Obligations and shall furnish cash collateral to Lender in such amounts as Lender determines are necessary to secure Lender from loss, cost, damage or expense, including legal fees and expenses, in connection with any contingent Obligations, including issued and outstanding Letter of Credit Accommodations and checks or other payments provisionally credited to the Obligations and/or as to which Lender has not yet received final and indefeasible payment. Such payments in respect of the Obligations and cash collateral shall be remitted by wire transfer in US Dollars to such bank account of Lender, as Lender may, in its discretion, designate in writing to Borrower for such purpose. Interest shall be due until and including the next Business Day, if the amounts so paid by Borrower to the bank account designated by Lender are received in such bank account later than 12:00 noon, Chicago time. (b) No termination of this Agreement or the other Financing Agreements shall relieve or discharge Borrower of its respective duties, obligations and covenants under this Agreement or the other Financing Agreements until all Obligations have been fully and finally discharged and paid, and US Collateral Agent’s and/or Lender’s continuing Lien in the Collateral and the rights and remedies of Lender hereunder, under the other Financing Agreements and applicable law, shall remain in effect until all such Obligations have been fully and finally discharged and paid. (c) If for any reason this Agreement is terminated prior to the end of the then current term of this Agreement, in view of the impracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of Lender’s lost profits as a result thereof, Borrower agrees to pay to Lender, upon the effective date of such termination, an early termination fee in the amount of 0.25% of the Maximum Credit. Such early termination fee shall be presumed to be the amount of damages sustained by Lender as a result of such early termination and Borrower agrees that it is reasonable under the circumstances currently existing. In addition, Lender shall be entitled to such early termination fee upon the occurrence of any Event of Default described in Section 9.1(g) and Section 9.1(h) hereof, even if Lender does not exercise its right to terminate this Agreement, but elects, at its option, to provide financing to Borrower or permit the use of cash   - 50 - -------------------------------------------------------------------------------- collateral under any applicable reorganization or insolvency legislation. The early termination fee provided for in this Section 11.1 shall be deemed included in the Obligations.   11.2 Notices All notices, requests and demands hereunder shall be in writing and (a) made to US Collateral Agent and/or Lender at its address set forth below and to Borrower at its chief executive office set forth below, or to such other address as either party may designate by written notice to the other in accordance with this provision, and (b) deemed to have been given or made: if delivered in person, immediately upon delivery; if by facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next business day, one (1) Business Day after sending; and if by certified mail, return receipt requested, five (5) days after mailing.   11.3 Partial Invalidity If any provision of this Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole, but this Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law.   11.4 Successors This Agreement, the other Financing Agreements and any other document referred to herein or therein shall be binding upon and inure to the benefit of and be enforceable by US Collateral Agent, Lender, Borrower and their respective successors and assigns, except that Borrower may not assign its rights under this Agreement, the other Financing Agreements and any other document referred to herein or therein without the prior written consent of Lender and US Collateral Agent. US Collateral Agent and/or Lender may, after written notice to Borrower, assign its rights and delegate its obligations under this Agreement and the other Financing Agreements and further may assign, or sell participations in, all or any part of the Revolving Loans, the Letter of Credit Accommodations or any other interest herein to another financial institution or other person, provided that such assignment or participation, as applicable, does not create any withholding tax obligations of Borrower; and upon the completion of any such assignment or participation, as applicable, such assignee or participant shall have, to the extent of such assignment or participation, the same rights and benefits as it would have if it were Lender and/or US Collateral Agent, as applicable, hereunder, subject to the terms of such assignment or participation.   11.5 Entire Agreement This Agreement, the other Financing Agreements, any supplements hereto or thereto, and any instruments or documents delivered or to be delivered in connection herewith or therewith represents the entire agreement and understanding concerning the subject matter hereof and thereof between the parties hereto, and supersede all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written. In the event of any   - 51 - -------------------------------------------------------------------------------- inconsistency between the terms of this Agreement and any schedule or exhibit hereto, the terms of this Agreement shall govern.   11.6 Headings The division of this Agreement into Sections and the insertion of headings and a table of contents are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.   11.7 Judgment Currency To the extent permitted by applicable law, the obligations of Borrower in respect of any amount due under this Agreement shall, notwithstanding any payment in any other currency (the “Other Currency”) (whether pursuant to a judgment or otherwise), be discharged only to the extent of the amount in the currency in which it is due (the “Agreed Currency”) that Lender may, in accordance with normal banking procedures, purchase with the sum paid in the Other Currency (after any premium and costs of exchange) on the Business Day immediately after the day on which Lender receives the payment. If the amount in the Agreed Currency that may be so purchased for any reason falls short of the amount originally due, Borrower shall pay all additional amounts, in the Agreed Currency, as may be necessary to compensate for the shortfall. Any obligation of Borrower not discharged by that payment shall, to the extent permitted by applicable law, be due as a separate and independent obligation and, until discharged as provided in this Section, continue in full force and effect.   11.8 Amended and Restatement; No Novation This Agreement amends, restates, consolidates and supplements certain provisions of the Loan Agreement. Any provision hereof which differs from or is inconsistent with a provision of the Loan Agreement constitutes an amendment to the Loan Agreement with each such amendment being effective as and from the date hereof. The provisions of the Loan Agreement as amended hereby have been consolidated and restated in this Agreement. This Agreement will not discharge or constitute a novation of any debt, obligation, covenant or agreement contained in the Loan Agreement or any of the other Financing Agreements but same shall remain in full force and effect save to the extent same are amended by the provisions in this Agreement.   11.9 Confirmation of Existing Security Borrower acknowledges and confirms that, notwithstanding the execution of this Agreement, each of the existing security documents that Borrower has executed in favor of Lender and/or US Collateral Agent including the General Security Agreement and the Intellectual Property Security Agreements, (i) remains in full force and effect and has not been terminated, discharged or released, and (ii) constitutes a legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms except as the same is limited by bankruptcy, insolvency or similar laws affecting creditors’ rights generally and the discretion of the court as to the granting of equitable remedies.   - 52 - -------------------------------------------------------------------------------- IN WITNESS WHEREOF, US Collateral Agent, Lender and Borrower have caused these presents to be duly executed as of the day and year first above written.   US COLLATERAL AGENT and LENDER     BORROWER WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL)     MAD CATZ, INC. By:   /s/ NIALL HAMILTON     By:   /s/ WHITNEY E. PETERSON Title:   Senior Vice President     Title:   Vice President and General Counsel Address:   150 South Wacker Drive Chicago, Illinois 60606 Fax: (312) 332-0424     Chief Executive Office:   7480 Mission Valley Road Suite 101 San Diego, California 92108   - 53 -

Exhibit 10.1 INDEMNIFICATION AGREEMENT THIS INDEMNIFICATION AGREEMENT is made and entered into this 18th day of October, 2006 (“Agreement”), by and between Alesco Financial Inc., a Maryland corporation (the “Company”), and ____________________ (“Indemnitee”). WHEREAS, at the request of the Company, Indemnitee currently serves as an officer or director (or both) of the Company and may, therefore, be subjected to claims, suits or proceedings arising as a result of his/her service; and WHEREAS, as an inducement to Indemnitee to continue to serve as such member, the Company has agreed to indemnify and to advance expenses and costs incurred by Indemnitee in connection with any such claims, suits or proceedings, to the maximum extent permitted by law; and WHEREAS, the parties by this Agreement desire to set forth their agreement regarding indemnification and advance of expenses; NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows: Section 1. Definitions. For purposes of this Agreement: (a) “Change of Control” means a change of control of the Company occurring after the Effective Date of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) 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, however, that, without limitation, such a Change of Control shall be deemed to have occurred if after the Effective Date (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 15% or more of the combined voting power in the election of directors of the Company’s then outstanding securities without the prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person attaining such percentage interest; (ii) there occurs a proxy contest, or the Company is a party to a merger, consolidation, sale of assets, plan of liquidation or other reorganization not approved by at least two-thirds of the members of the Board of Directors then in office, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter; or (iii) during any period of two consecutive years, other than as a result of an event described in clause (a)(ii) of this Section 1, individuals who at the beginning of such period constituted the Board of Directors (including for this purpose any new director whose election or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors. (b) “Corporate Status” means the status of a person who is or was a director, trustee, officer, employee or agent of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise for which such person is or was serving at the request of the Company. -------------------------------------------------------------------------------- (c) “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. (d) “Effective Date” means the date set forth in the first paragraph of this Agreement. (e) “Expenses” shall include all reasonable and out-of-pocket 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, 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. (f) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of Maryland corporation law and neither is, nor in the past five 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 or witness in 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. If a Change of Control has not occurred, Independent Counsel shall be selected by the Board of Directors, with the approval of Indemnitee, which approval will not be unreasonably withheld. If a Change of Control has occurred, Independent Counsel shall be selected by Indemnitee, with the approval of the Board of Directors, which approval will not be unreasonably withheld. (g) “Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative (including on appeal), except one pending or completed on or before the Effective Date, unless otherwise specifically agreed in writing by the Company and Indemnitee. Section 2. Services by Indemnitee. Indemnitee will serve as an officer or director (or both) 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. Section 3. Indemnification—General. The Company shall indemnify, and advance Expenses to, Indemnitee (a) as provided in this Agreement and (b) otherwise to the maximum 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 3 shall include, without limitation, 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 (“MGCL”). Section 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/she is, or is threatened to be, made a party to or a witness in 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 against all judgments, penalties, fines and amounts paid in settlement and all Expenses actually and reasonably incurred by him/her or on his behalf in connection with a Proceeding by reason of his Corporate Status unless it is established that (i) the act or omission of Indemnitee was material to the matter giving rise to the Proceeding and (a) was committed in bad faith or   2 -------------------------------------------------------------------------------- (b) was the result of active and deliberate dishonesty, (ii) Indemnitee actually received an improper personal benefit in money, property or services, or (iii) in the case of any criminal Proceeding, Indemnitee had reasonable cause to believe that his conduct was unlawful. Section 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/she is, or is threatened to be, made a party to or a witness in 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 Expenses actually and reasonably incurred by him/her or on his behalf in connection with such Proceeding unless it is established that (i) the act or omission of 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) Indemnitee actually received an improper personal benefit in money, property or services. Section 6. Court-Ordered Indemnification. Notwithstanding any other provision of this Agreement, a court of appropriate jurisdiction, upon application of Indemnitee and such notice as the court shall require, may order indemnification in the following circumstances: (a) if it determines Indemnitee is entitled to reimbursement under Section 2-418(d)(1) of the MGCL, the court shall order indemnification, in which case Indemnitee shall be entitled to recover the expenses of securing such reimbursement; or (b) if it determines that Indemnitee is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not Indemnitee (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 2-418(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 Expenses actually and reasonably incurred by him/her or on his behalf in connection with a Proceeding. Section 7. 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 his Corporate Status, made a party to and is successful, on the merits or otherwise, in the defense of any Proceeding, he/she shall be indemnified for all Expenses actually and reasonably incurred by him/her or on his behalf in connection therewith. 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 under this Section 7 for all Expenses actually and reasonably incurred by him/her or on his behalf in connection with each successfully resolved claim, issue or matter, allocated on a reasonable and proportionate basis. For purposes of this Section 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. Section 8. Advance of Expenses. The Company shall advance all reasonable Expenses actually and reasonably incurred by or on behalf of Indemnitee in connection with any Proceeding (other than a Proceeding brought to enforce indemnification under this Agreement, applicable law, the Company’s articles of incorporation or by-laws, each as amended, any agreement or a resolution of the shareholders entitled to vote generally in the election of directors or of the Board of Directors) to which Indemnitee is, or is threatened to be, made a party or a witness, within ten days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether   3 -------------------------------------------------------------------------------- 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 a written affirmation by Indemnitee of Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Company as authorized by law and by this Agreement has been met and a written undertaking by or on behalf of Indemnitee, in substantially the form attached hereto as Exhibit A or in such form as may be required under applicable law as in effect at the time of the execution thereof, to reimburse the portion of any Expenses advanced to Indemnitee relating to claims, issues or matters in the Proceeding as to which it shall ultimately be established that the standard of conduct has not been met and which have not been successfully resolved as described in Section 7. To the extent that Expenses advanced to Indemnitee do not relate to a specific claim, issue or matter in the Proceeding, such Expenses shall be allocated on a reasonable and proportionate basis. The undertaking required by this Section 8 shall be an unlimited general obligation by or on behalf of Indemnitee and shall be accepted without reference to Indemnitee’s financial ability to repay such advanced Expenses and without any requirement to post security therefor. Section 9. Procedure for Determination of Entitlement to Indemnification. (a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including 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 upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification. (b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 9(a) hereof, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall promptly be made in the specific case: (i) if a Change of Control shall have occurred, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee; or (ii) if a Change of Control shall not have occurred, (A) by the Board of Directors (or a duly authorized committee thereof) by a majority vote of a quorum consisting of Disinterested Directors (as herein defined), or (B) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee, or (C) if so directed by a majority of the members of the Board of Directors, by the shareholders of the Company. If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, 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 in the discretion of the Board of Directors or Independent Counsel if retained pursuant to clause (ii)(B) of this Section 9. Any Expenses actually and reasonably 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 shall indemnify and hold Indemnitee harmless therefrom. Section 10. Presumptions and Effect of Certain Proceedings. (a) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in   4 -------------------------------------------------------------------------------- accordance with Section 9(a) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making of any determination contrary to that presumption. (b) The termination of any Proceeding by judgment, order, settlement, conviction, a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, does not create a presumption that Indemnitee did not meet the requisite standard of conduct described herein for indemnification. Section 11. Remedies of Indemnitee. (a) If (i) a determination is made pursuant to Section 9 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advance of Expenses is not timely made pursuant to Section 8 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 9(b) of this Agreement within 45 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 7 of this Agreement within ten days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made within ten days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication in an appropriate court located in the State of Maryland, or in any other court of competent jurisdiction, of his entitlement to such indemnification or advance of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 11(a); provided, however, that the foregoing clause shall not apply to a proceeding brought by Indemnitee to enforce his rights under Section 7 of this Agreement. (b) In any judicial proceeding or arbitration commenced pursuant to this Section 11, the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advance of Expenses, as the case may be. (c) If a determination shall have been made pursuant to Section 9(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 11, absent a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification. (d) In the event that Indemnitee, pursuant to this Section 11, seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company for, any and all Expenses actually and reasonably incurred by him/her in such judicial adjudication or arbitration. If it shall be determined in such judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advance of Expenses sought, the Expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated. Section 12. Defense of the Underlying Proceeding. (a) Indemnitee shall notify the Company promptly upon being served with or receiving any summons, citation, subpoena, complaint, indictment, information, notice, request or other document   5 -------------------------------------------------------------------------------- relating to any Proceeding which may result in the right to indemnification or the advance of Expenses hereunder; provided, however, that the failure to give any such notice shall not disqualify Indemnitee from the right, or otherwise affect in any manner any right of Indemnitee, to indemnification or the advance of Expenses under this Agreement unless the Company’s ability to defend in such Proceeding or to obtain proceeds under any insurance policy is materially and adversely prejudiced thereby, and then only to the extent the Company is thereby actually so prejudiced. (b) Subject to the provisions of the last sentence of this Section 12(b) and of Section 12(c) below, the Company shall have the right to defend Indemnitee in any Proceeding which may give rise to indemnification hereunder; provided, however, that the Company shall notify Indemnitee of any such decision to defend within 15 calendar days following receipt of notice of any such Proceeding under Section 12(a) above. The Company shall not, without the prior written consent of Indemnitee, which shall not be unreasonably withheld or delayed, consent to the entry of any judgment against Indemnitee or enter into any settlement or compromise which (i) includes an admission of fault of Indemnitee or (ii) does not include, as an unconditional term thereof, the full release of Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to Indemnitee. This Section 12(b) shall not apply to a Proceeding brought by Indemnitee under Section 11 above or Section 18 below. (c) Notwithstanding the provisions of Section 12(b) above, if in a Proceeding to which Indemnitee is a party by reason of Indemnitee’s Corporate Status, (i) Indemnitee reasonably concludes, based upon an opinion of counsel approved by the Company, which approval shall not be unreasonably withheld, that he/she may have separate defenses or counterclaims to assert with respect to any issue which may not be consistent with other defendants in such Proceeding, (ii) Indemnitee reasonably concludes, based upon an opinion of counsel approved by the Company, which approval shall not be unreasonably withheld, that an actual or apparent conflict of interest or potential conflict of interest exists between Indemnitee and the Company, or (iii) if the Company fails to assume the defense of such Proceeding in a timely manner, Indemnitee shall be entitled to be represented by separate legal counsel of Indemnitee’s choice, subject to the prior approval of the Company, which shall not be unreasonably withheld, at the expense of the Company. In addition, if the Company fails to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any Proceeding to deny or to recover from Indemnitee the benefits intended to be provided to Indemnitee hereunder, Indemnitee shall have the right to retain counsel of Indemnitee’s choice, subject to the prior approval of the Company, which shall not be unreasonably withheld, at the expense of the Company (subject to Section 11(d)), to represent Indemnitee in connection with any such matter. Section 13. Non-Exclusivity; Survival of Rights; Subrogation; Insurance. (a) The rights of indemnification and advance of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Company’s articles of incorporation or by-laws, each as amended, any agreement or a resolution of the shareholders entitled to vote generally in the election of directors or of the Board of Directors, or otherwise. 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 Corporate Status prior to such amendment, alteration or repeal. (b) In the event of any 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 shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.   6 -------------------------------------------------------------------------------- (c) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable or payable or reimbursable as Expenses hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. Section 14. Insurance. The Company will use its reasonable best efforts to acquire directors and officers liability insurance, on terms and conditions deemed appropriate by the Board of Directors of the Company, with the advice of counsel, covering Indemnitee or any claim made against Indemnitee for service as a director or officer of the Company and covering the Company for any indemnification or advance of Expenses made by the Company to Indemnitee for any claims made against Indemnitee for service as a director or officer of the Company. Without in any way limiting any other obligation under this Agreement, the Company shall indemnify Indemnitee for any payment by Indemnitee arising out of the amount of any deductible or retention and the amount of any excess of the aggregate of all judgments, penalties, fines, settlements and reasonable Expenses actually and reasonably incurred by Indemnitee in connection with a Proceeding over the coverage of any insurance referred to in the previous sentence. Section 15. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is or may be, by reason of his Corporate Status, a witness in any Proceeding, whether instituted by the Company or any other party, and to which Indemnitee is not a party but in which the Indemnitee receives a subpoena to testify, he/she shall be advanced all reasonable Expenses and indemnified against all Expenses actually and reasonably incurred by him/her or on his behalf in connection therewith. Section 16. Duration of Agreement; Binding Effect. (a) This Agreement shall continue until and terminate ten years after the date that Indemnitee’s Corporate Status shall have ceased; provided, that the rights of Indemnitee hereunder shall continue until the final termination of any Proceeding then pending in respect of which Indemnitee is granted rights of indemnification or advance of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 11 of this Agreement relating thereto. (b) The indemnification and advance of Expenses provided by, or granted pursuant to, this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, trustee, officer, employee or agent of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the written request of the Company, and shall inure to the benefit of Indemnitee and his spouse, assigns, heirs, devisees, executors and administrators and other legal representatives. (c) The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, 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. Section 17. Severability. If any provision or provisions 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 this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the   7 -------------------------------------------------------------------------------- fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby. Section 18. Exception to Right of Indemnification or Advance of Expenses. Notwithstanding any other provision of this Agreement, Indemnitee shall not be entitled to indemnification or advance of Expenses under this Agreement with respect to any Proceeding brought by Indemnitee, unless (a) the Proceeding is brought to enforce indemnification under this Agreement, and then only to the extent in accordance with and as authorized by Sections 8 and 11 of this Agreement, or (b) the Company’s articles of incorporation or by-laws, each as amended, a resolution of the shareholders entitled to vote generally in the election of directors or of the Board of Directors or an agreement approved by the Board of Directors to which the Company is a party expressly provide otherwise. Section 19. 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. One such counterpart signed by the party against whom enforceability is sought shall be sufficient to evidence the existence of this Agreement. Section 20. 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. Section 21. 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. Section 22. 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:     (a) If to Indemnitee, to: The address set forth on the signature page hereto.     (b) If to the Company to: Alesco Financial Inc. Cira Centre 2929 Arch Street, 17th Floor Philadelphia, PA 19104 Attn: John J. Longino 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. Section 23. 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 Maryland, without regard to its conflicts of laws rules.   8 -------------------------------------------------------------------------------- Section 24. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. [SIGNATURE PAGE FOLLOWS]   9 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.   ALESCO FINANCIAL INC. By:        Name: John J. Longino Title: Chief Financial Officer INDEMNITEE         Name: Address:   10 -------------------------------------------------------------------------------- EXHIBIT A FORM OF UNDERTAKING TO REPAY EXPENSES ADVANCED The Board of Directors of Alesco Financial Inc. Re: Undertaking to Repay Expenses Advanced Ladies and Gentlemen: This undertaking is being provided pursuant to that certain Indemnification Agreement dated the ___ day of ______________, 200__, by and between Alesco Financial Inc. (the “Company”) and the undersigned Indemnitee (the “Indemnification Agreement”), pursuant to which I am entitled to advance of expenses in connection with [Description of Proceeding] (the “Proceeding”). Terms used herein and not otherwise defined shall have the meanings specified in the Indemnification Agreement. I am subject to the Proceeding by reason of my Corporate Status or by reason of alleged actions or omissions by me in such capacity. I hereby affirm that at all times, insofar as I was involved as [a director] [an officer] of the Company, in any of the facts or events giving rise to the Proceeding, I (1) acted in good faith and honestly, (2) did not receive any improper personal benefit in money, property or services and (3) in the case of any criminal proceeding, had no reasonable cause to believe that any act or omission by me was unlawful. In consideration of the advance of Expenses by the Company for reasonable attorneys’ fees and related expenses incurred by me in connection with the Proceeding (the “Advanced Expenses”), I hereby agree that if, in connection with the Proceeding, it is established that (1) an act or omission by me 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 or (2) I actually received an improper personal benefit in money, property or services or (3) in the case of any criminal proceeding, I had reasonable cause to believe that the act or omission was unlawful, then I shall promptly reimburse the portion of the Advanced Expenses relating to the claims, issues or matters in the Proceeding as to which the foregoing findings have been established and which have not been successfully resolved as described in Section 7 of the Indemnification Agreement. To the extent that Advanced Expenses do not relate to a specific claim, issue or matter in the Proceeding, I agree that such Expenses shall be allocated on a reasonable and proportionate basis. IN WITNESS WHEREOF, I have executed this Affirmation and Undertaking on this ___ day of ____________________, 200__.   WITNESS:                   (SEAL)      

EXHIBIT 10.1 RESTRICTED SHARE AGREEMENT THIS RESTRICTED SHARE AGREEMENT (this "Agreement"), is made as of this 31st day of January, 2006, by and between Steiner Leisure Limited, a Bahamas international business company (the "Company"), and the undersigned employee ("Employee"). Grant of Restricted Shares. Pursuant to the Steiner Leisure Limited 2004 Equity Incentive Plan (the "Plan"), the Company hereby grants to Employee, as of January 31, 2006 (the "Date of Grant"), __________, (_____) of the Company's common shares, par value (U.S.) $.01 per share, subject to the following restrictions, terms and conditions (the "Restricted Shares"). Capitalized terms not otherwise defined herein shall have the same meaning as in the Plan. Period of Restriction and Vesting of Restricted Shares. Period of Restriction. All restrictions imposed by this Agreement and the Plan shall apply to the Restricted Shares until such Restricted Shares are vested (as determined in accordance with Section 2(b) hereof) (the period during which such restrictions apply is referred to herein as the "Period of Restriction"). Restricted Shares as to which the Period of Restriction has ended are referred to herein as "Vested Shares." Vesting . Subject to the last sentence of this Subsection (b) and to Section 4 hereof, the Restricted Shares shall become vested upon the following dates: Date Annual Amount Vested Cumulative Amount First Anniversary of Date of Grant     Second Anniversary Grant Date of Grant     Third Anniversary Grant Date of Grant     Vesting of the Restricted Shares shall not occur unless the performance criteria with respect to the Company for 2006 set forth on Exhibit "A" attached hereto are achieved. Notwithstanding the foregoing, in the event of a change in control (as defined in the Plan) of the Company, the Restricted Shares shall vest as of the date of such change in control. Transferability of Restricted Shares . Unless otherwise permitted by the Committee in its sole and absolute discretion, the Restricted Shares may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated until they have become Vested Shares. Termination of Employment . Upon the termination of the employment or other service of Employee with the Company, for any reason, all Restricted Shares that are not Vested Shares shall be forfeited immediately; provided, however, that, in the event of the termination by the Company of Employee's employment in violation of the terms of a written employment agreement, as to which the Employee and the Company and/or, as the case may be, a Subsidiary are parties (a "Violation Termination"), unless otherwise specified in such written employment agreement, all Restricted Shares held by Employee which are not yet Vested Shares shall become Vested Shares, provided that (i) the effective time of such Violation Termination is at least one (1) year after the Date of Grant and (ii) in order to assure compliance with any applicable tax withholding requirements, such Vested Shares may only be sold through a securities broker selected by the Company. Certain Tax Actions . For United States taxpayers, if Employee makes an election with respect to the Restricted Shares as permitted under Code Section 83(b), Employee must notify the Company in writing of such election within ten (10) days after filing such election with the Internal Revenue Service. There is a strict time limit with respect to the making of an election under Section 83(b). Employee should consult with Employee's tax advisor as to whether a Code Section 83(b) election should be filed by Employee and as to other tax aspects of this grant of Restricted Shares. Employee indemnifies and holds harmless the Company and its affiliates and the directors, officers, agents and representatives of the Company and its affiliates, respectively, for any tax, penalty or interest imposed on the Company or such other parties in connection with the grant or vesting of the Restricted Shares resulting from Employee's failure to provide notice to the Company in accordance with this Section 5. Shareholder Rights . Employee shall have no rights as a shareholder with respect to the Restricted Shares until the expiration of the Period of Restriction. Among other things, during the Period of Restriction, the Employee shall have no voting rights or rights to dividends or other distributions (if any) with respect to the Restricted Shares. Upon the expiration of the Period of Restriction, the Employee shall have all rights of a shareholder with respect to the Vested Shares. Adjustments Upon Changes in Capitalization, Etc. In the event of any change in the outstanding Shares of the Company by reason of any Share split, Share dividend, recapitalization, merger, consolidation, combination or exchange of Shares or other similar corporate change or in the event of any special distribution to the shareholders, the Committee shall make such equitable adjustments in the number of Restricted Shares as the Committee determines are necessary and appropriate. Any such adjustment shall be conclusive and binding for all purposes of the Plan. Tax Withholding . In order to enable the Company to meet any applicable withholding tax requirements arising as a result of the grant or vesting of the Restricted Shares, unless the Company receives from Employee no later than five business (5) days after the date that the applicable portion of the Restricted Shares vests (or, if withholding is required earlier than the vesting date due to a tax election by Employee or otherwise, within five (5) business days after the date of such tax election or other event) a check in an amount equal to the amount required to be withheld for tax purposes in connection with such vesting or other event, the Company shall withhold such amount of Restricted Shares or Vested Shares that otherwise would have vested or been delivered to Employee as necessary to pay the required tax withholding. The value of any Restricted Shares or Vested Shares to be withheld by the Company shall be the Fair Market Value on the date to be used to determine the amount of tax to be withheld. Restricted Shares Subject to Plan . The Restricted Shares awarded pursuant to the Plan are subject to all of the terms and conditions of the Plan, the terms of which are hereby expressly incorporated and made a part hereof. Any conflict between this Agreement and the Plan shall be controlled by, and settled in accordance with, the terms of the Plan. Employee acknowledges that Employee has received, read and understood the provisions of the Plan and agrees to be bound by its terms and conditions. Interpretation . Any dispute regarding the interpretation of this Agreement shall be submitted by Employee or by the Company forthwith to the Committee, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Committee shall be final and binding on the Company and on Employee. Not a Contract of Employment . This Agreement shall not be deemed to constitute an employment contract between the Company and Employee or to be a consideration or an inducement for the employment of Employee. Notices . Any notice required or permitted hereunder shall be given in writing and deemed delivered when (i) personally delivered, (ii) sent by facsimile transmission and a confirmation of the transmission is received by the sender, or (iii) three (3) days after being deposited for delivery with a recognized overnight courier, such as Federal Express, and addressed or sent, as the case may be, to the address or facsimile number set forth below or to such other address or facsimile number as such party may in writing designate. Further Instruments . The parties agree to execute such further instruments and to take such further actions as may be reasonably necessary to carry out the purposes and intent of this Agreement. Entire Agreement; Governing Law; Severability; etc. The Plan is incorporated herein by reference. This Agreement and the Plan constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Employee with respect to the subject matter hereof and thereof, and shall be interpreted in accordance with, and shall be governed by, the laws of The Bahamas, subject to any applicable United States federal or state securities laws. Should any provision of this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable. This agreement may be executed in two counterparts, each of which shall be deemed to be an original, and both of which, together, shall constitute the same agreement. IN WITNESS WHEREOF , the parties have caused this Agreement to be executed and delivered as of the date first above written. EMPLOYEE : STEINER LEISURE LIMITED By:   /s/ Stephen Lazarus   Stephen Lazarus Sr. V.P. and Chief Financial Officer Address and Facsimile Number: Address and Facsimile Number: c/o Steiner Management Services, LLC 770 South Dixie Hwy., Suite 200 Coral Gables, Florida 33146 Facsimile: (305) 358-7704  

  Exhibit 10.1   CONSULTING AGREEMENT THIRD AMENDED ADDENDUM   This Consulting Agreement Third Amended Addendum (the “Third Amended Addendum”) is entered into on January 9, 2006, to be effective as of January 1, 2005, and is a supplement to, and modification of, that certain Consulting Agreement (the “Original Agreement”) by and between SOURCECORP, Incorporated (f/k/a F.Y.I. Incorporated) (the “Company”) and David Lowenstein (“Consultant”), dated as of January 1, 2000.   1.             Fee Modification.  Effective January 1, 2005, Consultant’s aggregate compensation limitation under the Original Agreement of $250,000 for any calendar year shall be increased to $320,000 for any calendar year for services Consultant performs at the request of, and on behalf of, the Company.  The proviso of Section 1 (which relates to activities not subject to an hourly rate) of that certain Consulting Agreement Addendum dated as of March 6, 2003 shall remain in effect.   2.             Governing Laws.  This Third Amended Addendum shall in all respect be construed according to the laws of the State of Texas.   3.             Counterparts.  This Third Amended Addendum may be executed in two (2) or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument.   4.             Effect of Third Amended Addendum.  Except as specifically amended by this Third Amended Addendum, all provisions of the Original Agreement (as amended by the Consulting Agreement Addendum dated effective as of March 6, 2003, the Consulting Agreement Amended Addendum dated effective as of October 1, 2004, and the Consulting Agreement Second Amended Addendum dated effective as of December 18, 2004) remain in full force and effect in accordance with their express terms.   IN WITNESS WHEREOF, the parties hereto have executed this Third Amended Addendum as of the day and year first above written.   SOURCECORP, Incorporated   CONSULTANT (f/k/a F.Y.I. Incorporated)                 By:       /s/ Thomas C. Walker           /s/ David Lowenstein     Thomas C. Walker   David Lowenstein     Chairman and Chief Development Officer         --------------------------------------------------------------------------------

Israel Technology Acquisition Corp. 7 Gush Etzion, 3rd Floor Givaat Shmuel Israel 54030 To: Southpoint Master Fund LP c/o Southpoint Capital Advisors 623 Fifth Avenue; Suite 2503 New York, NY, 10022 December 7, 2006 CERTIFICATION 1. In furtherance and in addition to the Certification date June 19, 2006 (the "Prior Certification") provided to you by the undersigned in connection with that certain Loan Agreement by and among you, IXI Mobile, Inc. ("IXI US"), a Delaware corporation and IXI Mobile (R&D) Ltd. (“IXI Israel”), an Israeli company and a wholly owned subsidiary of IXI US (the "Loan Agreement"), the undersigned hereby certifies that its Board of Directors (including any required committee or subgroup of its Board of Directors) has, as of the date of this Certification, unanimously granted its approval to IXI US to enter into an Amendment to the Loan Agreement in the form attached hereto as Exhibit A (the "Amendment") and has further unanimously approved the execution by ITAC of this Certification. 2. Subject to and conditioned upon the consummation of the ITAC/IXI Merger, ITAC hereby certifies and agrees that its certification and agreement in the Prior Certification to assume all of IXI US' and IXI Israel’s obligations, agreements, undertakings, representations and warranties pursuant to the Loan Agreement, as more specifically described in the Prior Certification, will apply to all such, agreements, undertakings, representations and warranties pursuant to the Loan Agreement in their amended terms as set forth in the Amendment. 3. For and in consideration of ITAC providing the foregoing Certification to Southpoint, Southpoint, by accepting this Certification, hereby agrees that its waiver of any Claims in or to any monies in the Trust Fund (as such terms are defined in the Prior Certification) as more fully set forth in the Prior Certification continues in full force and effect. 4. This Certification is provided as an inducement to you to enter into the Amendment. 5. This Certification shall be governed by and construed in accordance with the laws of Delaware without regard to the conflicts of laws provisions thereof. [Signature Page Follows]     --------------------------------------------------------------------------------                 ISRAEL TECHNOLOGY ACQUISITION CORP.               By:      /s/ Israel Frieder                                          Name: Israel Frieder               Title: Chairman and Chief Executive Officer   Accepted as of the date hereof:       SOUTHPOINT MASTER FUND, LP       By:       Southpoint GP, LP, its general partner                    By:       Southpoint GP, LLC                    By: /s/ Robert W. Butts                           Name: Robert W. Butts                Title: Manager                        By: /s/ John S. Clark, II                Name: John S. Clark, II                Title: Manager   2 --------------------------------------------------------------------------------  

Exhibit 10.2 STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT (this “Agreement”) dated and effective as of December 20, 2006, is entered into by and between INTERNET COMMERCE CORPORATION, a Delaware corporation (the “Buyer”), and DISTRESSED/HIGH YIELD TRADING OPPORTUNITIES, LTD., a British Virgin Island limited company (the “Seller”). WHEREAS, the Seller owns 5,000 shares of Series C Preferred Stock of Internet Commerce Corporation (the “Company”) and 190,556 shares of the Class A Common Stock of the Company; and WHEREAS, the Buyer desires to purchase from the Seller 2,500 shares of the Series C Preferred Stock of the Company and 95,278 shares of the Class A Common Stock of the Company (together, the “Securities”), and the Seller desires to sell to the Buyer the Securities, on the terms and conditions herein contained. NOW, THEREFORE, for the good and valuable consideration described herein, the parties agree as follows: 1.             PURCHASE OF SHARES (a)           On the terms contained in this Agreement, the Buyer does hereby purchase from the Seller, and the Seller does hereby sell to the Buyer, the Securities, for an aggregate purchase price of $1,437,500 (the “Purchase Price”).  On the Closing Date, (i) the Seller shall deliver to the Buyer (or its designee) executed stock powers or other instruments of transfer with respect to all of the Securities that are reasonably necessary to transfer ownership of the Securities to the Buyer, and (ii) the Buyer shall pay the Purchase Price to the Seller by wire transfer of an amount of immediately available funds equal to the Purchase Price to an account designated by the Seller. (b)           Other than the following representations and warranties, the Buyer is purchasing the securities “as is”: (i)                                     The Seller is duly organized, validly existing and in good standing under the laws of the British Virgin Island; (ii)                                  The Seller has made no assignment, transfer, or conveyance to any party of the Securities, in whole or in part; (iii)                               The Seller is the owner of, and authorized and entitled to sell, the Securities free and clear of any and all liens, claims, security interests or encumbrances of any kind or nature whatsoever; 1 --------------------------------------------------------------------------------   (iv)                              The Seller has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and this Agreement constitutes a valid, legal and binding obligation of the Seller, enforceable against the Seller in accordance with its terms and conditions; and (v)                                 Neither the execution, delivery or performance of this Agreement nor consummation of the transactions contemplated hereby will violate or contravene any law, rule, regulation, order, agreement or instrument affecting the Seller;  (c)                                     The Closing Date shall be the date mutually agreeable to the Seller and the Buyer, but in no event later than 3 days after the date of execution of this Agreement by all parties hereto. 2.           MISCELLANEOUS. (a)           Notice.  Any notice required under this Agreement shall be in writing addressed to the party at the address of record for such party provided in this Agreement or in documents provided herewith. All notices will be deemed to have been given upon personal delivery or upon deposit in the U.S. Mail, postage prepaid, and properly addressed to the party to be notified. Either party may change its address for notice by a notice given to the other party as provided for herein. (b)           Entire Agreement; No Oral Modification. This Agreement supersedes all previous agreements between the parties, contains the whole of the agreement between the parties, and may not be modified except in writing signed by all parties. (c)           Governing Law. The substantive and procedural laws of the State of New York without reference to its choice-of-law provisions shall control the interpretation and enforcement of this Agreement, including but not limited to all issues concerning liabilities and damages. (d)           Counterparts. 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 agreement. This Agreement may also be executed by facsimile signature. This Agreement will be binding and enforceable when executed by all parties. (e)         Successors and Assignees. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by the parties hereto, and their heirs, legal representatives and assignees. (f)          Authorization. The parties hereto each represent and warrant that any officers signing this Agreement on behalf of a party have authority to enter into this Agreement on that party’s behalf and to bind that party fully to the agreements, terms and conditions contained herein. 2 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above.   BUYER:       INTERNET COMMERCE CORPORATION       By: /s/ Glen Shipley   Name: Glen Shipley   Title: CFO               SELLER:       DISTRESSED/HIGH YIELD TRADING OPPORTUNITIES, LTD.       By: /s/ Scott A. Stagg   Name: Scott A. Stagg   Title: Portfolio Manager   3 --------------------------------------------------------------------------------

Exhibit 10.3   [g68543kgi001.jpg]     450 WEST 33RD STREET   NEW YORK, NY 10001   212 884 2000 P   212 884 2396 F   NEW YORK & COMPANY 450 West 33rd Street New York, NY 10001     Robert Luzzi   Re:  Letter Agreement of Employment   Dear Bob:   This letter agreement (this “Agreement”) sets forth the terms and conditions of your employment, and your employment relationship, with Lerner New York, Inc. (the “Company”).  Your execution of this Agreement will represent your acceptance of all of the terms set forth below and will supercede any other Letter Agreement of Employment entered into prior to this Agreement.   1.             Nature of Agreement and Relationship.  This Agreement does not represent an employment contract for any specified term.  Your employment relationship thus will remain “at-will,” meaning that, subject to the terms hereof, either party to this Agreement may terminate the employment relationship at any time for any lawful reason.   2.             Job Title and Duties.  Your job title will be Executive Vice President, Creative Services.  You will be expected to devote all of your full time efforts to the performance of the duties and responsibilities normally associated with this position, including those from time-to-time that may be assigned to you by your Supervisor, the President, the Chief Executive Officer, the Chief Operating Officer or the Board of Directors of the Company (or the designee of any of the foregoing).   3.             Salary.  For the 12-month period ending on the last Saturday of each January (the last day of the fiscal year), you will receive a base salary at the rate of $485,000 per annum (“Base Salary”), subject to the remaining provisions of this Section.   For the remainder of the current fiscal year starting on the date of this Agreement, your Base Salary will be pro rated based on the number of days remaining in such fiscal year divided by 365.  At the Company’s sole discretion, your Base Salary may be increased or decreased based on your performance and the performance of the business.  You will be paid in accordance with the Company’s normal payroll policies and practices, with all applicable deductions being withheld from your paychecks.   4.             Bonus.  You will be eligible to participate in the Company’s then current bonus plan, in accordance with its terms and conditions, and to receive performance-based bonuses pursuant to any formula that may be established.  For the Company’s current fiscal year, your bonus target for the spring bonus (relating to the Company’s results for the first and second fiscal quarters of each fiscal year) will be 24% of your Base Salary and for the fall bonus (relating to the Company’s results for the third and fourth fiscal quarters of each fiscal year) will be 36% of your Base Salary.  Any bonus will be payable in the month following the last quarter to which that bonus relates.  All bonuses are determined at the Company’s sole discretion, and the Company   1 --------------------------------------------------------------------------------   has the sole discretion to modify or terminate any bonus plan and that plan will govern your right, if any, to a bonus payment upon termination of your employment.   5.             Stock Options and Other Long-Term Incentives.  You will be eligible to receive awards under stock option, restricted stock or other equity-based long-term incentive plans established by the Company (or an Affiliate) that cover executive officers of the Company.  The term “Affiliate” means any corporation, partnership, limited liability company or other entity (other than the Company) that controls or is controlled by the Company, whether directly or indirectly, such as a parent company or subsidiary.  All equity awards described in this paragraph are determined at the Company’s sole discretion, and the Company has the sole discretion to modify or terminate any stock option, restricted stock or other equity-based long-term incentive plan and that plan will govern your rights, if any, relating to any equity award(s) you have received, or may be entitled to receive, upon termination of your employment.   6.             Employee Benefits.  You will be entitled to participate in all employee benefits plans, practices and programs maintained by the Company and made available to senior executives generally and as may be in effect from time to time (the “Benefits Plans”).  Your participation in the Benefits Plans will be on the same basis and terms as are applicable to senior executives of the Company generally.  Benefits Plans include, but are not limited to, savings and retirement plans, deferred compensation, health and prescription drug benefits, disability benefits, other insurance programs, vacation and other leave, merchandise discounts and business expense procedures.  Plan documents setting forth terms of certain of the Benefits Plans are available upon request, which plan documents control all questions of interpretation concerning applicable Benefits Plans, including your rights, if any, upon termination of your employment.  The Benefits Plans are subject to modification or termination by the Company at any time, at its sole discretion, in accordance with their terms.   7.             Severance Pay.  Upon your termination of employment by the Company and all Affiliates without Cause (as defined below), but subject to your performance of all post-employment obligations set forth in this Agreement and also subject to your signing a release of claims in a form acceptable to the Company, you will be entitled to receive severance pay for twelve (12) months “Severance Period” at your final Base Salary (“Severance Pay”), beginning the first pay period following your separation date and ending upon the earlier of:  (i)  your receipt of 52 such payments or (ii) your first day of employment with another employer, whichever is earlier.  If you obtain employment at an annual salary that is lower than your final Base Salary, you will continue to receive the differential between the two rates of pay for the balance of the 52 weeks. This Severance Pay, which will be subject to applicable deductions required by law, will be paid on the Company’s regular payroll dates for the balance of the twelve (12) month “Severance Period” following your termination date, as outlined above.  For purposes of this Agreement, “Cause” means: (i) your wrongful misappropriation of the Company’s or an Affiliate’s assets of a material value; (ii) any physical or mental impairment that renders you incapable of performing the essential functions of your position with reasonable accommodations; (iii) your conviction of, or pleading “guilty” or “no contest” to, a felony; (iv) your intentionally causing the Company or an Affiliate to violate a material local state or federal law in any material respect; (v) your willful refusal to comply with a significant, lawful and proper policy, directive or decision of your supervisor or the Board in furtherance of a legitimate business purpose or your willful refusal to perform the duties reasonably assigned to you consistent with your functions, duties and responsibilities, in each case, in any material respect, and only if not remedied within thirty (30) days after receipt of written notice from the Company; or (vi) your breach of this Agreement, in any material respect, not remedied within thirty (30) days after receipt of written notice from the Company.   8.             Confidential Information, Intellectual Property.   8.1           Confidentiality.  You agree to not disclose, distribute, publish, communicate or in any way cause to be disclosed, distributed, published, or communicated in any way or at any time, Confidential Information (as defined herein), or any part of   2 --------------------------------------------------------------------------------   Confidential Information, to any person, firm, corporation, association, or any other operation or entity except on behalf of the Company in performance of your duties and responsibilities for the Company, and then only in a fashion consistent with protecting the Confidential Information from unauthorized use or disclosure, except as otherwise approved by the Company.  You further agree not to use or permit the reproduction of any Confidential Information except on behalf of the Company in your capacity as an employee of the Company.  You agree to take all reasonable care to avoid the unauthorized disclosure or use of any Confidential Information.  You assume responsibility for and agree to indemnify and hold harmless the Company from and against any disclosure or use of the Confidential Information in violation of this Agreement.   8.2           Confidential Information.  For the purpose of this Agreement, “Confidential Information” shall mean any written or unwritten information which relates to and/or is used in the Company’s business (including, without limitation, information related to the names, addresses, buying habits and other special information regarding past, present and potential customers, employees and suppliers of the Company; customer and supplier contracts and transactions or price lists of the Company and suppliers; all agreements, files, books, logs, charts, records, studies, reports, processes, schedules and statistical information relating to the Company; all products, services, programs and processes sold, and all computer software licensed or developed by the Company; data, plans and specifications related to present and/or future development projects of the Company; financial and/or marketing data respecting the conduct of the present or future phases of business of the Company; computer programs, computer- and/or web-based training programs, systems and/or software; ideas, inventions, trademarks, business information, know-how, processes, techniques, improvements, designs, redesigns, creations, discoveries and developments of the Company; and finances and financial information of the Company) which the Company deems confidential and proprietary, which is generally not known to others outside the Company, or which gives or tends to give the Company a competitive advantage over persons who do not possess such information or the secrecy of which is otherwise of value to the Company in the conduct of its business regardless of when and by whom such information was developed or acquired, and regardless of whether any of these are described in writing, copyrightable or considered copyrightable, patentable or considered patentable.  “Confidential Information” shall not include general industry information or information which is publicly available or otherwise known to those persons outside the Company working in the area of the business of the Company or is otherwise in the public domain without breach of this Agreement or information which you have lawfully acquired without an obligation to maintain the information in confidence from a source other than the Company.  “Confidential Information” specifically includes information received by the Company from others, including the Company’s clients, that the Company has an obligation to treat as confidential and also includes any confidential information acquired or obtained by you while in the employment of any of the Company’s subsidiary or affiliated companies or any company which has been acquired by the Company.   8.3           Invention Ownership.  With respect to information, inventions and discoveries developed, made or conceived by you, either alone or with others, at any time during your employment by the Company and whether or not within normal working hours, arising out of such employment or pertinent to any field of business or research in which, during such employment, the Company is engaged or (if such is known to or ascertainable by you) is considering engaging, you agree:   3 --------------------------------------------------------------------------------   (a)           that all such information, inventions and discoveries, whether or not patented or patentable, shall be and remain the sole property of the Company;   (b)           to disclose promptly to an authorized representative of the Company all such information, inventions and discoveries and all information in your possession as to possible applications and uses thereof;   (c)           not to file any patent applications relating to any such invention or discovery except with the prior consent of an authorized representative of the Company; and   (d)           at the request of the Company, and without expense or additional compensation to you, to execute such documents and perform such other acts as the Company deems necessary, to obtain patents on such inventions in a jurisdiction or jurisdictions designated by the Company, and to assign to the Company or its designee such inventions and all patent applications and patents relating thereto.   Both the Company and you intend that all original works of authorship within the purview of the copyright laws of the United States authored or created by you in the course of your employment with the Company will be works for hire within the meaning of such copyright laws.   8.4           Confidentiality of Inventions; Return of Materials and Confidential Information.  With respect to the information, inventions and discoveries referred to in Section 8.3, and also with respect to all other information, whatever its nature and form and whether obtained orally, by observation, from graphic materials, or otherwise (except such as is generally available through publication) obtained by you during or as a result of your employment by the Company and relating to any product, service, process, or apparatus or to any use of any of them, or to materials, tolerances, specifications, costs (including manufacturing costs), prices, or to any plans of the Company, you agree:   (a)           to hold all such information, inventions and discoveries in strict confidence and not to publish or otherwise disclose any portion thereof except with the prior consent of an authorized representative of the Company;   (b)           to take all reasonable precautions to ensure that all such information, inventions, and discoveries are properly protected from access by unauthorized persons;   (c)           to make no use of any such information, invention, or discovery except as required or permitted in the performance of your duties and responsibilities for the Company; and   (d)           upon termination of your employment by the Company, or at any time upon request of the Company, to deliver to the Company all graphic materials and all substances, models, prototypes and the like containing or relating to Confidential Information or any such information, invention, or discovery, all of which graphic materials and other things shall be and remain the sole property of the Company.  The term “graphic materials” includes letters, memoranda, reports, notes, notebooks, books of account, drawings, prints, specifications, formulae, data printouts, microfilms, magnetic tapes and disks and other documents and recordings, together with all copies thereof.   4 --------------------------------------------------------------------------------   9.             Non-Solicitation.  Regardless of whether you are eligible to receive Severance Pay, you agree that, if your employment with the Company ends for any reason, you will not, for a period if eighteen (18) months following such termination of employment, (i) directly or indirectly, either for yourself or for any other person, business, company or entity, hire from the Company or any Affiliate, or attempt to hire, divert or take away from the Company or any Affiliate, any of the then current officers or employees of the Company or any Affiliate, (ii) interfere with or harm, or attempt to interfere with or harm, the relationship of the Company or any Affiliate with any person who at any time was an employee, customer or supplier of the Company or any Affiliate or otherwise had a business relationship with the Company or any Affiliate, or (iii) unless compelled by law to do so, directly or indirectly, knowingly make any statement or other communication that impugns or attacks the reputation or character of the Company or any Affiliate, or damages the goodwill of the Company or any Affiliate, or knowingly take any action, directly or indirectly, that would interfere with any contractual or customer or supplier relationships of the Company or any Affiliate.   10.           Non-Competition. If you resign your employment, or if your employment is terminated with Cause, for a period of eighteen (18) months following such employment termination, you may not and will not, within the United States of America, directly or indirectly, without the prior written consent of the Company’s chief executive officer or its Board of Directors (which may be given or withheld in its sole discretion), own, manage, operate, join, control, be employed by, consult with or participate in the ownership, management, operation or control of, or be connected with (as a stockholder, partner or otherwise) any business, partnership, firm, company, corporation or other entity engaged in the retail business of women’s fashion apparel,  accessories and related products or any other product sold or intended to be sold by the Company or an Affiliate during your employment with the Company.  Notwithstanding the foregoing, your beneficial ownership after your termination of employment with the Company, either individually or as a member of a group, of not more than two percent (2%) of the voting stock of any publicly held corporation shall not be a violation of this provision.   11.           Remedies.  You acknowledge that money will not adequately compensate the Company for the substantial damages that will arise upon the breach of any provision of Sections 8, 9 and 10 of this Agreement and that the Company would have no adequate remedy at law.  For this reason, any claim the Company may make that you have breached or are threatening to breach Sections 8, 9, or 10 is not subject to mandatory arbitration under Section 14.  Instead, if you breach or threaten to breach any provision of Sections 8, 9 or 10, the Company will be entitled, in addition to other rights and remedies, to specific performance, injunctive relief and other equitable relief to prevent or restrain any breach or threatened breach of Sections 8, 9 or 10.  The Company may obtain such relief from (i) any court of competent jurisdiction, (ii) an arbitrator acting pursuant to Section 14 hereof,  or (iii) a combination of the two (e.g., by simultaneously seeking arbitration under Section 14 and a temporary injunction from a court pending the outcome of the arbitration).  It shall be the Company’s sole and exclusive right to elect which approach to use to vindicate its rights.  You also agree that in the event of a breach (or any threat of breach) the Company shall be entitled to obtain an immediate injunction and restraining order to prevent such breach and/or threatened breach and/or continued breach, without having to prove damages, and to obtain all costs and expenses, including reasonable attorneys’ fees and costs.  In addition, the existence of any claim or cause of action by you against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the restrictive covenants of this Agreement.   12.           Acknowledgment of Reasonableness.  You and the Company specifically agree that the provisions of the restrictive covenants contained in this Agreement, including the post-employment covenants regarding non-solicitation and non-competition, are reasonable and that the Company would not have entered into this Agreement but for the inclusion of such covenants.  You understand that the Company’s business is nationwide, and, therefore, a nationwide restrictive covenant is reasonable.  If a court or arbitrator determines that any provision of any such restrictive covenant is unreasonable, whether in period of time, geographical area, or otherwise, you and the Company agree that the covenant shall be   5 --------------------------------------------------------------------------------   interpreted and enforced to the maximum extent which a court or arbitrator deems reasonable.  In addition, you and the Company authorize any such court or arbitrator to reform these restrictions to the minimum extent necessary.   13.           Company Property.  Upon your termination of employment for any reason, you will promptly return to the Company all Company-related documents and Company property within your possession or control.   14.           Arbitration of Disputes.  Except as set forth in Section 11, any dispute, claim or difference arising out of or in relation to your employment will be settled exclusively by binding arbitration administered by the American Arbitration Association under its National Rules for the Resolution of Employment Disputes before a single arbitrator. The Executive expressly understands and agrees that claims subject to arbitration under this section include asserted violations of the Employee Retirement and Income Security Act of 1974; the Age Discrimination in Employment Act; the Older Worker’s Benefit Protection Act; the Americans with Disabilities Act; Title VII of the Civil Rights Act of 1964 (as amended); the Family and Medical Leave Act; and any law prohibiting discrimination, harassment or retaliation in employment, whether based on federal, state or local law; any claim of breach of contract, tort, promissory estoppel or detrimental reliance, defamation, intentional infliction of emotional distress; or the public policy of any state, or any other federal, state or local law. The arbitration will be held in New York, New York unless you and the Company (each a “Party,” and jointly, the “Parties”) mutually agree otherwise.  To the extent permitted by law, each Party will bear its own costs and fees of the arbitration, and other fees and expenses of the arbitrator will be borne equally by the Parties; provided, however, that the arbitrator will be empowered to require any one or more of the Parties to bear all or any portion of fees and expenses of the Parties and/or the fees and expenses of the arbitrator in the event that the arbitrator determines such Party has acted in bad faith.  The arbitrator will have the authority to award any remedy or relief that a court of the State of New York could order or grant.  The decision and award of the arbitrator will be binding on all Parties.  Either Party to the arbitration may seek to have the ruling of the arbitrator entered in any court having jurisdiction thereof.  Each Party agrees that it will not file suit, motion, petition or otherwise commence any legal action or proceeding for any matter which is required to be submitted to arbitration as contemplated herein, except in connection with the enforcement of an award rendered by an arbitrator and except to seek the issuance of an injunction or temporary restraining order pending a final determination by the arbitrator.   15.           Post-Termination Cooperation.  As is required of you during employment, you agree that during and after employment with the Company you will, without expense or additional compensation to you, cooperate with the Company or any Affiliate in the following areas:   15.1         Cooperation With the Company.  You agree [a] to be reasonably available to answer questions for the Company’s (or any Affiliate’s) officers regarding any matter, project, initiative or effort for which you were responsible while employed by the Company and [b] to cooperate with the Company (and with any Affiliate) during the course of all third-party proceedings arising out of the Company’s (or any Affiliate’s) business about which you have knowledge or information.  For purposes of this Agreement, [c] “proceedings” includes internal investigations, administrative investigations or proceedings and lawsuits (including pre-trial discovery and trial testimony) and [d] ”cooperation” includes [i] your being reasonably available for interviews, meetings, depositions, hearings and/or trials without the need for subpoena or assurances by the Company (or any Affiliate), [ii] providing any and all documents in your possession that relate to the proceeding, and [iii] providing assistance in locating any and all relevant notes and/or documents.   15.2         Cooperation With Media.  You agree not to communicate with, or give statements to, any member of the media (including print, television or radio media) relating to   6 --------------------------------------------------------------------------------   any matter (including pending or threatened lawsuits or administrative investigations) about which you have knowledge or information (other than knowledge or information that is not Confidential Information as defined in Section 8.2) as a result of employment with the Company.  You also agree to notify the Chief Executive Officer or his designee immediately after being contacted by any member of the media with respect to any matter affected by this section.   16.           Entire Agreement.  This Agreement constitutes your entire agreement with the Company relating to the subject mater hereof, and superseded in its entirety any and all prior agreements, understandings or arrangements with the Company.   17.           Governing Law.  All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.   18.           Survival of Provisions.  Sections 8 to 12, 14, 15, 17 and 18 will survive the termination of your employment for any reason and shall not be affected by any transfer(s) between the Company and its Affiliate(s).   19.           Understandings and Representations.  You should not sign this Agreement until you understand its terms and conditions.  Your execution of this Agreement represents your acknowledgement that you have take all steps you believe necessary, including consultation with financial and/or legal advisors of your choice, to understand this Agreement.     Sincerely,                         By:   /s/ Richard P. Crystal   Dated: March 13, 2006 Name: Richard Crystal         Chief Executive Officer                             /s/ Robert Luzzi   Dated: March 13, 2006 Robert Luzzi       Executive Vice President, Creative         7 --------------------------------------------------------------------------------

  Exhibit 10.1 BOB EVANS FARMS, INC. PERFORMANCE INCENTIVE PLAN NOTICE OF ELIGIBILITY AND PARTICIPATION AGREEMENT       TO:   [Participant’s Name] FROM:   Bob Evans Farms, Inc. Compensation Committee (“Committee”) DATE:   ______________________________________________ RE:   Bob Evans Farms, Inc. Performance Incentive Plan (“PIP”) The Committee has selected you to participate in the PIP for the fiscal year ending ___, 200_ (“200___ Performance Period”) and has established your “Target Award” at ___% of the base salary you are paid during the 200___ Performance Period, although the actual amount of your “PIP Award” will be calculated under Sections 1.00 and 2.00. Also, you must satisfy the terms and conditions described in Section 3.00 to receive your PIP Award. Although you may earn this award under the PIP, any equity grants you receive will be made under the Bob Evans Farms, Inc. First Amended and Restated 1998 Stock Option and Incentive Plan or a similar Company plan (“Equity Plan”). 1.00 Earning Your Option After the 200___ Performance Period ends, 25% of the dollar value of your Target Award will be paid as an “Option” to buy Shares through the Equity Plan. The number of Shares you may buy will be [1] 25% of the dollar value of your Target Award, divided by [2] the fair market value of the Option (determined by using the Black-Scholes valuation model and discounted for vesting conditions) and [3] rounded up to the next whole Share. You also will receive an award agreement describing the Option’s exercise price (which will be equal to the “fair market value” as defined in the Equity Plan (“FMV”) of a Share on the Option’s grant date), when the Option may be exercised and any other terms and conditions affecting the Option. 2.00 Earning Your Restricted Shares The rest of your PIP Award will be paid as “Restricted Shares” through the Equity Plan if [insert performance goals]. The number of Restricted Shares you receive (if any) will be calculated first by determining the value of the award you have earned, which will be based on the following table (percentages for performance between the levels shown will be interpolated to the nearest one-hundredth of a percent), but may not be larger than $2,500,000:                                                     % of Goal                                           120% or   Attained   Less than 80%   80%   90%   100%   110%   More     Payout %   0%   37.5% of your   56.25% of your   75% of your   93.75% of your   112.5% of your             Target Award   Target Award   Target Award   Target Award   Target Award   After the 200___ Performance Period ends and the value of your earned award is calculated, you will receive a number of Restricted Shares equal to [1] the value of your earned award, divided by [2] the FMV of a Share on the date the Restricted Shares are granted (discounted to reflect vesting requirements) and [3] rounded up to the next whole Share. You also will receive an 1 --------------------------------------------------------------------------------   award agreement describing when the Restricted Shares will vest and any other terms and conditions affecting them. 3.00 Termination of Employment In addition to meeting the requirements described in Sections 1.00 and 2.00, you will receive the Options and Restricted Shares only if you are employed by the Company or any of its affiliates through the entire 200___ Performance Period and on the date the Committee grants Restricted Shares and Options for the 200___ Performance Period under the PIP. However, if, after the 200___ Performance Period but before the Options and Restricted Shares for the 200___ Performance Period are granted, you die, become “disabled” (as determined by the Committee in its sole discretion) or “retire” (as defined in the Equity Plan) or if your employment ends for another reason that the Committee believes is not violative of the purpose of the PIP, you (or your beneficiary) will be paid cash (but not Options or Restricted Shares) equal to the value of the PIP Award that you earned during the 200___ Performance Period. 4.00 Signature By signing below, you [1] agree to be bound by the terms and conditions of the PIP and the Equity Plan, [2] acknowledge that you understand the terms of your award and the conditions that you must meet before you receive anything under the PIP or the Equity Plan and [3] without any consideration, agree to accept any changes needed to avoid penalties that might be imposed on you under Section 409A of the Internal Revenue Code.                     Date   [Participant’s Name]       RECEIVED BY                   Authorized Company Representative                   Print Name                   Date     2

  Exhibit 10.2 AGREEMENT      This agreement (the “Agreement”) is made and entered into as of September ___, 2006 by and between ___ (“Seller”) and PawnMart, Inc., a Nevada corporation (“Buyer”). Seller and Buyer are hereinafter sometimes referred to individually as a “party” and collectively as the “parties.”      WHEREAS, Integrity Mutual Funds, Inc., a North Dakota corporation (the “Company”), currently has 3,050,000 Series A Convertible Preferred Shares (the “Shares”) issued and outstanding; and      WHEREAS, Seller is the record and beneficial owner of ___ Shares; and      WHEREAS, Ancora Securities, Inc. (“Broker”) has entered into an agreement with Buyer to deliver certificates representing a minimum of 2,000,000 Shares, each endorsed in blank or accompanied by a stock power executed in blank, in proper form for transfer to Seller; and      WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, all of Seller’s Shares on the terms herein described;      NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is acknowledged by the parties, the parties agree as follows:      1. Sale of Shares. Subject to the terms and conditions of this Agreement, Seller shall sell to Buyer, and Buyer shall purchase from Seller, the Shares.      2. Price. The consideration to be paid by Buyer to Seller for the Shares is $0.50 per Share (the “Payment”) for a total of $___.      3. Closing. In the absence of contrary agreement between the parties, the sale shall be closed (the “Closing”) at the offices of Holland, Johns, Schwartz & Penny, L.L.P., 306 West Seventh Street, Suite 500, Fort Worth, Texas 76102, at a mutually agreeable time but in no event later than October 1, 2006.      4. Delivery at Closing.           (a) At the Closing Seller will deliver to Buyer the certificates and other instruments evidencing the Shares being purchased by Buyer duly endorsed in blank or accompanied by a stock power executed in blank in proper form for transfer.           (b) At the Closing, Buyer will deliver to Broker the Payment by wire transfer and Broker will forward the Payment to Seller.           (c) Seller will request the Company to issue the certificate evidencing the Shares free of any restrictive legend and will provide all reasonably necessary information and any opinion required by the Company in this regard.   --------------------------------------------------------------------------------        5. Seller’s Representations and Warranties. Seller represents and warrants to Buyer as of the date hereof and as of the date of the Closing as follows:           (a) Seller has full power and authority to enter into this Agreement and this Agreement constitutes a valid and legally binding obligation of Seller.           (b) Seller has and will have full power and authority to sell, assign and transfer the Shares and when the Shares are accepted for payment by Buyer, Buyer will acquire good, marketable and unencumbered title in and to the Shares, free and clear of any and all liens, restrictions, claims, charges and encumbrances. Seller will, upon request, execute any signature guarantees or additional documents deemed necessary by Buyer or the Company to complete the sale, assignment and transfer of the Shares.           (c) Seller has received all the information Seller considers necessary or appropriate to determine whether to sell the Shares.           (d) Seller has not relied on any information furnished by Broker, Richard Barone, Jerry Szilagyi or any other party, other than Buyer, in determining whether to sell the Shares.           (e) Seller is experienced in evaluating securities of companies similar to the Company, is represented by legal and/or investment advisory counsel with regard to this Agreement or has voluntarily elected to forego such counsel, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of selling his investment in the Shares.           (f) The provisions of this Section 5 shall survive the Closing.      6. Buyer’s Representations and Warranties. Buyer represents and warrants to Seller as follows:           (a) Buyer has full power and authority to enter into this Agreement and this Agreement constitutes a valid and legally binding obligation of Buyer.           (b) The Shares will be acquired for investment for Buyer’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and Buyer has no present intention of selling, granting any participation in, or otherwise distributing the same, except in compliance with applicable federal and state securities laws. Buyer does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person with respect to any of the Shares.           (c) Buyer is experienced in evaluating and investing in securities of companies similar to the Company, is represented by legal and/or investment advisory counsel with regard to this Agreement or has voluntarily elected to forego such counsel, can bear the economic risk of its investment in the Shares, and has such knowledge and -2- --------------------------------------------------------------------------------   experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Shares.           (d) The provisions of this Section 6 shall survive the Closing.      7. Severability. To the extent that any provision herein is inconsistent with or in violation of any applicable law, rule or regulation, such provision shall be deemed modified so as to comply with such applicable law, rule or regulation, and shall not otherwise affect any other provisions of this Agreement. Any provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining provisions of this Agreement or affecting the validity or enforceability of that provision or of any other provisions of this Agreement in any other jurisdiction.      8. Governing Law. The Agreement shall be construed in accordance with the laws of the State of Texas.      9. Further Actions. At any time and from time to time, each party agrees, without further consideration, to take such actions and to execute and deliver such documents as may be reasonably necessary to effect the purposes of this Agreement.      10. Counterparts. This Agreement 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. Advice of Counsel; Voluntary Agreement. Each of the parties agrees and represents that such party has been represented by each party’s own separate counsel with regard to the execution of this Agreement or that, if acting without counsel, such party has had adequate opportunity and understands the importance to such party’s interest of obtaining the advice of such party’s own separate counsel prior to the execution of this Agreement and has knowingly and freely waived the right to obtain advice of such party’s own separate counsel. Each party has fully read and understands this Agreement. This Agreement is the knowing and voluntary agreement of each of the parties.      12. Entire Agreement. This Agreement and the instruments called for by this Agreement constitute the whole agreement of the parties and supersedes any commitment, agreement, memorandum or understanding previously made by the parties, or any of them, with respect to the subject matter of this Agreement.      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.               SELLER:                           Name:                           Address:                                     -3- --------------------------------------------------------------------------------             BUYER:   PawnMart, Inc.               By:   /s/ Dwayne A. Moyers                   Dwayne A. Moyers, Executive Vice President               6400 Atlantic Boulevard, Suite 190 Norcross, Georgia 30071 -4-

                                                                                Exhibit 10.1 EMPLOYMENT AGREEMENT   THIS EMPLOYMENT AGREEMENT is made and entered into on this 3rd day of January, 2006, by and among SUMMIT FINANCIAL GROUP, INC. (“Summit FGI”), a West Virginia corporation, and ______________________ (the “Employee”).   WHEREAS, Summit FGI offers the terms and conditions of employment hereinafter set forth and Employee accepts such terms and conditions in consideration of his employment with the Company; and   NOW THEREFORE, in consideration of the promises and the respective covenants and agreements of the parties herein contained, Summit FGI and Employee contract and agree as follows:   1. Definitions. The following definitions in addition to any terms otherwise defined herein, shall apply to designated phrases used in this Employment Agreement.   (a) “Change of Control” means (i) a change of ownership of Summit FGI that would have to be reported to the Securities and Exchange Commission as a change of control, including but not limited to the acquisition by any “person” and/or entity as defined by securities regulations and law (other than Summit FGI or any Summit FGI employee benefit plan), of direct or indirect “beneficial ownership,” as defined by securities regulations and law, of twenty-five percent (25%) or more of the combined voting power of Summit FGI’s then outstanding securities; (ii) the failure during any period of three (3) consecutive years of individuals who at the beginning of such period constitute the Board of Directors of Summit FGI for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved by at least two-thirds (2/3) of the directors at the beginning of the period; or (iii) the consummation of a “Business Combination” as defined in Summit FGI’s Articles of Incorporation. In no event shall corporate restructuring of Summit FGI and/or its affiliates be construed as a “change in control” absent one or more of the conditions set forth above.       --------------------------------------------------------------------------------   (b) “Salary” means the Employee’s average of annual base salary and bonuses for the two full year periods immediately prior to the date of the consummation of a Change of Control or for two full year periods immediately preceding the effective date of termination, whichever is greater.   (c) “Good Cause” includes (i) Employee’s continued poor work performance after written notice of and reasonable opportunity to correct deficiencies; (ii) Employee’s behavior outside or on the job which affects the ability of management of Summit FGI or its affiliates or co-workers to perform their jobs and that is not corrected after reasonable written warning; (iii) Employee’s failure to devote reasonable time to the job that is not corrected after reasonable warning; (iv) any other significant deficiency in performance by Employee that is not corrected after reasonable warning; (v) Employee’s repeated negligence, malfeasance or misfeasance in the performance of Employee’s duties that can reasonably be expected to have an adverse impact upon the business and affairs of Summit FGI or its affiliates, provided, however that if in the reasonable judgment of the Board of Directors of Summit FGI, the damage incurred by Summit FGI as a result of Employee’s conduct is capable of being substantially corrected, Summit FGI will give Employee thirty (30) days’ advance notice of its intention to terminate for Good Cause under this section and a reasonable opportunity to cure the cause of the possible termination to the reasonable satisfaction of Summit FGI; (vi) Employee’s commission of any act constituting theft, intentional wrongdoing or fraud; (vii) the conviction of the Employee of a felony criminal offense in either state or federal court; (viii) any single act by Employee constituting gross negligence or that causes material harm to the reputation, financial condition or property of Summit FGI or its affiliates.   (d) “Disability” means unable as a result of a physical or mental condition to perform Employee’s normal duties from day to day in Employee’s usual capacity.   (e) “Retirement” means termination of employment by Employee in accordance with Summit FGI’s ’s retirement plan, including early retirement as approved by the Board of Directors of Summit FGI .   (f) “Good Reason” means a Change of Control in Summit FGI and; (i) a decrease in the total amount of Employee’s base salary below its level in effect on the date of consummation of the Change of Control, without Employee’s prior written consent; or (ii) a material change in Employee’s job duties and responsibilities without Employee’s prior written consent; or (iii) a geographical relocation of Employee to an office more than twenty (20) miles from Employee’s location at the time of the Change of Control without Employee’s prior written consent; or (iv) failure of Summit FGI to obtain assumption of this Employment Agreement by its/their successor; or (v) any purported termination of Employee’s employment which is not effected pursuant to a notice of termination required in Paragraph 15 of this Employment Agreement.       --------------------------------------------------------------------------------   (g) “Wrongful Termination” means termination of Employee’s employment prior to the expiration of twenty-four (24) months after consummation of a Change of Control for any reason other than at Employee’s option, Good Cause or the death, Disability or Retirement of Employee.   2. Term. The initial term of this Employment Agreement shall be for three (3) years, unless terminated sooner as provided herein. Absent termination by one of the parties as provided in this Employment Agreement, the term of this Employment Agreement shall automatically be extended for unlimited additional one (1) year term(s), in which case such term shall end one (1) year from the date on which it is last renewed.   3. Duties. Employee shall perform and have all of the duties and responsibilities that may be assigned to him from time to time by the Chief Executive Officer and/or the Board of Directors of Summit FGI; provided any material changes to Employee’s duties or obligations have been determined by the Board of Directors and/or the Chief Executive Officer in their reasonable discretion to be commensurate with duties and obligations that might be assigned to other similarly-situated executive officers of the Company. No later than five (5) days after the Company materially changes Employee’s duties or obligations, Employee will give the Company written notice if he believes a breach of this section has occurred and Company shall have a reasonable opportunity to cure the cause of the possible breach. Failure by Employee to give the notice required under this section shall constitute a waiver of his rights to claim a breach of this section arising from the specific duties or obligations then at issue. If it is determined through arbitration that the Company has breached this provision, then in consideration of the compensation and benefits set forth herein, Company and Employee agree that any damages received by Employee shall be limited to the amount Employee would be entitled to had he been terminated not for Good Cause under paragraph 6 of this Agreement.       --------------------------------------------------------------------------------   Employee’s duties shall include, but not be limited to, ________________ _____________________________. Employee shall devote his best efforts on a full-time basis to the performance of such duties.   4. Compensation and Benefits. During the term of this Employment Agreement, including any extensions, Summit FGI agrees that Employee’s compensation and benefits shall be as follows:   (a) Base Salary. Employee’s base salary shall be not less than One Hundred Fifty Thousand Dollars ($150,000.00) per year, paid on a semi-monthly basis. Employee shall be considered for salary increases on the basis of merit on an annual basis, with any future increases subject to the sole discretion of Summit FGI.   (b) Bonus. In addition to the base salary provided for herein, Employee shall be eligible for incentive-based bonuses subject to goals and criteria to be determined by the Board of Directors of Summit FGI.   (c) Paid Leave. Employee shall be entitled to all paid leave as provided by Summit FGI to other similarly-situated officers.   (d) Fringe Benefits. Except as specified below, Summit FGI shall afford to Employee the benefit of all fringe benefits afforded to all other similarly-situated employees of Summit FGI, including but not limited to retirement plans, stock ownership or stock option plans, life insurance, disability, health and accident insurance benefits or any other fringe benefit plan now existing or hereinafter adopted by Summit FGI, subject to the terms and conditions thereof.   (e) Business Expenses. Summit FGI shall reimburse Employee for reasonable expenses incurred by Employee in carrying out his duties and responsibilities, including but not limited to reimbursing civic club organization dues and reasonable expenses for customer entertainment. All such reimbursement shall be administered in accordance with the policies and practices established by Summit FGI from time to time.   (f) Automobile. Summit FGI shall provide Employee with the use of an automobile for the Employee’s business and personal use. Summit FGI shall be responsible for expenses associated with the vehicle including but not limited to taxes, gasoline, licenses, maintenance, repair, insurance and reasonable cellular phone charges. Employee shall be subject to tax for his personal use of the vehicle in accordance with the Internal Revenue Code and any applicable state law. Upon approval of the Chief Executive Officer of Summit FGI, appropriate replacement vehicles shall be provided in the future, but in no event less frequently than every third model year. If Employee is terminated not for Good Cause, or if Employee terminates his employment under this Agreement for Good Reason, or Summit FGI terminates Employee’s employment under this Agreement in a manner constituting Wrongful Termination, then Employee shall be entitled to retain the vehicle provided hereunder.   5. Termination for Good Cause. Subject to the provisions of Paragraph 7 below, if Employee terminates his employment with Summit FGI for any reason or Summit FGI terminates Employee’s employment for Good Cause, Employee shall not be entitled to any compensation other than that which is earned and payable as of the effective date of termination of employment.   6. Termination Not for Good Cause. Employee’s employment may be terminated by Summit FGI for any reason permitted under applicable law so long as Employee is given thirty (30) days advance written notice (or payment in lieu thereof). In the event of a termination pursuant to this paragraph, Employee shall be entitled to payment from Summit FGI equal to the base salary compensation set forth in this Agreement for the remaining term of the Agreement, or severance pay equal to 100% of his then current annual base salary, whichever is greater.   7. Termination Upon Change of Control.   (a) Except as hereinafter provided, if Employee terminates his employment with Summit FGI for Good Reason or Summit FGI terminates Employee’s employment in a manner constituting Wrongful Termination, Summit FGI hereby agrees to pay Employee a cash payment equal to Employee’s Salary, on a monthly basis, multiplied by the number of months between the effective date of termination and the date that is twenty-four (24) months after the date of consummation of Change of Control; provided that in no event shall Employee receive a lump sum payment that is less than 100% of his Salary. Employee shall have the right to terminate his employment without reason at his option by giving written notice of termination within six (6) months of a Change of Control. In this case, Employee will be entitled to receive a lump sum equal to seventy five percent of his Salary.       --------------------------------------------------------------------------------   (b) For the year in which Employee terminates his employment with Summit FGI for Good Reason or Summit FGI terminates Employee’s employment in a manner constituting Wrongful Termination, Employee will be entitled to receive his reasonable share of Summit FGI’s cash bonuses and employee benefit plan contributions, if any, allocated in accordance with existing policies and procedures and authorized by the Board of Directors of Summit FGI prior to the Change in Control. The amount of Employee’s cash incentive award shall not be reduced due to Employee not being actively employed for the full year.   (c) If compensation pursuant to Paragraph 7(a) is payable, Employee will continue to participate, without discrimination, for the number of months between the date of termination and the date that is twenty-four (24) months after the date of the consummation of the Change of Control, in benefit plans (such as retirement, disability and medical insurance) maintained after any Change of Control for employees, in general, of Summit FGI and/or any successor organization(s), provided Employee’s continued participation is possible under the general terms and conditions of such plans. In the event Employee’s participation in any such plan is barred, Summit FGI shall arrange to provide Employee with benefits substantially similar to those which Employee would have been entitled had his participation not been barred. Notwithstanding the foregoing, if Employee terminates his employment after a Change of Control without reason at his option, as permitted under Paragraph 7(a), then Employee shall be entitled to receive the employee benefits contemplated in this Agreement for a period of six (6) months after the date of termination. However, in no event will Employee receive from Summit FGI the employee benefits contemplated by this section if Employee receives comparable benefits from any other source.       --------------------------------------------------------------------------------   8. Other Employment. Employee shall not be required to mitigate the amount of any payment provided for in this Employment Agreement by seeking other employment. The amount of any payment provided for in this Employment Agreement shall not be reduced by any compensation earned or benefits provided (except as set forth in Paragraph 7(c) above) as the result of employment by another employer after the date of termination.   9. Rights of Summit FGI Prior to the Change of Control. This Employment Agreement shall not affect the right of Summit FGI to terminate Employee, or to reduce the salary or benefits of Employee, with or without Good Cause, prior to any Change of Control; provided, however, any termination for any reason other than at Employee’s option, Good Cause or the death, Disability or Retirement of Employee that takes place after discussions have commenced that result in a Change of Control shall be presumed to be a Wrongful Termination, absent clear and convincing evidence to the contrary.   10. Noncompetition and Nonsolicitation. In consideration of the covenants set forth herein, including but not limited to the compensation set forth in Paragraphs 4, 6 and 7 above, Employee agrees as follows:   (a) For the entire duration of Employee’s employment with Summit FGI and for two (2) years following the termination of such employment for any reason by either Employee or Summit FGI (the “Restricted Period”), Employee shall not (i) within a seventy-five (75) mile radius of Summit FGI and/or its affiliates directly or indirectly engage in any business or activity of any nature whatsoever that is competitive with the business of Summit FGI or its affiliates or (ii) sell or solicit the sale of, any services or products related thereto, directly or indirectly, to any of Summit FGI’s or its affiliates’ customers or clients within the State of West Virginia, the Commonwealth of Virginia or any other states in which Summit FGI and/or its affiliates conducts such business or sells services in the future. Notwithstanding the foregoing, this noncompetition covenant shall not apply to the business and activities conducted by Summit Mortgage, a division of Shenandoah Valley National Bank, unless such business and activities are conducted in the State of West Virginia, Virginia or any other state in which other affiliates of Summit FGI also engage in any business or activity or sell or solicit services in the future.       --------------------------------------------------------------------------------   (b) Without limitation of the foregoing, during the Restricted Period, Employee shall not serve as a proprietor, partner, officer, director, stockholder, employee, sales representative or consultant for any organization, company or business entity of any type that engages in any business or activity of any nature whatsoever described in Paragraph 10(a) above, provided however that this provision will not prohibit Employee from (i) owning bonds, non-voting preferred stock or up to five percent (5%) of the outstanding common stock of any such entity if such common stock is publicly traded, or (ii) accepting a position with a nationally- recognized professional services firm, provided that in such capacity, Employee does not render services, directly or indirectly, to any client or customer of such firm that engages in any business or activity described in Paragraph 10(a), above.   (c) Employee acknowledges and agrees that in the event of the breach or threatened breach of this provision, the harm and damages that will be suffered by Summit FGI are not susceptible of calculation or determination with a reasonable degree of certainty, and cannot be fully remedied by an award of money damages or other remedy at law. Employee further acknowledges and agrees that considering Employee’s relevant background, education and experience, Employee will be able to earn a livelihood without violating the foregoing restrictions. In addition to any and all other rights and remedies available to Summit FGI in the event of any threatened, actual or continuing breach of this covenant not to compete, Employee consents to and acknowledges Summit FGI’s right and option to seek and obtain in any court of competent jurisdiction a preliminary and/or permanent injunction in respect of any threatened, actual or continuing breach of the covenant not to compete set forth herein.   (d) In the event that this provision shall be deemed by any court or body of competent jurisdiction to be unenforceable in whole or in part by reason of its extending for too long a period of time, or too great a geographical area or over too great a range of activities, or overly broad in any other respect or for any other reason, then and in such event this Employment Agreement shall be deemed modified and interpreted to extend over only such maximum period of time, geographical area or range of activities, or otherwise, so as to render these provisions valid and enforceable, and as so modified, these provisions shall be enforceable and enforced.       --------------------------------------------------------------------------------   (e) This Paragraph 10 shall not apply in any respect to Employee, unless Employee agrees otherwise in writing, in the event of the consummation of a Change in Control or in the event of Employee’s termination by Summit FGI for other than Good Cause.   11. Confidential Information.   (a) Employee agrees not to use, publish or otherwise disclose (except as Employee’s duties may require), either during or at any time subsequent to his/her employment, any secret, proprietary or confidential information or data of Summit FGI or any information or data of others that Summit FGI or its affiliates is obligated to maintain in confidence. Employee understands that the use, publication or other disclosure of such information may violate privacy rights, as well as expose Summit FGI or its affiliates to financial loss, competitive disadvantage and/or embarrassment. Employee also understands that it is Employee’s duty to take adequate care to ensure that such secret, proprietary or confidential information is not used, published or otherwise disclosed by others. Notwithstanding the foregoing, nothing herein shall prevent Employee from utilizing the knowledge and experience he has acquired in the banking industry.   (b) Employee also agrees that upon any termination of his/her employment to deliver to Summit FGI promptly all items that belong to Summit FGI or that by their nature are for the use of employees of Summit FGI only, including, without limitation, all written and other materials that are of a secret, proprietary or confidential nature relating to the business of Summit FGI and/or Summit FGI’s affiliates. All business developed and produced by Employee while in the employ of Summit FGI is the exclusive property of Summit FGI unless specifically excluded in this Agreement. Employee shall not, during the term of this Agreement or any time thereafter, intentionally interfere with any business or contractual relationship of Summit FGI.   (c) For purposes of this Employment Agreement, the terms “secret” or confidential” are used in the ordinary sense and do not refer to official security classifications of the United States Government. Without limitation, examples of materials, information and data that are considered to be of a secret or confidential nature are for purposes of this Employment Agreement include but are not limited to drawings, manuals, customer lists, notebooks, reports, models, inventions, formulas, incentive plans, processes, machines, compositions, computer programs, accounting methods, business plans and information systems including such materials, information and data that are in machine-readable form.       --------------------------------------------------------------------------------   12. No Prior Obligation: Other than this Employment Agreement, Employee represents that there are no agreements, covenants or arrangements, whether written or oral, in effect which would prevent him from rendering service to Summit FGI during the term of this employment and he has not made and will not make any commitments, become associated, either directly or indirectly, in any manner, as partner, officer, director, stockholder, advisor, employee or in any other capacity in any business or organization, unless such activity complies with Summit FGI’s Code of Ethics. Employee expressly agrees to indemnify and hold harmless Company, its affiliates, and Company’s and its affiliates’ and directors, officers and employees from any and all liability resulting from or arising under the breach of this representation and warranty. This indemnify is in addition to and not in substitution of rights Company may have against Employee at common law or otherwise.   13. Successors; Binding Agreement; Exclusive Remedy.   (a) Summit FGI will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business stock and/or assets of Summit FGI, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Employment Agreement.   (b) This Employment Agreement and all rights of Employee hereunder shall inure to the benefit of and be enforceable by Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If Employee should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Employment Agreement to Employee’s devisee, legatee, or other designee or, if there be no such designee, to Employee’s estate.   (c) This Employment Agreement shall represent the exclusive and only remedy of Employee in the event a termination occurs after a Change in Control. Summit FGI and Employee agree that it is impossible to determine with any reasonable accuracy the amount of prospective damages to either party should Employee be terminated or terminate his employment during the term of this Employment Agreement. Summit FGI and Employee agree that the payment provided herein is reasonable and not a penalty, based upon the facts and circumstances of the parties at the time of entering this Employment Agreement, and with due regard to future expectations.       --------------------------------------------------------------------------------   14. Arbitration. Except for any dispute arising out of the obligations set forth in Paragraph 10 of this Employment Agreement, any dispute between the parties arising out of or with respect to this Employment Agreement or any of its provisions or Employee’s employment with Summit FGI shall be resolved by the sole and exclusive remedy of binding arbitration. Unless otherwise agreed by the parties, the arbitration shall be conducted in Moorefield, West Virginia under the auspices of, and in accordance with the rules of the American Arbitration Association. Any decision issued by an arbitrator in accordance with this provision shall be final and binding on the parties thereto and not subject to appeal or civil litigation.   15. Notice. For the purposes of this Employment Agreement, notices, demands and other communications provided for in the Employment Agreement shall be in writing and shall be deemed to have been duly given when delivered or (unless otherwise specified) mailed by the United States registered mail, return receipt requested, postage prepaid, addressed as follows:    If to Employee: _________________                      _________________                      _________________     If to Summit FGI: Summit Financial Group, Inc.   Attn:  H. Charles Maddy, III, President & CEO P. O. Box 179 Moorefield, WV  26836   or such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.       --------------------------------------------------------------------------------   16. Indemnification. To the fullest extent permitted under West Virginia law and federal banking law, Summit FGI agrees that it will indemnify and hold Employee harmless from and against all costs and expenses, including without limitation, all court costs and attorney’s fees, incurred by Employee in defending any and all claims, demands, proceedings, suits or actions actually instituted or threatened by third parties involving this Agreement, its validity or enforceability or with respect to payments to be made pursuant thereto.   17. Additional Payment by Summit FGI.   a. Gross-Up Payment. Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution by Summit FGI and any of its subsidiaries and affiliates to or for the benefit of Employee (whether paid or payable or distributed or distributable pursuant to this Agreement, the Supplemental Retirement Agreement between Summit FGI and Employee, or any other agreement, contract, plan or arrangement, but determined without regard to any additional payments required under this Paragraph 17) (any such payments and distributions collectively referred to as “Payments”), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, or any similar tax that may hereinafter be imposed or any interest and penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then Summit FGI shall pay to Employee an additional payment (the “Gross-Up Payment”) equal to one hundred percent (100%) of the Excise Tax and one hundred percent (100%) of the amount of any federal, state and local income taxes and Excise Tax imposed on the Gross-Up Payment.   b. Determination of Gross-Up Payment. All determinations required to be made under this paragraph 17 including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by the firm of independent accountants selected by Summit FGI to audit its financial statements (the “Accounting Firm”) which shall provide detailed supporting calculations both to Summit FGI and Employee in good faith within a reasonable time period. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting a “change in control,” Employee shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the “Accounting Firm” hereunder). All fees and expenses of the Accounting Firm shall be borne solely by Summit FGI. Any Gross-Up Payment, as determined pursuant to this Paragraph 17, shall be paid to Employee within 30 days of the receipt of the Accounting Firm’s determination.       --------------------------------------------------------------------------------   18. Miscellaneous. No provisions of this Employment Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Employee and authorized officers of Summit FGI. No waiver by either party hereto at any time of any breach by the other hereto of, or compliance with, any condition or provisions of this Employment Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or any prior or subsequent time.   19. Validity. The invalidity or unenforceability of any provision or provisions of this Employment Agreement shall not affect the validity or enforceability of any other provisions of this Employment Agreement, which shall remain in full force and effect.   IN WITNESS WHEREOF, the parties have caused this Employment Agreement to be signed as of the day and year first above written.   SUMMIT FINANCIAL GROUP, INC.   By:                                                             Its:                                                           

EXHIBIT 10(bg) National Western Life Insurance Company 2006 EXECUTIVE Officer Bonus Program The Bonus Program ("Program") is designed to reward selected executive officers for their performance in assisting the Company in achieving pre-determined sales targets while managing to profit criteria. The Plan incorporates three measurable performance factors: (1) sales, which are defined as net placed annualized target premium for Life business and as total placed premium for Annuity business, (2) expense management, and (3) overall Company profitability. Each of the above performance factors will have an assigned target level for purposes of the Program. Assuming a "par" performance (i.e. achieving each target level), the weighting of the bonus (applied to base salary) is 10% for sales performance, 10% for expense management performance, and 10% for profitability, or an overall par percentage of 30%. Actual results compared to the targets can either increase or decrease each of these individual percentages as explained in the following sections. However, the total bonus percentage cannot exceed 30%. Sales Component: The sales component of the Program is further subdivided between Life production and Annuity production. For 2006, the bonus sales goals are: -  International Life -- $27,000,000 net placed annualized target premium -  Domestic Life -- $9,700,000 net placed annualized target premium -  Annuities -- $640,000,000 net placed total premium The New Business Market Summary Report (NWAR60) will be the source of sales results for purposes of this Program. Based upon these sales goals, the bonus percentage corresponding with each sales production levels achieved in 2006 will be applied to 100% of the executive officer's base salary in accordance with the following grid: Intl Life Placed Target Bonus % Domestic Life Placed Target Bonus % Annuities Placed Premium Bonus % $25,000,000 2.00% $5,700,000 2.00% $560,000,000 2.00% $26,000,000 2.50% $7,700,000 2.50% $600,000,000 2.50% $27,000,000 3.34% $9,700,000 3.33% $640,000,000 3.33% $28,000,000 4.00% $10,700,000 4.00% $680,000,000 4.00% $29,000,000 5.00% $11,700,000 5.00% $720,000,000 5.00%   The level shaded in gray represents the Company's sales goals for each segment for purposes of the bonus program and represents the par performance level. If the actual results attain this level, the executive officer would be eligible to receive a bonus of 10% (3.33% for each line of business) of base salary. Expense Management Component: The expense component of the program is based upon a ratio of actual expenses to a sales unit of production. For purposes of this ratio, the sales unit of production will be based upon target premium. Annuity sales target premium will be assumed to be equal to 7.5% of total placed annuity premium. Assuming "par" sales goals of $27.0 million in International Life sales, $9.7 million in Domestic Life sales, and $640 million in total annuity sales, the par sales production for purposes of the expense management component is $84.7 million. The submitted expense budget based upon these sales goals is approximately $40 million. Accordingly, the par ratio of expenses to sales production is roughly 47%. Based upon this relationship, the bonus percentage corresponding with the actual expense ratio achieved in 2006 will be applied to 100% of each executive officer's base salary in accordance with the following grid: Expense/Sales Ratio Bonus % 53% 6.00% 50% 8.00% 47% 10.00% 46% 11.00% 43% 12.00% For purposes of the expense component, marketing and executive officer bonuses will be excluded. In addition, special consideration may be given at the discretion of the Incentive Compensation Committee of the Board of Directors for items of an unusual and/or non-recurring nature (i.e. excess pension contributions) that are beyond the control of Company management. Company Profitability Component: The profitability component of the program is based upon GAAP operating earnings as a percentage of beginning stockholders' equity. GAAP operating earnings are net of federal income taxes and exclude realized gains and losses on investments. The amounts used for purposes of the bonus calculation will be the figures audited by the Company's independent auditors. The bonus percentage corresponding with the actual GAAP operating earnings achieved in 2006 relative to beginning of the year stockholders' equity will be applied to 100% of each executive officer's base salary in accordance with the following grid: GAAP Profitability Bonus % 7.5% of Stockholders' Equity 6.00% 8.5% of Stockholders' Equity 8.00% 9.5% of Stockholders' Equity 10.00% 10.5% of Stockholders' Equity 11.00% 11.5% of Stockholders' Equity 12.00% Example: Assume the following actual results for 2006: - International Life placed target premium sales $ 28,500,000 - Domestic Life placed target premium sales $ 5,800,000 - Annuity placed total premium sales $ 580,000,000 - Actual budget center expenses $ 39,000,000 - GAAP operating earnings $ 85,000,000 - Beginning GAAP stockholders' equity $ 880,000,000         Based upon the above charts, the executive officer's 2006 bonus would be calculated as follows:   Sales Component               International Life sales bonus %   4.00%   Domestic Life sales bonus %   2.00%   Annuity sales bonus %   2.50%   Total sales bonus %   8.50%           Expense Management Component               Actual budget center expenses $ 39,000,000           Sale Production Amount:       International Life target premium $ 28,500,000   Domestic Life target premium   5,800,000   Annuity target ($580m @ 7.5%)   43,500,000     $ 77,800,000           Ratio of Actual/Sales Production   50.1%   Expense management bonus%   6.0%   Company Profitability Component               GAAP operating earnings $ 85,000,000   Beginning stockholders' equity $ 880,000,000           Ratio of earnings/equity   9.66%   Company profitability bonus   10.00%           Total Bonus %               Sales component   8.50%   Expense management component   6.00%   Company profitability component   10.00%       24.50% Administration: Bonus amounts under the program will be earned and paid at the end of the Company's calendar year upon the availability of audited GAAP financial statements. The Company's independent auditors will also review the calculation of the bonus % for compliance with the details of this Program as part of the Company's audited financial statements. If employment with the Company is terminated for any reason other than "termination for cause" by NWL, the bonus amount paid at termination will be based upon the pro rated percentage of the calendar year that services were rendered to the Company. In the event of death, the bonus amount will be paid to the individual's spouse, and if the individual's spouse is also not living at that time, then to the individual's children. February 16, 2006

Exhibit 10.1   LOGO [g13334logo1.jpg]   LOGO [g13334logo2.jpg] March 9, 2006 The McClatchy Company 2100 Q Street Sacramento, California 95816-6899 Attention: Mr. Patrick J. Talamantes     Re: $3.75 Billion Senior Credit Facility Dear Mr. Talamantes: You have advised Bank of America, N.A. (“Bank of America”), Banc of America Securities LLC (“BAS”), JPMorgan Chase Bank, N.A. (“JPMCB”) and J. P. Morgan Securities Inc. (“JPMorgan Securities”) that you intend to acquire (the “Acquisition”) Knight-Ridder, Inc., a Florida corporation (the “Company”), for not more than $3.75 billion in cash by way of a forward merger of the Company with and into you, with you being the surviving entity. You have also advised Bank of America, BAS, JPMCB and JPMorgan Securities that you intend to finance a portion of the Acquisition, costs and expenses related thereto and the ongoing working capital and other general corporate purposes of The McClatchy Company (the “Borrower”) and its subsidiaries from a $3.75 billion senior credit facility. Bank of America is pleased to offer to be the sole and exclusive administrative agent (in such capacity, the “Administrative Agent”) and JPMCB is pleased to offer to be the sole and exclusive syndication agent (in such capacity, the “Syndication Agent”) for a $3.75 Billion Senior Credit Facility (the “Senior Credit Facility”) to the Borrower, comprised of (i) a term loan A facility of up to $2.2 billion, (ii) a bridge facility of up to $550 million and (iii) a revolving credit facility of up to $1.0 billion, and Bank of America and JPMCB are pleased to offer their respective commitments to each provide 50% of the Senior Credit Facility, upon and subject to the terms and conditions of this letter and the Summary of Terms and Conditions attached hereto (the “Summary of Terms”). Furthermore, BAS and JPMorgan Securities are pleased to advise you of their willingness in connection with the foregoing commitments, as joint lead arrangers and joint and exclusive book runners (in such capacities, the “Lead Arrangers”) for the Senior Credit Facility, to form a syndicate of financial institutions (the “Lenders”) acceptable to you for the Senior Credit Facility. Bank of America will act as sole and exclusive Administrative Agent and JPMCB will act as sole and exclusive Syndication Agent for the Senior Credit Facility and BAS and JPMorgan Securities will act as joint and exclusive Lead Arrangers for the Senior Credit Facility. No additional agents, co-agents or arrangers will be appointed and no other titles will be awarded without our prior approval or without consultation with you. It is understood that such titles shall be in name only and the Senior Credit Facility shall be arranged by the Lead Arrangers only. You hereby agree that, effective upon your acceptance of this Commitment Letter and continuing through December 31, 2006, you shall not enter into any agreement with any other bank, investment bank, financial institution, person or entity to provide, structure, arrange or syndicate the Senior Credit Facility or any other senior financing similar to or as a replacement of the Senior Credit Facility; provided, however, that such prohibition shall not apply in the event Bank of America and JPMCB fail to perform their duties hereunder in any material respect or terminate their commitments hereunder (other than for failure of any condition to such commitment). The commitments of Bank of America and JPMCB hereunder and the undertaking of BAS and JPMorgan Securities to provide the services described herein are subject to the satisfactions of each of the following conditions precedent in a manner acceptable to Bank of America, BAS, JPMCB and JPMorgan Securities: (a) [intentionally omitted]; (b) the accuracy and completeness in all material respects of all -------------------------------------------------------------------------------- The McClatchy Company March 9, 2006 Page 2 representations that you and your affiliates make to Bank of America, BAS, JPMCB and JPMorgan Securities and your compliance with the terms of this Commitment Letter (including the Summary of Terms) and the Fee Letter as hereinafter defined; (c) prior to and during the syndication of the Senior Credit Facility, but limited to December 31, 2006, there shall be no competing offering, placement or arrangement of any debt securities or bank financing by or on behalf of the Borrower or any of its subsidiaries; (d) the negotiation, execution and delivery of definitive documentation for the Senior Credit Facility consistent with the Summary of Terms and otherwise satisfactory to Bank of America, BAS, JPMCB and JPMorgan Securities; and (e) no Company Material Adverse Effect (as defined in the Acquisition Agreement) shall have occurred. BAS and JPMorgan Securities intend to commence syndication efforts promptly upon your acceptance of this Commitment Letter and the Fee Letter and the aggregate commitments of Bank of America and JPMCB hereunder shall be reduced dollar-for-dollar as and when corresponding commitments are received from the Lenders. You agree to make commercially reasonable efforts to actively assist BAS and JPMorgan Securities in achieving a syndication of the Senior Credit Facility that is satisfactory to them. Such assistance shall include (a) using commercially reasonable efforts to provide and cause your advisors to provide Bank of America, BAS, JPMCB and JPMorgan Securities and the other Lenders upon request with all information reasonably deemed necessary by Bank of America, BAS, JPMCB and JPMorgan Securities to complete syndication; (b) your assistance in the preparation of an Information Memorandum to be used in connection with the syndication of the Senior Credit Facility; (c) using commercially reasonable efforts to ensure that the syndication efforts of BAS and JPMorgan Securities benefit materially from your existing banking relationships; and (d) otherwise assisting Bank of America, BAS, JPMCB and JPMorgan Securities in their syndication efforts, including using commercially reasonable efforts to make your senior management and advisors reasonably available from time to time to attend and make presentations regarding the business and prospects of the Borrower and its subsidiaries, as appropriate, at one or more meetings of prospective Lenders. It is understood and agreed that you shall not access the Increase Option described in the Summary of Terms until the commitments of each of Bank of America and JPMCB have been reduced to the target hold level specified in paragraph 5 of the hereinafter-described Fee Letter. It is understood and agreed that BAS and JPMorgan Securities will manage and control all aspects of the syndication in consultation with you, including decisions as to the selection of prospective Lenders and any titles offered to proposed Lenders, when commitments will be accepted and the final allocations of the commitments among the Lenders. It is understood that no Lender, other than Bank of America and JPMCB participating in the Senior Credit Facility will receive compensation from you in order to obtain its commitment, except on the terms contained herein, in the Summary of Terms and in the Fee Letter. It is also understood and agreed that the amount and distribution of the fees among the Lenders will be at the sole discretion of Bank of America, BAS, JPMCB and JPMorgan Securities. You hereby represent, warrant and covenant that (a) all information, other than Projections (defined below), which has been or is hereafter made available to Bank of America, BAS, JPMCB, JPMorgan Securities or the Lenders by you or any of your representatives (or on your or their behalf) in connection with the transactions contemplated hereby (when taken together with your and the Company’s filings with the SEC) (the “Information”) is and will be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading, and (b) all financial projections concerning the Borrower and its subsidiaries that have been or are hereafter made available to Bank of America, BAS, JPMCB, JPMorgan Securities or the Lenders by you or any of your representatives (the “Projections”) have been or will be prepared in good faith based upon assumptions that were reasonable at the date of preparation. You agree to furnish us with such Information and Projections as we may reasonably request and to supplement the Information and the Projections from time to time until the closing date for the Senior Credit Facility (the “Closing Date”) so that the representation, warranty and covenant in the preceding sentence is correct on the Closing Date. In issuing this commitment and in arranging and syndicating the Senior Credit Facility, Bank of America, BAS, JPMCB and JPMorgan Securities are and will be using and relying on the Information and the Projections (collectively, the “Pre-Commitment Information”) without independent verification thereof. -------------------------------------------------------------------------------- The McClatchy Company March 9, 2006 Page 3 You hereby acknowledge that (a) BAS, Bank of America, JPMCB and/or JPMorgan Securities will make available Information and Projections (collectively, “Borrower Materials”) to the proposed syndicate of Lenders by posting the Borrower Materials on IntraLinks or another similar electronic system (the “Platform”) and (b) certain of the proposed Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities or the Company or its securities) (each, a “Public Lender”). You hereby agree that, (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” you shall be deemed to have authorized BAS, Bank of America, JPMCB, JPMorgan Securities and the proposed Lenders to treat such Borrower Materials as not containing any material non-public information with respect to the Borrower or its securities or the Company or its securities for purposes of United States federal and state securities laws, it being understood that certain of such Borrower Materials may be subject to the confidentiality requirements of the definitive credit documentation; (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Investor;” and (z) BAS, Bank of America, JPMCB, JPMorgan Securities shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Investor.” Notwithstanding the foregoing, you shall be under no obligation to mark any Borrower Materials “PUBLIC.” By executing this Commitment Letter, you agree to reimburse Bank of America, BAS, JPMCB and JPMorgan Securities from time to time on demand for all reasonable out-of-pocket fees and expenses (including, but not limited to, (a) the reasonable fees, disbursements and other charges, of (i) one counsel to the Lead Arrangers, the Administrative Agent and the Syndication Agent, unless the interests of the Lead Arrangers, the Administrative Agent and the Syndication Agent are sufficiently divergent, in which case one additional counsel may be appointed for each such person or group of persons with such sufficiently divergent interests, and (ii) such local or special legal counsel as may be retained by the Administrative Agent in connection with the Senior Credit Facility, (b) due diligence expenses and (c) all CUSIP fees for registration with the Standard & Poor’s CUSIP Service Bureau) incurred in connection with the Senior Credit Facility, the syndication thereof, the preparation of the definitive documentation thereof and the other transactions contemplated hereby. You agree to indemnify and hold harmless Bank of America, BAS, JPMCB and JPMorgan Securities and each of their affiliates and their respective officers, directors, employees, agents, advisors and other representatives (each, an “Indemnified Party”) from and against (and will reimburse each Indemnified Party as the same are incurred for) any and all claims, damages, losses, liabilities and expenses (including, without limitation, the reasonable fees, disbursements and other charges of counsel) that may be incurred by or asserted or awarded against any Indemnified Party (but excluding a breach of contract action between you and an Indemnified Party brought by you where you are the prevailing party in a final, non-appealable judgment by a competent court), in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (a) any matters contemplated by this Commitment Letter or any related transaction or (b) the Senior Credit Facility and any other financings or any use made or proposed to be made with the proceeds thereof except to the extent such claim, damage, loss, liability or expense is found in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct. In the case of an investigation, litigation or proceeding to which the indemnity in this paragraph applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by you (other than a breach of contract action where you are the prevailing party in a final, non-appealable judgment by a competent court), your equity holders or creditors or an Indemnified Party, whether or not an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are -------------------------------------------------------------------------------- The McClatchy Company March 9, 2006 Page 4 consummated. You also agree that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to you or your subsidiaries or affiliates or to your or their respective equity holders or creditors for any special, indirect, consequential or punitive damages in connection with its activities related to the Senior Credit Facility. It is further agreed that Bank of America and JPMCB shall only have liability to you (as opposed to any other person), that each of Bank of America and JPMCB shall be liable solely in respect of its own commitment to the Senior Credit Facility on a several, and not joint, basis with any other Lender, and that such liability shall only arise to the extent damages have been caused by a breach of Bank of America’s or JPMCB’s obligations hereunder to negotiate in good faith definitive documentation for the Senior Credit Facility on the terms set forth herein as determined in a final non-appealable judgment by a court of competent jurisdiction. Notwithstanding any other provision of this Commitment Letter, no Indemnified Party shall be liable for any damages arising from the use by others of information or other materials obtained through electronic telecommunications or other information transmission systems, unless such damages are found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct. Promptly after receipt by an Indemnified Party under this paragraph of notice of its involvement in any action arising out of this Commitment Letter, if a claim for indemnification in respect thereof is to be made against you under this paragraph, such Indemnified Party shall notify you in writing of such involvement. Failure by such Indemnified Party to so notify you shall not relieve you from the obligation to indemnify the Indemnified Party in accordance with this paragraph. If any Indemnified Party is entitled to indemnification under this paragraph with respect to any action or proceeding relating to this Commitment Letter brought by a third party that is also brought against you, you shall be entitled to assume the defense of such action or proceeding with counsel reasonably satisfactory to the Indemnified Party. Upon assumption by you of the defense of any such action or proceeding, the Indemnified Party shall have the right to participate in such action or proceeding and to retain its own counsel but you shall not be liable for any legal expenses of such other counsel subsequently incurred by such Indemnified Party in connection with the defense thereof unless (a) you have agreed to pay such fees and expenses, (b) you shall have failed to employ counsel reasonably satisfactory to the Indemnified Party in a timely manner, or (c) the Indemnified Party shall have been advised by counsel that there are actual or potential conflicting interests between you and the Indemnified Party, including situations in which there are one or more legal defenses available to the Indemnified Party that are different from or additional to those available to you. You will not, without the Indemnified Party’s written consent, settle, compromise, consent to the entry of any judgment in or otherwise seek to terminate any claim, action or proceeding in respect of which indemnity may be sought hereunder, whether or not any Indemnified Party is an actual or potential party thereto, unless such settlement, compromise, consent or termination includes an unconditional release of each Indemnified Party from any liabilities arising out of such claim, action or proceeding. This Commitment Letter and the fee letter among you, Bank of America, BAS, JPMCB and JPMorgan Securities (the “Fee Letter”) and the contents hereof and thereof are confidential and, except for disclosure hereof or thereof on a confidential basis to your accountants, attorneys and other professional advisors retained by you in connection with the Senior Credit Facility or as otherwise required by law, may not be disclosed in whole or in part to any person or entity without our prior written consent; provided, however, it is understood and agreed that you may disclose this Commitment Letter (including the Summary of Terms) but not the Fee Letter after your acceptance of this Commitment Letter and the Fee Letter, in filings with the Securities and Exchange Commission and other applicable regulatory authorities and stock exchanges. Bank of America, BAS, JPMCB and JPMorgan Securities hereby notify you that pursuant to the requirements of the USA Patriot Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “Act”), each of them is required to obtain, verify and record information that identifies you, which information includes your name and address and other information that will allow Bank of America, BAS, JPMCB or JPMorgan Securities as applicable, to identify you in accordance with the Act. You acknowledge that Bank of America, BAS, JPMCB and JPMorgan Securities or their affiliates may be providing financing or other services to parties whose interests may conflict with yours. Without limiting -------------------------------------------------------------------------------- The McClatchy Company March 9, 2006 Page 5 any of the other confidentiality obligations hereunder, each of Bank of America, BAS, JPMCB and JPMorgan Securities agrees that it will not furnish the Information (as defined below) to any of their other customers. Each of Bank of America, BAS, JPMCB and JPMorgan Securities agrees to use the Information solely in connection with the extensions of its commitment under, and its syndication of, the Senior Credit Facility. Each of Bank of America, BAS, JMPCB and JPMorgan Securities further agrees to maintain the confidentiality of all Information with the same degree of care as it reasonably would be expected to exercise with respect to its own confidential information, except that Information may be disclosed by any such party (a) to its affiliates and to its affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (provided each such person to whom such disclosure is made is informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory agency having authority over such person, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any prospective Lender that has agreed to keep the Information confidential and to use the Information only for the purpose of evaluating its participation in the Senior Credit Facility, (e) in connection with any action or proceeding relating to this Commitment Letter, the Fee Letter or the Senior Credit Facility or the enforcement of rights hereunder or thereunder, (f) with the prior written consent of the Borrower or (g) to the extent such Information (x) becomes publicly available other than as a result of a breach of this paragraph or (y) becomes available to such person on a nonconfidential basis from a source other than the Borrower. The Borrower further agrees that pursuant to clause (f) of the preceding sentence Bank of America, BAS, JPMCB and JPMorgan Securities may use any public information in marketing materials, press releases or other transactional announcements or updates provided to investor or trade publications, provided that the content and final form of any such intended use are furnished to the Borrower reasonably in advance of the date of proposed use and such content and final form are acceptable to the Borrower. For purposes of this paragraph “Information” means all information received in connection with this Commitment Letter or the Senior Credit Facility relating to the Borrower or its business, other than any such information that is available on a non-confidential basis prior to such receipt. Bank of America, BAS, JPMCB and JPMorgan Securities further advise you that they will not make available to you confidential information that they have obtained or may obtain from any other customer. The confidentiality provisions set forth in this paragraph shall terminate on the earlier of (i) December 31, 2007, (ii) the date of execution of definitive documentation for the Senior Credit Facility or (iii) termination of the planned Acquisition. In connection with all aspects of each transaction contemplated by this letter, you acknowledge and agree that: (i) the Senior Credit Facility and any related arranging or other services described in this letter is an arm’s-length commercial transaction between you and your affiliates, on the one hand, and Bank of America, BAS, JPMCB and JPMorgan Securities and any other Lead Arranger, on the other hand, and you are capable of evaluating and understanding and understand and accept the terms, risks and conditions of the transactions contemplated by this letter; (ii) in connection with the process leading to the Senior Credit Facility, Bank of America, BAS, JPMCB and JPMorgan Securities and any other Lead Arranger, each is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for you or any of your affiliates, stockholders, creditors or employees or any other party; (iii) neither Bank of America, BAS, JPMCB nor JPMorgan Securities nor any other Lead Arranger has assumed or will assume by virtue of this Commitment Letter, the Summary of Terms or the Fee Letter, an advisory, agency or fiduciary responsibility in your or your affiliates’ favor with respect to any of the transactions contemplated hereby or the process leading thereto (irrespective of whether Bank of America, BAS, JPMCB or JPMorgan Securities or any other Lead Arranger has advised or is currently advising you or your affiliates on other matters) and neither Bank of America, BAS, JPMCB nor JPMorgan Securities nor any other Lead Arranger has any obligation to you or your affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth in this letter; (iv) Bank of America, BAS, JPMCB and JPMorgan Securities and any other Lead Arranger, and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from yours and your affiliates and Bank of America, BAS, JPMCB and JPMorgan Securities and any other Lead Arranger have no obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) Bank of America, BAS, JPMCB and JPMorgan Securities and any other Lead -------------------------------------------------------------------------------- The McClatchy Company March 9, 2006 Page 6 Arranger have not provided any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby and you have consulted your own legal, accounting, regulatory and tax advisors to the extent you have deemed appropriate. You hereby waive and release, to the fullest extent permitted by law, any claims that you may have against Bank of America, BAS, JPMCB and JPMorgan Securities and any other Lead Arranger with respect to any breach or alleged breach of agency or fiduciary duty. Except as provided in the last sentence of the second preceding paragraph, the provisions of the immediately preceding five paragraphs shall remain in full force and effect regardless of whether any definitive documentation for the Senior Credit Facility shall be executed and delivered, and notwithstanding the termination of this letter or any commitment or undertaking hereunder. This Commitment Letter and the Fee Letter may be executed in counterparts which, taken together, shall constitute an original. Delivery of an executed counterpart of this Commitment Letter or the Fee Letter by telecopier or facsimile shall be effective as delivery of a manually executed counterpart thereof. This Commitment Letter and the Fee Letter shall be governed by, and construed in accordance with, the laws of the State of New York. Each of you, Bank of America, BAS, JPMCB and JPMorgan Securities hereby irrevocably waives any and all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Commitment Letter (including, without limitation, the Summary of Terms), the Fee Letter, the transactions contemplated hereby and thereby or the actions of Bank of America and BAS in the negotiation, performance or enforcement hereof. The commitments and undertakings of Bank of America, BAS, JPMCB and JPMorgan Securities may be terminated by us, if you fail to perform your obligations under this Commitment Letter or the Fee Letter on a timely basis. This Commitment Letter, together with the Summary of Terms and the Fee Letter, embodies the entire agreement and understanding among Bank of America, BAS, JPMCB and JPMorgan Securities, you and your affiliates with respect to the Senior Credit Facility and supercedes all prior agreements and understandings relating to the specific matters hereof. However, please note that the terms and conditions of the commitment of Bank of America and JPMCB and the undertaking of BAS and JPMorgan Securities hereunder are not limited to those set forth herein or in the Summary of Terms. Those matters that are not covered or made clear herein or in the Summary of Terms or the Fee Letter are subject to mutual agreement of the parties. No party has been authorized by Bank of America, BAS, JPMCB or JPMorgan Securities to make any oral or written statements that are inconsistent with this Commitment Letter. This Commitment Letter is not assignable by the Borrower without our prior written consent and is intended to be solely for the benefit of the parties hereto and the Indemnified Parties. This offer will expire at 5:00 p.m. Pacific Time on March 20, 2006 unless you execute this letter and the Fee Letter and return them to us prior to that time (which may be by facsimile transmission), whereupon this letter and the Fee Letter (each of which may be signed in one or more counterparts) shall become binding agreements. Thereafter, this undertaking and commitment will expire on the End Date (as defined in the Acquisition Agreement) as it may be extended pursuant to the provisions of Section 7.1(b) of the Acquisition Agreement (but in no event later than December 31, 2006), unless definitive documentation for the Senior Credit Facility is executed and delivered prior to such date. -------------------------------------------------------------------------------- The McClatchy Company March 9, 2006 Page 7 We are pleased to have the opportunity to work with you in connection with this important financing. Very truly yours,   BANK OF AMERICA, N.A.     JPMORGAN CHASE BANK, N.A. By:   /s/ Robert Munn Jr.     By:   /s/ Peter Thauer Name:   Robert Munn Jr.     Name:   Peter Thauer Title:   Senior Vice President     Title:   Vice President BANC OF AMERICA SECURITIES LLC     J.P. MORGAN SECURITIES INC. By:   /s/ William Bowen Jr.     By:   /s/ Richard Gabriel Name:   William Bowen Jr.     Name:   Richard Gabriel Title:   Managing Director     Title:   Vice President Accepted and agreed to as of the date first above written: THE MCCLATCHY COMPANY   By:   /s/ Patrick J. Talamantes Name:   Patrick J. Talamantes Title:   Chief Financial Officer -------------------------------------------------------------------------------- SUMMARY OF TERMS AND CONDITIONS THE MCCLATCHY COMPANY $3,750,000,000 SENIOR CREDIT FACILITY   BORROWER:    The McClatchy Company (the “Borrower”). GUARANTORS:    If the ratings on the Senior Credit Facility are lower than BBB- and Baa3, then the obligations of the Borrower under the Senior Credit Facility will be guaranteed by each existing and future direct and indirect material domestic and, to the extent no adverse tax consequences would result, foreign subsidiary of the Borrower (collectively, the “Guarantors”). All guarantees will be guarantees of payment and not of collection. ADMINISTRATIVE AGENT:    Bank of America, N.A. (the “Administrative Agent” or “Bank of America”) will act as sole and exclusive administrative agent. SYNDICATION AGENT:    JPMorgan Chase Bank, N.A. (the “Syndication Agent” or “JPMCB”) will act as sole and exclusive syndication agent. JOINT LEAD ARRANGERS AND    JOINT BOOK RUNNERS:    Banc of America Securities LLC (“BAS”) and J. P. Morgan Securities Inc. (“JPMorgan Securities”). LENDERS:    A syndicate of financial institutions (including Bank of America and JPMCB) arranged by BAS and JPMorgan Securities, which institutions shall be acceptable to the Borrower, the Administrative Agent and the Syndication Agent (collectively, the “Lenders”). SENIOR CREDIT FACILITY:    An aggregate principal amount of up to $3.75 billion will be available through the following facilities:    Term A Facility: a $2.2 billion term A loan facility (the “Term A Facility”), all of which will be drawn on the Closing Date.    Bridge Facility: a $550 million bridge facility (the “Bridge Facility”), all of which will be drawn on the Closing Date.    Revolving Credit Facility: a $1.0 billion Revolving Credit Facility (the “Revolving Credit Facility”) which will include a to-be-determined sublimit for the issuance of standby letters of credit (each a “Letter of Credit”) and a $60 million sublimit for swingline loans (each a “Swingline Loan”). Letters of Credit will be issued by Bank of America (in such capacity, the “Fronting Bank”) and Swingline Loans will be made available by Bank of America, and each Lender will purchase an irrevocable and unconditional participation in each Letter of Credit and Swingline Loan. SWINGLINE OPTION:    Swingline Loans will be made available on a same day basis in an aggregate amount not exceeding $60 million and in minimum amounts of $500,000. The Borrower must repay each Swingline Loan in full no later than 7 days after such loan is made. -------------------------------------------------------------------------------- INCREASE OPTION:    Provided there is no Event of Default then existing and continuing and within four years of Closing, the Borrower may, without the consent of the Lenders, increase the size of the Revolving Credit Facility by $500 million. No Lender is in any manner obligated to participate in such increase by increasing its own commitment amount. Lenders of the additional amount(s) will be afforded the same rights and protections that are provided to the Lenders of the original Revolving Credit Facility. Additional Lenders shall be subject to the same criteria as assignees of Lenders. PURPOSE:    The Senior Credit Facility shall be used: (i) to finance in part the acquisition (the “Acquisition”) of Knight-Ridder, Inc. (the “Company”), (ii) to refinance outstanding amounts under the Borrower’s and the Company’s existing credit agreements, (iii) for working capital, (iv) to support the Borrower’s commercial paper program, and (v) for other lawful corporate purposes. MATURITY:    The Term A Facility shall be due and payable in full 5 years after the Closing Date with no required amortization prior to that date.    The Bridge Facility shall be due and payable in full 24 months after the Closing Date.    The Revolving Credit Facility shall terminate and all amounts outstanding thereunder shall be due and payable in full 5 years from the Closing Date. CLOSING DATE:    The execution of definitive loan documentation is currently expected to occur on or before September 30, 2006; however, this date will be extended if the End Date (as defined in the Acquisition Agreement) is extended pursuant to the provisions of Section 7.1(b) of the Acquisition Agreement (but in no event to a date later than December 31, 2006) (the “Closing Date”). INTEREST RATES:    As set forth in Addendum I. MANDATORY    PREPAYMENTS:    100% of all net cash proceeds from sales of property and assets of the Borrower and its subsidiaries (excluding sales of inventory in the ordinary course and other exceptions to be agreed in the loan documentation) shall be applied to the repayment of the Bridge Facility. OPTIONAL PREPAYMENTS AND COMMITMENT    REDUCTIONS:    Prior to the Closing Date, any voluntary reduction of the commitments shall be applied to first reduce the Bridge Facility, and once the Bridge Facility has been reduced to zero thereafter to either the Term A Facility or the Revolving Credit Facility, as the Borrower may elect. After the Closing Date, the Borrower may prepay any portion of the Senior Credit Facility in whole or in part at any time without penalty, subject to reimbursement of the Lenders’ breakage and redeployment costs in the case of prepayment of LIBOR borrowings. The unutilized portion of any commitment under the Revolving Credit Facility and Swing Line Loans may be irrevocably canceled by Borrower in whole or in part.   2 -------------------------------------------------------------------------------- CONDITIONS PRECEDENT       TO CLOSING:    The Closing of the Senior Credit Facility will be subject to satisfaction of the conditions precedent customary for a credit facility of this type, including, but not limited to, the following:    (i)    The negotiation, execution and delivery of definitive documentation (including, without limitation, satisfactory legal opinions and other customary closing documents) for the Senior Credit Facility satisfactory to BAS, the Administrative Agent, the Syndication Agent and the Lenders.    (ii)    There shall not have occurred a Company Material Adverse Effect (as defined in the Acquisition Agreement).    (iii)    The simultaneous termination of the existing Credit Agreement dated May 10, 2004 as among the Borrower, various financial institutions and Bank of America, N.A., as agent, upon repayment (or refinancing under the Senior Credit Facility) of all outstanding loans, fees and other amounts accrued or owing thereunder, concurrently with, or prior to, the initial borrowing under the Senior Credit Facility on the Closing Date.    (iv)    Receipt of pro forma corporate ratings for the Borrower and ratings on the Senior Credit Facility from each of Moody’s Investor Service Inc. and Standard & Poors Ratings Group.    (v)    Receipt of confirmation that all continuing public indebtedness of the Company and its subsidiaries will, after giving effect to the Acquisition, be an obligation of the Borrower.    (vi)    Receipt of confirmation that the Acquisition will be consummated as contemplated in the Commitment Letter and in accordance with the Acquisition Agreement without any amendment or modification of any material provision of the Acquisition Agreement (except with the consent of the Lead Arrangers and except with respect to any amendment or modification that does not materially and adversely affect the interests of the Lead Arrangers, the Agents or the Lenders).    (vii)    Receipt of confirmations that all conditions precedent to the consummation of the Acquisition have been satisfied or if waived, such waivers do not materially and adversely affect the interests of the Lead Arrangers, the Agents or the Lenders or the Lead Arrangers shall have consented to such waivers. CONDITIONS PRECEDENT       TO ALL LOANS:    Usual and customary for transactions of this type, to include without limitation: (i) all representations and warranties are true and correct in all material respects as of the date of each loan, and (ii) no event of default under the Senior Credit Facility or incipient default has occurred and is continuing, or would result from such loan. REPRESENTATIONS    AND WARRANTIES:    Usual and customary for transactions of this type subject to appropriate standards of materiality, to include without limitation: (i) corporate   3 --------------------------------------------------------------------------------   existence and status; (ii) corporate power and authority, enforceability; (iii) no violation of law, contracts or organizational documents; (iv) no material litigation; (v) accuracy and completeness of specified financial statements and no material adverse change; (vi) no absence of required governmental or third party approvals or consents; (vii) use of proceeds and not engaging in business of purchasing/carrying margin stock; (viii) status under Investment Company Act; (ix) ERISA matters; (x) environmental matters; (xi) tax matters; (xii) accuracy of disclosure; (xiii) compliance with laws; (xiv) subsidiaries; (xv) ownership of property and insurance matters, and (xvi) no default. COVENANTS:   Usual and customary for transactions of this type subject to mutually agreeable standards of materiality and customary exceptions, where applicable, to include without limitation: (i) delivery of financial statements, SEC filings, compliance certificates and notices of default, material litigation, material governmental, ERISA and environmental proceedings and material changes in accounting or financial reporting practices; (ii) compliance with laws (including environmental laws and ERISA matters) and material contractual obligations; (iii) payment of obligations; (iv) preservation of existence; (v) maintenance of books and records, and inspection rights; (vi) use of proceeds; (vii) maintenance of properties and insurance; (viii) limitation on liens and sales of all or substantially all of the assets of the Borrower; (ix) limitation on subsidiary indebtedness; (x) limitation on transactions with affiliates; and (xi) limitation on restrictive agreements that could adversely affect the Lenders.   Financial covenants to include (but not be limited to):   •   Maintenance on a rolling four quarter basis of a Maximum Total Leverage Ratio (total debt/EBITDA) of equal to or less than 5.50 to 1.00 as of the Closing Date, with step downs to 4.75 to 1.00 as of December 31, 2006, to 4.25 to 1.00 as of December 31, 2007 and a further step down to 4.00 to 1.00 as of December 31, 2008; and   •   Maintenance on a rolling four quarter basis of an Interest Coverage Ratio (EBITDA/interest expense) of at least 3.00 to 1.00; provided, that if the ratings on the Senior Credit Facility shall at any time be A- and A3 or better, this covenant shall cease to be operative. EVENTS OF DEFAULT:   Usual and customary in transactions of this type subject to appropriate grace periods, to include without limitation: (i) nonpayment of principal, interest, fees or other amounts; (ii) any representation or warranty proving to have been materially incorrect when made or confirmed; (iii) failure to perform or observe covenants set forth in the loan documentation within a specified period of time, where customary and appropriate, after such failure; (iv) cross-default to other indebtedness in an amount to be agreed; (v) bankruptcy and insolvency defaults (with grace period for involuntary proceedings); (vi) monetary judgment defaults in an amount to be agreed; (vii) actual or asserted invalidity of any loan documentation; (viii) change of control (defined as a change in ownership of 51% or more of the voting stock of the Borrower); and (ix) customary ERISA defaults.   4 -------------------------------------------------------------------------------- ASSIGNMENTS AND    PARTICIPATIONS:    Each Lender will be permitted to make assignments in a minimum amount of $5 million to other financial institutions approved by the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower, which approval shall not be unreasonably withheld or delayed; provided, however, that neither the approval of the Borrower nor the Administrative Agent shall be required in connection with assignments to other Lenders, to any affiliate or a Lender, or to any Approved Fund (as such term shall be defined in the definitive loan documentation), but the parties to such an assignment shall use reasonable efforts to provide the Borrower and Administrative Agent with five business days prior notice thereof. An assignment fee of $3,500 may be charged with respect to each assignment (other than assignments to affiliates). Each Lender will also have the right, without consent of the Borrower or the Administrative Agent, to assign as security all or part of its rights under the loan documentation to any Federal Reserve Bank. Lenders will be permitted to sell participations with voting rights limited to significant matters such as changes in amount, rate and maturity date. WAIVERS AND    AMENDMENTS:    Amendments and waivers of the provisions of the loan agreement and other definitive credit documentation will require the approval of Lenders holding loans and commitments representing more than 51% of the aggregate amount of loans and commitments under the Senior Credit Facility, except that the consent of all the Lenders affected thereby shall be required with respect to (i) increases in the commitment of such Lenders, (ii) reductions of principal, interest or fees and (iii) extensions of scheduled maturities or times for payment. INDEMNIFICATION:    The Borrower will indemnify and hold harmless the Administrative Agent, BAS, the Syndication Agent, JPMCB and each Lender and their respective affiliates and their officers, directors, employees, agents and advisors from and against all losses, liabilities, claims, damages or expenses arising out of or relating to the Senior Credit Facility, the Borrower’s use of loan proceeds or the commitments, including, but not limited to, reasonable attorneys’ fees (including the allocated cost of internal counsel) and settlement costs. This indemnification shall survive and continue for the benefit of all such persons or entities, notwithstanding any failure of the Senior Credit Facility to close. GOVERNING LAW:    State of New York PRICING / FEES EXPENSES:    As set forth in Addendum I. OTHER:    Each of the parties shall (i) waive its right to a trial by jury and (ii) submit to New York jurisdiction. The loan documentation will contain customary increased cost, withholding tax, capital adequacy and yield protection provisions as covered in Addendum I.   5 -------------------------------------------------------------------------------- Confidential     The McClatchy Company ADDENDUM I PRICING, FEES AND EXPENSES   COMMITMENT FEE:    The Borrower will pay a fee (the “Commitment Fee”), determined in accordance with the Performance Pricing grid set forth below, on the unused portion of each Lender’s commitments under the Senior Credit Facility. The Commitment Fee is payable quarterly in arrears commencing upon the Closing Date. Swing Line Loans will not be deemed to be utilization for purposes of calculating the Commitment Fee. LETTER OF    CREDIT FEES:    The Borrower will pay a fee (the “Letter of Credit Fee”), determined in accordance with the Performance Pricing grid set forth below, in an amount equal to the Applicable Margin on the aggregate maximum stated amount for each Letter of Credit that is issued and outstanding. The Letter of Credit Fee is payable quarterly in arrears, commencing on the Closing Date, and will be shared proportionately by the Lenders. INTEREST RATES:    At the Borrower’s option, any loan under the Senior Credit Facility that is made to it will bear interest at a rate equal to (i) LIBOR plus the Applicable Margin, as determined in accordance with the Performance Pricing grid set forth below, and (ii) the Alternate Base Rate (to be defined as the higher of (a) the Bank of America prime rate and (b) the Federal Funds rate plus .50%); provided, in each case that if during the 180 day period following the Closing Date, any breakage costs, charges or fees are incurred on account of the syndication of the Senior Credit Facility, the Borrower shall immediately reimburse the Administrative Agent for any such costs, charges or fees; provided that the Administrative Agent and the Borrower shall use reasonable efforts to coordinate the syndication with the ends of interest periods. Such right of reimbursement shall be in addition to and not in limitation of customary cost and yield protections. The Borrower may select interest periods of 1, 2, 3 or 6 months for LIBOR loans, subject to availability. Interest shall be payable at the end of the selected interest period, but no less frequently than quarterly. A default rate shall apply on all obligations in the event of default under the Senior Credit Facility at a rate per annum of 2% above the applicable interest rate. PERFORMANCE    PRICING:    The Commitment Fee and Applicable Margin for LIBOR Loans shall be, at any time, the rate per annum set forth in the table below opposite the rating of the Senior Credit Facility by Standard & Poor’s Ratings Group and Moody’s Investors Service Inc. (In the case of a split rating when the ratings are at least BBB- and Baa3, the higher rating will apply; in the case of any other split rating, the lower rating will apply; and in the case of any multiple split rating, the rating that is one level higher than the lower rating will apply). --------------------------------------------------------------------------------   Confidential     The McClatchy Company   Level   Rating    Applicable Margin for LIBOR Loans    Commitment Fee I   A- / A3 or better    37.5    10.0 II   BBB+ / Baa1    50.0    10.0 III   BBB / Baa2    62.5    12.5 IV   BBB- / Baa3    75.0    15.0 V   BBB- or better and Ba1; or BB+ and Baa3 or better    100.0    17.5 VI   BB+ / Ba1 or below    125.0    20.0   CALCULATION OF INTEREST AND    FEES:    Other than calculations in respect of interest at the Bank of America prime rate (which shall be made on the basis of actual number of days elapsed in a 365/366 day year), all calculations of interest and fees shall be made on the basis of actual number of days elapsed in a 360-day year. COST AND YIELD    PROTECTION:    Customary for transactions and facilities of this type, including, without limitation, in respect of breakage or redeployment costs incurred in connection with prepayments, changes in capital adequacy and capital requirements or their interpretation, illegality, unavailability, reserves and payments free and clear of withholding or other taxes. EXPENSES:    The Borrower will pay all reasonable costs and expenses associated with the preparation, due diligence, administration, syndication and closing of all loan documentation, including, without limitation, the reasonable legal fees of counsel to the Administrative Agent and BAS, regardless of whether or not the Senior Credit Facility is closed. The Borrower will also pay the expenses of the Administrative Agent, the Syndication Agent and each Lender in connection with the enforcement of any loan documentation.

  Exhibit 10.1   ev3 Inc. 2005 INCENTIVE STOCK PLAN   ADDENDUM Terms and Conditions for French Stock Grants The following terms and conditions will apply in the case of Stock Grants under the ev3 Inc. 2005 Incentive Stock Plan to French residents and to those individuals who are otherwise subject to the laws of France.   As a matter of principle, any provision included in the ev3 Inc. 2005 Incentive Stock Plan (the “Plan”) or any other document evidencing the terms and conditions of the Plan or a stock grant under the Plan that would contravene any substantive principle set out in Articles L.225-197-1 to L.225-197-5 of the French Code de Commerce shall not be applicable to participants who are residents of France.   ev3 INC. 2005 INCENTIVE STOCK PLAN STOCK GRANT CERTIFICATE   This Stock Grant Certificate evidences a Stock Grant made pursuant to the ev3 Inc. 2005 Incentive Stock Plan of [                ] shares of restricted Stock to [                ], who shall be referred to as “Grantee”.  This Stock Grant is granted effective as of [                ], which shall be referred to as the “Grant Date.”       ev3 INC.               By:       Name:     Title:   §1.                               PLAN AND STOCK GRANT .  THIS STOCK GRANT IS SUBJECT TO ALL OF THE TERMS AND CONDITIONS SET FORTH IN I) THIS STOCK GRANT CERTIFICATE  INCLUDING THE ADDENDUM OR “SUB-PLAN” COVERING STOCK GRANTS TO RESIDENTS OF FRANCE II) IN THE PLAN.   IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE PLAN AND THE SUB-PLAN, THE SUB-PLAN SHALL CONTROL.  ALL OF THE CAPITALIZED TERMS NOT OTHERWISE DEFINED IN THIS STOCK GRANT CERTIFICATE SHALL HAVE THE SAME MEANING IN THIS STOCK GRANT CERTIFICATE AS IN THE PLAN.   §2.                               STOCKHOLDER STATUS.  GRANTEE SHALL HAVE NO RIGHTS AS A STOCKHOLDER WITH RESPECT TO THE SHARES OF STOCK SUBJECT TO THIS STOCK GRANT UNTIL SUCH SHARES HAVE BEEN ISSUED PURSUANT TO § 4 OF THIS STOCK GRANT CERTIFICATE.  NOTWITHSTANDING THE GENERALITY OF THE   --------------------------------------------------------------------------------   FOREGOING, GRANTEE SHALL NOT BE ENTITLED TO VOTE ANY OF THE SHARES OF STOCK SUBJECT TO THIS STOCK GRANT UNTIL SUCH SHARES HAVE BEEN ISSUED PURSUANT TO § 4 OF THIS STOCK GRANT CERTIFICATE OR RECEIVE ANY DIVIDENDS DECLARED PRIOR TO THE ISSUANCE OF SUCH SHARES OR OTHERWISE EXERCISE ANY INCIDENTS OF OWNERSHIP WITH RESPECT TO SUCH SHARES OF STOCK UNTIL SUCH SHARES HAVE BEEN ISSUED PURSUANT TO § 4 OF THIS STOCK GRANT CERTIFICATE.   §3.                               STOCK OWNERSHIP LIMITATION   (A)                                  NO SHARE OF STOCK MAY BE ISSUED UNDER THIS STOCK GRANT CERTIFICATE IF GRANTEE OWNS 10% OR MORE OF THE VOTING POWER OF ALL CLASSES OF STOCK OF THE COMPANY AT THE TIME OF ISSUANCE OF SUCH SHARE.   (B)                                 THE NUMBER OF SHARES OF STOCK THAT MAY BE ISSUED TO THE GRANTEE UNDER THIS STOCK GRANT CERTIFICATE, ON A CUMULATIVE BASIS, SHALL NOT EXCEED 10% OF THE TOTAL NUMBER OF SHARES OF STOCK OF THE COMPANY.   (C)                                  ANY SHARE OF STOCK ISSUED TO GRANTEE IN VIOLATION OF THIS § 3 SHALL NOT BE DEEMED TO HAVE BEEN ISSUED TO GRANTEE.   §4.                               CONDITIONS TO ISSUANCE OF SHARES.   (A)                                  CONDITIONS TO ISSUANCE OF SHARES.  SUBJECT TO § 3 ABOVE AND §4(B) AND §4(C) BELOW, THE SHARES OF STOCK SUBJECT TO THIS STOCK GRANT SHALL BE ISSUED IN SUCH INCREMENTS AND AT SUCH TIMES AS FOLLOWS:   (1)                                  50% of the shares of Stock subject to this Stock Grant (rounding down to the nearest whole number of shares of Stock) shall be issued on [         ], which date shall not be before the expiration of a two (2) year period from the Grant Date;  provided, however, that the Grantee continuously provides services to the Company or its Affiliates through such date,   (2)                                  An additional 25% of the shares of Stock subject to this Stock Grant (rounding down to the nearest whole number of shares of Stock) shall be issued on [         ], which date shall not be before the expiration of a three (3) year period from the Grant Date;  provided, however, that the Grantee continuously provides services to the Company or its Affiliates through such date, and   (3)                                  The remaining 25% of the shares of Stock subject to this Stock Grant (rounding down to the nearest whole number of shares of Stock) shall be issued on [         ], which date shall not be before the expiration of a three (3) year period from the Grant Date;  provided, however, that the Grantee continuously provides services to the Company or its Affiliates through such date.   2 --------------------------------------------------------------------------------   (b)                                 Forfeiture of Rights to Receive Unissued Shares.  If Grantee’s continuous service relationship with the Company and its Affiliates terminates for any reason whatsoever, other than Grantee’s death, before all of the shares of Stock subject to this Stock Grant are issued pursuant to § 4(a), then he or she shall (except as provided in § 14 of the Plan) forfeit his or her rights to receive all of the remaining shares of Stock subject to this Stock Grant that have not been issued as of the date Grantee’s service relationship with the Company and its Affiliates so terminates.   (c)                                  Issuance of Shares Upon Death of Grantee.  If Grantee’s continuous service relationship with the Company and its Affiliates terminates as a result of Grantee’s death before all of the shares of Stock subject to this Stock Grant are issued pursuant to § 4(a), then all of the remaining shares of Stock subject to this Stock Grant that have not been issued as of the date Grantee’s service relationship with the Company and its Affiliates so terminates will be issued to Grantee’s heirs upon their request as provided under applicable law. The shares of Stock may be issued at any time within six (6) months following the date of death by the Grantee’s estate or by a person who acquired the right to receive the shares by bequest or inheritance.   §5.          MANDATORY HOLDING PERIOD.  IF GRANTEE (OR GRANTEE’S HEIRS IF REQUIRED BY THE FRENCH LAW) IS ISSUED SHARES OF STOCK PURSUANT TO § 4, GRANTEE (OR GRANTEE’S HEIRS)   MUST HOLD SUCH SHARES OF STOCK FOR A MINIMUM PERIOD OF TWO (2) YEARS FROM THE DATE OF ISSUANCE OF SUCH SHARES OF STOCK.   §6.                               CHANGES IN SHARES.  THE TAX AND SOCIAL SECURITY TREATMENT OF ANY ADJUSTMENT PROVIDED FOR IN SECTION 13 OF THE PLAN TO THE NUMBER OF SHARES TO BE ISSUED SHALL HAVE TO BE APPRECIATED IN CONSIDERATION OF THE APPLICABLE PROVISIONS OF THE FRENCH CODE OF COMMERCE.   §7.                               STOCK CERTIFICATES.  AS SOON AS PRACTICABLE AFTER EACH DATE AS OF WHICH SHARES OF STOCK SUBJECT TO THIS STOCK GRANT ARE ISSUED PURSUANT TO § 4, THE COMPANY SHALL DIRECT ITS TRANSFER AGENT TO ISSUE ONE OR MORE STOCK CERTIFICATES REPRESENTING SUCH NUMBER OF SHARES OF STOCK ISSUED PURSUANT TO § 4 IN THE NAME OF GRANTEE (OR GRANTEE’S HEIRS); PROVIDED, HOWEVER, THAT SUCH STOCK CERTIFICATE(S) SHALL CONTAIN A RESTRICTIVE LEGEND REGARDING THE MANDATORY HOLDING PERIOD AS PROVIDED IN § 5.   §8.                               NONTRANSFERABLE.  NO RIGHTS GRANTED UNDER THIS STOCK GRANT CERTIFICATE SHALL BE TRANSFERABLE BY GRANTEE OTHER THAN BY WILL OR BY THE LAWS OF DESCENT AND DISTRIBUTION.   §9.                               OTHER LAWS.  THE COMPANY SHALL HAVE THE RIGHT TO REFUSE TO ISSUE OR TRANSFER SHARES OF STOCK SUBJECT TO THIS STOCK GRANT TO GRANTEE (OR GRANTEE’S HEIRS) IF THE COMPANY ACTING IN ITS ABSOLUTE DISCRETION DETERMINES THAT THE ISSUANCE OR TRANSFER OF SUCH SHARES MIGHT VIOLATE ANY APPLICABLE LAW OR REGULATION.   3 --------------------------------------------------------------------------------   §10.                        NO RIGHT TO CONTINUE SERVICE.  NONE OF THE PLAN (INCLUDING THE SUB-PLAN), THIS STOCK GRANT CERTIFICATE, OR ANY RELATED MATERIAL SHALL GIVE GRANTEE THE RIGHT TO REMAIN EMPLOYED BY THE COMPANY OR ITS AFFILIATES OR TO CONTINUE IN THE SERVICE OF THE COMPANY OR ITS AFFILIATES IN ANY OTHER CAPACITY.   §11.                        GOVERNING LAW.  THE PLAN (INCLUDING THE SUB-PLAN)  AND THIS STOCK GRANT CERTIFICATE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE OF THE UNITED STATES OF AMERICA.   §12.                        BINDING EFFECT.  THIS STOCK GRANT CERTIFICATE SHALL BE BINDING UPON THE COMPANY AND GRANTEE AND THEIR RESPECTIVE HEIRS, EXECUTORS, ADMINISTRATORS AND SUCCESSORS.   §13.                        HEADINGS AND SECTIONS.  THE HEADINGS CONTAINED IN THIS STOCK GRANT CERTIFICATE ARE FOR REFERENCE PURPOSES ONLY AND SHALL NOT AFFECT IN ANY WAY THE MEANING OR INTERPRETATION OF THIS STOCK GRANT CERTIFICATE.  ALL REFERENCES TO SECTIONS IN THIS STOCK GRANT CERTIFICATE SHALL BE TO SECTIONS OF THIS STOCK GRANT CERTIFICATE UNLESS OTHERWISE EXPRESSLY STATED AS PART OF SUCH REFERENCE.   4 --------------------------------------------------------------------------------   Granted acknowledges receipt of a copy of the Plan, represents that he or she is familiar with the terms and provisions thereof, and hereby accepts the Stock Grant subject to all of the terms and provisions hereof and thereof.   Granted has reviewed this Stock Grant Certificate and the Plan in their entirety, has had an opportunity to obtain the advice of counsel and fully understands all provisions of this Stock Grant Certificate and the Plan.     DATED:       SIGNED         Beneficiary         Address:             5 --------------------------------------------------------------------------------  

Exhibit 10.16 LEASE SCHEDULE NO. 003R “This Lease Schedule No. 003R replaces Lease Schedule No. 003.” This Lease Schedule is issued pursuant to the Lease Agreement Number TR051905 dated May 19, 2005. The terms of the Lease Agreement and serial numbers contained on Certificates of Acceptance are a part hereof and are incorporated by reference herein.   LESSOR    LESSEE Farnam Street Financial, Inc.    Transcend Services, Inc. 240 Pondview Plaza    945 East Paces Ferry Road 5850 Opus Parkway    Suite 1475 Minnetonka, MN 55343    Atlanta, GA 30326 SUPPLIER OF EQUIPMENT    LOCATION OF EQUIPMENT eWorkz, Digital Voice Systems,    Same as above Tridia, Various    Term of Lease from Commencement Date: 24 Months Monthly Lease Charge: $26,258.00 Anticipated Delivery and Installation: October 2005 – February 2006 Projected Commencement Date: March 1, 2006 Security Deposit: Upon Lessee’s execution of this Lease Schedule, Lessee shall deliver a security deposit in the amount of $26,258.00. At the end of the applicable lease term, provided that there is no event of default, this security deposit will be returned to Lessee. EQUIPMENT   MANUFACTURER    QTY    MACHINE/MODEL    EQUIPMENT DESCRIPTION (including features) Dictaphone          Transcription hardware and software Milner Voice & Data          Voice Fusion Software eWorkz          Servers Digital Voice Systems          PCs Tridia          DVI Expansion, software Various          Various hardware and software for Data Center All of the Equipment on this Lease Schedule shall be defined as a total of $616,000.00. The Monthly Lease Charge listed above is calculated based on the agreement that this cost will be comprised of $362,000.00 of hardware at a lease rate of 0.041240 per $1.00 and $254,000.00 of soft costs (software, installation, service, maintenance, deposits, etc.) at a lease rate factor of 0.044604 per $1.00. This Lease Schedule shall Commence in accordance with the Lease Agreement when all of the Equipment cost described above is installed and accepted under Certificates of Acceptance issued pursuant to this Lease Schedule. The Monthly Lease Charge will be prorated and charged as interim rent between the date an item of equipment is accepted and the Commencement Date. If the exact description of the Equipment changes from what is listed above or on the Attachment A or should Lessee and Lessor agree to revise the total cost or the proportion of hardware to soft costs, a revised Lease Schedule shall be executed by both parties to reflect these changes.   Every Term is Agreed to and Accepted:     Every Term is Agreed to and Accepted: FARNAM STREET FINANCIAL, INC. “LESSOR”     TRANSCEND SERVICES, INC. “LESSEE” By:   /s/ Steven C. Morgan     By:   /s/ Lance B. Cornell Print Name:   Steven C. Morgan     Print Name:   Lance B. Cornell Title:   President     Title:   C.F.O. Date:   Dec. 21, 2005     Date:   12/20/05

Exhibit 10.4   DEUTSCHE BANK TRUST COMPANY AMERICAS DEUTSCHE BANK SECURITIES INC. 60 Wall Street New York, New York 10005   MERRILL LYNCH CAPITAL CORPORATION MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED 4 World Financial Center New York, New York 10280   CIT LENDING SERVICES CORPORATION CIT CAPITAL SECURITIES, LLC 1 CIT Drive Livingston, New Jersey 07039 August 11, 2006 US LEC Corp. Morrocroft III 6801 Morrison Blvd. Charlotte, NC 28211 Attention: J. Lyle Patrick PAETEC Corp. PAETEC Communications, Inc. One PAETEC Plaza 600 Willowbrook Office Park Fairport, NY 14450 Attention: Keith M. Wilson Re: Senior Secured Financing – Commitment Letter Ladies and Gentlemen: You have informed Deutsche Bank Trust Company Americas (“DBTCA”), Deutsche Bank Securities Inc. (“DBSI” and, together with DBTCA, “DB”), Merrill Lynch Capital Corporation (“MLCC”), Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPFS” and, together with MLCC, “ML”), CIT Lending Services Corporation (“CITLS”) and CIT Capital Securities, LLC (“CITCS” and, together with CITLS, “CIT” and, together with DB and ML, “we”, “us” or the “ Commitment Parties”) that: (i) US LEC Corp., a Delaware corporation (“USA”), and PAETEC Corp., a Delaware corporation (“Poland” and, together with USA, “you”), intend to consummate merger transactions (such transactions being herein called the “Mergers”), whereby:     (a) WC Acquisition Holdings Corp. (the “Company” or the “Borrower”), a Delaware corporation and a newly formed wholly-owned direct subsidiary of Poland, has formed two wholly-owned subsidiaries, WC Acquisition Sub U Corp., a Delaware corporation (“Merger Sub U”), and WC Acquisition Sub P Corp., a Delaware corporation (“Merger Sub P”); and     (b) Merger Sub U and Merger Sub P will, respectively, merge into USA and Poland, with USA and Poland as the surviving entities, and the common stock of each of USA and Poland will be converted into the right to receive common stock of the Company, -------------------------------------------------------------------------------- and as a result of which, the holders of common stock of USA and Poland will together own all the outstanding common stock of the Company and the Company will in turn own all the outstanding common stock of USA and Poland; (ii) concurrently with the consummation of the Mergers, USA shall (x) redeem, repurchase or otherwise discharge in full its outstanding Second Priority Senior Secured Floating Rate Notes due 2009, (y) repay in full, and terminate all commitments under, its existing $10.0 million senior secured revolving credit facility dated as of October 25, 2005 (or any replacement working capital facility in respect thereof) and (z) purchase in full (and cancel) its outstanding Series A Mandatorily Redeemable Convertible Preferred Stock (the foregoing redemptions and purchases are collectively referred to herein as the “USA Refinancing”); and (iii) concurrently with the consummation of the Mergers, Poland and its existing wholly-owned subsidiary, PAETEC Communications, Inc. a Delaware corporation, shall repay in full, and terminate all commitments under, (x) their existing first-lien credit agreement dated as of June 12, 2006 (as in effect on the date hereof, the “Existing First-Lien Poland Credit Agreement”) and (y) their existing second-lien credit agreement dated as of June 12, 2006 (as in effect on the date hereof, the “Existing Second-Lien Poland Credit Agreement”) (the foregoing repayments are collectively referred to herein as the “Poland Refinancing” and, together with the USA Refinancing, the “Refinancing”). In connection with the foregoing, we understand that (i) the merger consideration to be paid to the stockholders of USA and Poland pursuant to the Mergers (other than cash in lieu of fractional shares) shall only be newly issued shares of common stock of the Company, (ii) the amount needed to effect the Refinancing (including related premiums) will be $801.1 million, (iii) the fees and expenses payable in connection with the Transaction (as defined below) will be approximately $24.1 million and (iv) after giving effect to the Transaction, the Company, USA, Poland and their respective subsidiaries shall have no indebtedness or preferred stock other than (x) indebtedness under the Senior Secured Financing (as defined below) and (y) such other existing indebtedness (if any) as may be agreed to by the Commitment Parties. The sources of funds required to finance the Refinancing, to pay the fees and expenses incurred in connection with the Transaction, and to provide for the working capital needs and general corporate requirements of the Borrower and its subsidiaries after giving effect to the Transaction, shall be provided solely through (i) cash on hand of not less than $50.0 million and (ii) the incurrence by the Borrower of senior secured credit facilities in the aggregate amount of $850.0 million (the “Credit Facilities” or the “Senior Secured Financing” and, together with the Mergers and the Refinancing, the “Transaction”); it being understood that (x) all of the First-Lien Term Loan Facility and Second-Lien Credit Facility shall be incurred on the closing date of the Mergers (the “Closing Date”) to finance the Refinancing and to pay the fees and expenses incurred in connection with the Transaction and (y) no portion of the Revolving Credit Facility may be utilized to make payments owing to effect the Mergers or the Refinancing   2 -------------------------------------------------------------------------------- or to pay any fees and expenses incurred in connection with the Transaction. A summary of certain of the terms and conditions of (i) the First-Lien Credit Facilities is set forth in Exhibit A attached hereto (the “First-Lien Term Sheet”) and (ii) the Second-Lien Credit Facility is set forth in Exhibit B attached hereto (the “Second-Lien Term Sheet” and, together with the First-Lien Term Sheet and the Conditions Precedent set forth in Exhibit C hereto, the “Term Sheets”), which Term Sheets are incorporated herein and made a part hereof. Each of DBTCA, MLCC and CITLS (in such capacity, the “Initial Lenders”) is pleased to confirm that, subject to the terms and conditions set forth herein and in the Term Sheets, it hereby severally commits to provide 60%, 30% and 10%, respectively, of each of the Credit Facilities. It is agreed that (i) unless DB otherwise determines, DBTCA will act as sole Administrative Agent for both Credit Facilities (in such capacities, the “Administrative Agent”) for a syndicate of lenders who will participate in the Senior Secured Financing (together with the Initial Lenders, the “Lenders”), (ii) MLPFS will act as sole Syndication Agent for both Credit Facilities (in such capacity, the “Syndication Agent”), (iii) CITLS will act as sole Documentation Agent for both Credit Facilities (in such capacity, the “Documentation Agent”) and (iv) DBSI and MLPFS will act as sole Joint Lead Arrangers and Joint Book Running Managers for both Credit Facilities, with DBSI having “left” placement on all marketing materials for each of the Credit Facilities (in such capacity, the “Joint Lead Arrangers”). At DB’s option, DBTCA, DBSI, MLCC, MLPFS and/or one or more affiliates thereof may also be designated with such other titles as may be deemed appropriate or desirable by DB in consultation with you and ML. Notwithstanding anything to the contrary contained above in this paragraph, in connection with the syndication of the Senior Secured Financing, DB shall have the right (in consultation with you and ML) to award one or more other roles or titles to one or more other Lenders or affiliates thereof, in each case as determined by DB in its sole discretion. DB shall also have the right, at its discretion following consultation with you and ML, to require one or more different agents to act for the First-Lien Credit Facilities as opposed to the Second-Lien Credit Facility. You understand and agree that, for each Administrative Agent with respect to the First-Lien Credit Facilities and/or Second-Lien Credit Facility, you shall be obligated to pay to each such agent the reasonable fees and expenses in its capacity as such as agreed with the respective agent. You agree that, except as contemplated above in this paragraph, no other agents, co-agents or arrangers will be appointed and no other titles will be awarded in connection with the Credit Facilities unless you and we shall so agree. Each Initial Lender reserves the right, prior to or after execution of the definitive credit documentation for the Senior Secured Financing, to syndicate all or part of its commitment hereunder to one or more other Lenders that will become party to such definitive credit documentation pursuant to a syndication to be managed by DB in consultation with you and ML. You agree that, upon delivery to the Commitment Parties and you by another Lender (which is a reputable fund or financial institution) of a commitment letter addressed to the Commitment Parties and you for all or a portion of the Senior Secured Financing containing terms no less favorable to you in any material respect than the terms hereof, each Initial Lender shall be fully relieved of its obligations hereunder, to the extent of the commitments set forth in such commitment letter (and with such reduction to be allocated 60% to DBTCA, 30% to MLCC and 10% to CITLS). All aspects of the syndication of the Senior Secured Financing, including, without limitation, timing, potential syndicate members to be approached, titles, allocations and division of fees, shall be determined by DB in consultation with you and ML. You agree to   3 -------------------------------------------------------------------------------- actively assist DB (in a commercially reasonable manner) in such syndication, including by using your commercially reasonable efforts to ensure that DB’s syndication efforts benefit materially from your existing lending relationships and to provide DB and the Lenders, promptly upon request, with all information reasonably deemed necessary by DB to complete successfully the syndication, including, but not limited to, (a) an information package for delivery to potential syndicate members and participants and (b) projections and all information prepared by you or your affiliates or advisors relating to the transactions described herein. You also agree to make available each of your senior officers and representatives, in each case from time to time and to attend and make presentations regarding the business and prospects of the Company, USA, Poland and their respective subsidiaries at a meeting or meetings of Lenders or prospective Lenders and with rating agencies at such times and places as DB may reasonably request. The provisions of the preceding two sentences shall remain in full force and effect until the completion of the Successful Syndication (as defined in the General Fee Letter) of the Senior Secured Financing. Each of Poland and USA represents, warrants and covenants, as to itself and its subsidiaries, that (i) no written information which has been or is hereafter furnished by it or on its behalf in connection with the transactions contemplated hereby and (ii) no other information given at information meetings for or during other communications with potential syndicate members and supplied or approved by it or on its behalf (such written information and other information being referred to herein collectively as the “Information”) taken as a whole contained (or, in the case of Information furnished after the date hereof, will contain), as of the time it was (or hereafter is) furnished, any material misstatement of fact or omitted (or will omit) as of such time to state any material fact necessary to make the statements therein taken as a whole not misleading, in the light of the circumstances under which they were (or hereafter are) made; provided that, with respect to Information consisting of statements, estimates and projections regarding the future performance of the Company, USA, Poland and their respective subsidiaries (collectively, the “Projections”), no representation, warranty or covenant is made other than that the Projections have been (and, in the case of Projections furnished after the date hereof, will be) prepared in good faith based on assumptions believed to be reasonable at the time of preparation thereof (it being understood that the Projections are and will be subject to contingencies and assumptions, many of which are beyond your control, and that no assurance can be given that the Projections will be realized). You agree to supplement the Information and the Projections from time to time until the date of the initial borrowing under the Senior Secured Financing, as appropriate, so that the representations and warranties in the preceding sentence remain correct. You understand that, in syndicating the Senior Secured Financing, the Commitment Parties will use and rely on the Information and the Projections without independent verification thereof. Each Commitment Party’s commitments and agreements hereunder are subject to (a) since December 31, 2005, there shall not have been any change, event, violation, inaccuracy, circumstance or effect (any such item, an “Effect”) that, individually or when taken together with all other Effects that have occurred prior to the date of determination of the occurrence of the Material Adverse Effect (as defined below), is or is reasonably expected (i) to be materially adverse to the business, assets (including intangible assets), liabilities, capitalization, condition (financial or otherwise) or results of operations of USA and its subsidiaries, taken as a whole, or Poland and its subsidiaries, taken as a whole; provided, however, that, in no event shall any of   4 -------------------------------------------------------------------------------- the following, alone or in combination, be deemed to constitute, nor shall any of the following be taken into account in determining whether there has been or will be, a Material Adverse Effect on USA and its subsidiaries, taken as a whole, or Poland and its subsidiaries, taken as a whole: (A) events or circumstances generally affecting the segments of the telecommunications industry in which USA and USA’s subsidiaries and Poland and Poland’s subsidiaries operate, and which do not have a materially disproportionate effect on USA and USA’s subsidiaries or Poland and Poland’s subsidiaries, as the case may be, (B) U.S. or global political or economic conditions, or (C) the execution, delivery, announcement or performance of the Merger Agreement or the Senior Secured Financing or the consummation of any transaction contemplated thereby or hereby; or (ii) to impair in any material respect the ability of USA or Poland to perform its obligations under the Merger Agreement or the ability of the Company, USA or Poland to perform its material obligations under the Senior Secured Financing or prevent or materially delay the consummation by such party of any of the transactions contemplated thereby or hereby (each of preceding sub-clauses (i) and (ii), a “Material Adverse Effect”), (b) the Joint Lead Arrangers having had at least 30 days from the date of the completion of a satisfactory confidential information memorandum with respect to the Credit Facilities to market and syndicate, and each of you having cooperated in the manner required hereby in the syndication of, the Credit Facilities, (c) until the earlier of (x) 60 days following the Closing Date and (y) Successful Syndication (as defined in the Fee Letter) of the Credit Facilities, there shall be no offering, placement or arrangement of any debt securities or bank financing (including refinancings and renewals of debt) by or on behalf of the Company, USA, Poland or any of their respective subsidiaries without the prior written consent of DB (which consent shall not be unreasonably withheld), provided that this clause (c) shall not restrict the ability of USA to renew or replace its existing working capital facility in an amount not to exceed $10.0 million, and (d) the other conditions set forth herein and in the Term Sheets. To induce the Commitment Parties to issue this letter (together with the Term Sheets, this “Commitment Letter”) and to proceed with the documentation of the proposed Senior Secured Financing, you hereby jointly and severally agree that all reasonable fees and reasonable out-of-pocket expenses (including the reasonable fees and expenses of White & Case LLP as counsel to the Commitment Parties, any separate counsel retained by the Commitment Parties with respect to the Second-Lien Credit Facility, and any local counsel and consultants) of the Commitment Parties and their affiliates arising in connection with this Commitment Letter, in connection with the Transaction and other transactions described herein (including in connection with our due diligence and syndication efforts) and in connection with the enforcement of this Commitment Letter, the Fee Letters (as defined below) or any other related agreements shall be for your account (and that you shall from time to time upon request from a Commitment Party reimburse it and its affiliates for all such fees and expenses paid or incurred by them), whether or not the Transaction is consummated or the Senior Secured Financing is made available or definitive credit documents are executed. You further jointly and severally agree to indemnify and hold harmless each Commitment Party (including in its various capacities hereunder), each other agent or co-agent (if any) designated by DB with respect to the Senior Secured Financing (each, an “Agent”), each Lender (including in any event DBTCA, MLCC and CITLS) and their respective affiliates and each director, officer, employee, representative and agent thereof (each, an “indemnified person”) from and against any and all actions, suits, proceedings (including any investigations or inquiries), claims, losses, damages, liabilities or expenses of any kind or nature whatsoever which may be incurred by or asserted   5 -------------------------------------------------------------------------------- against or involve DB, ML, CIT, any Agent, any Lender or any other such indemnified person as a result of or arising out of or in any way related to or resulting from the Transaction or this Commitment Letter and, upon demand, to pay and reimburse DB, ML, CIT, each Agent, each Lender and each other indemnified person for any reasonable legal or other out-of-pocket expenses paid or incurred in connection with investigating, defending or preparing to defend any such action, suit, proceeding (including any inquiry or investigation) or claim (whether or not DB, ML, CIT, any Agent, any Lender or any other such indemnified person is a party to any action or proceeding out of which any such expenses arise) and in connection with the enforcement of this Commitment Letter, the Fee Letters or any other related agreements; provided, however, that you shall not have to indemnify any indemnified person against any loss, claim, damage, expense or liability to the extent same resulted from the gross negligence or willful misconduct of the respective indemnified person (as determined by a court of competent jurisdiction in a final and non-appealable judgment). None of DB, ML, CIT, any Agent or any other indemnified person shall be responsible or liable to you or any other person or entity for (x) any determination made by it pursuant to this Commitment Letter in the absence of gross negligence or willful misconduct on the part of such person or entity (as determined by a court of competent jurisdiction in a final and non-appealable judgment), (y) any damages arising from the use by others of information or other materials obtained through electronic, telecommunications or other information transmission systems (except, in the case of the indemnified person responsible for such damages, to the extent the same result from the gross negligence or willful misconduct of such indemnified person (as determined by a court of competent jurisdiction in a final and non-appealable judgment)) or (z) any indirect, special, incidental, punitive or consequential damages (including, without limitation, any loss of profits, business or anticipated savings) which may be alleged as a result of this Commitment Letter or the financing contemplated hereby. Each Commitment Party reserves the right to employ the services of its affiliates in providing services contemplated by this Commitment Letter and to allocate, in whole or in part, to its affiliates certain fees payable to such Commitment Party in such manner as such Commitment Party and its affiliates may agree in their sole discretion. You also agree that each Commitment Party may at any time and from time to time assign all or any portion of its commitments hereunder to one or more of its affiliates. You further acknowledge that (i) such Commitment Party may share with any of its affiliates, and such affiliates may share with each Commitment Party, any information related to the Transaction, the Company, USA, Poland (and their and your respective subsidiaries and affiliates), or any of the matters contemplated hereby, (ii) such Commitment Party and its affiliates may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which you may have conflicting interests regarding the transactions described herein and otherwise and (iii) each Commitment Party and its affiliates may now or in the future own equity securities of the Borrower and/or its affiliates. Each Commitment Party agrees to treat, and cause any such affiliate to treat, all non-public information provided to it by the Company, USA, Poland and their respective subsidiaries as confidential information in accordance with customary banking industry practices, including compliance with applicable securities law but subject in any event to disclosure requirements of applicable law and regulation and any applicable judicial, court or governmental order or decree (it being understood that the information package distributed to potential syndicate members and participants shall contain a similar agreement on the part of such potential syndicate members and participants).   6 -------------------------------------------------------------------------------- You agree that this Commitment Letter is for your confidential use only and that, unless each Commitment Party has otherwise consented, neither its existence nor the terms hereof will be disclosed by you to any person or entity other than USA, Poland and each of their respective officers, directors, employees, accountants and other advisors and your officers, directors, employees, accountants, attorneys and other advisors, and then only on a “need to know” basis in connection with the transactions contemplated hereby and on a confidential basis. Notwithstanding the foregoing, following your acceptance of the provisions hereof and your return of an executed counterpart of this Commitment Letter, the related fee letter of even date herewith among the parties hereto (the “General Fee Letter”) and the related agency fee letter of even date herewith between DB and you (the “Agency Fee Letter” and, together with the General Fee Letter, the “Fee Letters”) to us as provided below, (i) you may make public disclosure of the existence and amount of the commitments hereunder and of the identity of the Administrative Agent, the Syndication Agent, the Documentation Agent and the Joint Lead Arrangers, (ii) you may file a copy of this Commitment Letter (but not the Fee Letters) in any public record in which it is required by law to be filed and (iii) you may make such other public disclosures of the terms and conditions hereof and of the Fee Letters as, and to the extent, you are required by law, upon the advice of your counsel, to make; provided that except where prohibited by applicable law, prior to making any disclosure of the terms and conditions of either Fee Letter, you shall provide to the Joint Lead Arrangers at least one business day’s prior written notice of the intended disclosure. If this Commitment Letter is not accepted by you as provided below, please immediately return this Commitment Letter (and any copies hereof) to the undersigned. Notwithstanding anything herein to the contrary, any party to this Commitment Letter (and any employee, representative or other agent of such party) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Commitment Letter and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure, except that (i) tax treatment and tax structure shall not include the identity of any existing or future party (or any affiliate of such party) to this Commitment Letter, and (ii) no party shall disclose any information relating to such tax treatment and tax structure to the extent nondisclosure is reasonably necessary in order to comply with applicable securities laws. For this purpose, the tax treatment of the transactions contemplated by this Commitment Letter is the purported or claimed U.S. Federal income tax treatment of such transactions and the tax structure of such transactions is any fact that may be relevant to understanding the purported or claimed U.S. Federal income tax treatment of such transactions. You hereby represent and acknowledge that no Commitment Party, nor any employees or agents of, or other persons affiliated with, any Commitment Party, have directly or indirectly made or provided any statement (oral or written) to you or to any of your employees or agents, or other persons affiliated with or related to you (or, so far as you are aware, to any other person), as to the potential tax consequences of the Transaction. The provisions of the five immediately preceding paragraphs shall survive any termination of this Commitment Letter. In order to comply with the USA Patriot Act, each Commitment Party must obtain, verify and record information that sufficiently identifies each entity (or individual) that   7 -------------------------------------------------------------------------------- enters into a business relationship with such Commitment Party. As a result, in addition to your corporate name and address, each Commitment Party will obtain your corporate tax identification number and certain other information. Each Commitment Party may also request relevant corporate resolutions and other identifying documents. This Commitment Letter and the Fee Letters (and your rights and obligations hereunder and thereunder) shall not be assignable by you to any person or entity without the prior written consent of each Commitment Party (and any purported assignment without such consent shall be null and void). This Commitment Letter and the Fee Letters may not be amended or modified, or any provision hereof and thereof waived, except by an instrument in writing signed by you and each Commitment Party. Each of this Commitment Letter and the Fee Letters may be executed in any number of counterparts, each of which shall be an original and all of which, when taken together, shall constitute one agreement. Delivery of an executed signature page of this Commitment Letter or the Fee Letters by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof or thereof, as the case may be. This Commitment Letter and the Fee Letters shall be governed by, and construed in accordance with, the laws of the State of New York. This Commitment Letter and the Fee Letters supersede all prior communications, written or oral, with respect to the matters herein or therein. This Commitment Letter is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person or entity other than the parties hereto (and indemnified persons) and may not be relied upon by any person or entity other than you. Neither this Commitment Letter nor the Fee Letters are intended to create a fiduciary relationship among the parties hereto or thereto. Each of the parties hereto hereby waives any right to trial by jury with respect to any claim, action, suit or proceeding arising out of or contemplated by this Commitment Letter or the Fee Letters. You hereby submit to the non-exclusive jurisdiction of the federal and New York state courts located in the county of New York in connection with any dispute related to this Commitment Letter, the Fee Letters or any matters contemplated hereby or thereby. Each Commitment Party willingness, and commitments, with respect to the Credit Facilities as set forth above will terminate on the first to occur of (x) August 15, 2006, unless on or prior to such date a definitive agreement and plan of merger with respect to the Mergers (the “Merger Agreement”) has been entered into by and among USA, Poland and the Company, (y) April 30, 2007, unless on or prior to such date the Transaction has been consummated and definitive credit agreements evidencing the Senior Secured Financing, in form and substance satisfactory to each Commitment Party, shall have been entered into and the initial borrowings shall have occurred thereunder, or (z) any time after the execution of the Merger Agreement and prior to the consummation of the Transaction, the date of the termination of the Merger Agreement (other than with respect to ongoing indemnities, confidentiality provisions and similar provisions). Subject to the provisions of the fourth preceding paragraph, you shall have the right to terminate this Commitment Letter at any time upon written notice to each Commitment Party. *  *  *   8 -------------------------------------------------------------------------------- If you are in agreement with the foregoing, please sign and return to DB the enclosed copy of this Commitment Letter, together with a copy of the enclosed Fee Letters, no later than 5:00 p.m., New York time, on August 15 , 2006. Unless this Commitment Letter and the Fee Letters are signed and returned by the time and date provided in the immediately preceding sentence, this Commitment Letter shall terminate at such time and date.   Very truly yours, DEUTSCHE BANK TRUST COMPANY AMERICAS By:   /s/ David Mayhew Name:   David Mayhew Title:   Managing Director By:   /s/ Robert Wheeler Name:   Robert Wheeler Title:   Director DEUTSCHE BANK SECURITIES INC. By:   /s/ Don Birchenough Name:   Don Birchenough Title:   Managing Director By:   /s/ Matthew Maley Name:   Matthew Maley Title:   Director MERRILL LYNCH CAPITAL CORPORATION By:   /s/ Gregory Margolies Name:   Gregory Margolies Title:   Managing Director MERRILL LYNCH, PIERCE, FENNER & SMITH By:   /s/ Gregory Margolies Name:   Gregory Margolies Title:   Managing Director CIT LENDING SERVICES CORPORATION By:   /s/ Joseph Junda Name:   Joseph Junda Title:   Vice President CIT CAPITAL SECURITIES, LLC. By:   /s/ Thomas Westdyk Name:   Thomas Westdyk Title:   Vice President -------------------------------------------------------------------------------- Agreed to and Accepted this 11 day of August, 2006:   US LEC CORP. By:   /s/ J. Lyle Patrick Name:   J. Lyle Patrick Title:   Executive Vice President and Chief Financial Officer PAETEC CORP. By:   /s/ Keith M. Wilson Name:   Keith M. Wilson Title:   Executive Vice President and Chief Financial Officer PAETEC COMMUNICATIONS, INC. By:   /s/ Keith M. Wilson Name:   Keith M. Wilson Title:   Executive Vice President and Chief Financial Officer -------------------------------------------------------------------------------- EXHIBIT A SUMMARY OF CERTAIN TERMS OF FIRST-LIEN CREDIT FACILITIES Unless otherwise defined herein, capitalized terms used herein and defined in the letter agreement to which this Exhibit A is attached (the “Commitment Letter”) are used herein as therein defined. I. Description of First-Lien Credit Facilities   Borrower:    WC Acquisition Holdings Corp. (the “Borrower”). Total Committed First-Lien Credit Facilities:    $675.0 million as of the Closing Date (as defined below). Credit Facilities:    1.      Term loan facility in an aggregate principal amount of $625.0 million (the “First-Lien Term Loan Facility”).    2.      Revolving credit facility in an aggregate principal amount of $50.0 million (the “Revolving Credit Facility” and, together with the First-Lien Term Loan Facility, the “First-Lien Credit Facilities”).    3.      Uncommitted Incremental First-Lien Term Loan Facilities (as defined below) in an aggregate amount of up to $100.0 million. A. First-Lien Term Loan Facility   Use of Proceeds:    The loans made pursuant to the First-Lien Term Loan Facility (the “Initial First-Lien Term Loans”) may only be incurred on the date on which the Transaction is consummated (the “Closing Date”) and the proceeds thereof shall be utilized solely to finance, in part, the Refinancing and to pay the fees and expenses incurred in connection with the Transaction. Maturity:    The final maturity date of the First-Lien Term Loan Facility shall be 6 years from the Closing Date (the “First-Lien Term Loan Maturity Date”). Amortizations:    (i)     During each of the first 5 3/4 years following the Closing Date, annual amortization (payable in equal quarterly installments) of the Initial First-Lien Term Loans shall be required in an amount equal to 1.0% of the initial aggregate principal amount of the Initial First-Lien Term Loans.    (ii)    The remaining aggregate principal amount of Initial First-Lien Term Loans shall be repaid on the First-Lien Term Loan Maturity Date. -------------------------------------------------------------------------------- EXHIBIT A Page 2   Availability:    Initial First-Lien Term Loans may only be incurred on the Closing Date. No amount of Initial First-Lien Term Loans once repaid may be reborrowed. B.     Revolving Credit Facility Use of Proceeds:    The proceeds of loans under the Revolving Credit Facility (the “Revolving Loans”) shall be utilized for working capital, capital expenditures and general corporate purposes, provided that no portion of the Revolving Credit Facility may be utilized to pay amounts owing to finance the Refinancing or to pay any fees and expenses incurred in connection with the Transaction. Maturity:    The final maturity date of the Revolving Credit Facility shall be 5 years from the Closing Date (the “Revolving Loan Maturity Date”). Availability:    Revolving Loans may be borrowed, repaid and reborrowed on and after the Closing Date and prior to the Revolving Loan Maturity Date in accordance with the terms of the definitive credit documentation governing the Credit Facilities. Letters of Credit:    A portion of the Revolving Credit Facility in an amount to be mutually agreed upon will be available for the issuance by one or more Lenders (to be determined) or their respective affiliates of stand-by and trade letters of credit (“Letters of Credit”) to support obligations of the Borrower and its subsidiaries satisfactory to the Administrative Agent and the Required Lenders (as defined below). Maturities for Letters of Credit will not exceed twelve months in the case of standby Letters of Credit or 180 days in the case of trade Letters of Credit, renewable annually thereafter in the case of standby Letters or Credit and, in any event, shall not extend beyond the tenth business day prior to the Revolving Loan Maturity Date. Swingline Loans:    A portion of the Revolving Credit Facility in an amount to be mutually agreed upon shall be available prior to the Revolving Loan Maturity Date for swingline loans (the “Swingline Loans”) to be made by DBTCA on same-day notice. Any Swingline Loans will reduce availability under the Revolving Credit Facility on a dollar-for-dollar basis. Each Lender under the Revolving Credit Facility shall acquire an irrevocable and unconditional pro rata participation in each Swingline Loan. -------------------------------------------------------------------------------- EXHIBIT A Page 3   C.     Uncommitted First-Lien Incremental Term Loan Facilities    The Borrower may from time to time after the later to occur of (x) the Closing Date and (y) the Successful Syndication of the Senior Secured Financing solicit DBTCA, MLCC and other existing or prospective Lenders reasonably acceptable to the Administrative Agent to provide incremental commitments consisting of one or more increases to the First-Lien Term Loan Facility (such increase(s) to the First-Lien Term Loan Facility, the “Incremental First-Lien Term Loan Facilities”) in minimum amounts of at least $25.0 million, up to a maximum aggregate principal amount of $100.0 million, so long as (i) no default or event of default then exists under the First-Lien Credit Facilities or would result therefrom, (ii) any loans incurred pursuant to any Incremental First-Lien Term Loan Facility (the “Incremental First-Lien Term Loans” and, together with the Initial First-Lien Term Loans, the “First-Lien Term Loans” and, together with the Revolving Loans and Swingline Loans, the “Loans”) are incurred on the date of the effectiveness of the commitments thereunder, (iii) the proceeds of all Incremental First-Lien Term Loans are used for general corporate and working capital purposes of the Borrower and its subsidiaries and (iv) the Borrower and its subsidiaries are in pro forma compliance with each of the financial covenants under the First-Lien Credit Facilities (determined after giving effect to the full utilization of the commitments provided under such Incremental First-Lien Term Loan Facility). Each Incremental First-Lien Term Loan Facility shall be subject to the same terms, conditions and covenants as are applicable to the First-Lien Term Loan Facility (including, without limitation, tenor, interest rate, amortization and voluntary and mandatory prepayment provisions), except that the “effective margin” applicable to Incremental First-Lien Term Loans (which, for such purposes only, shall be deemed to include all upfront or similar fees or original issue discount (amortized over the life of such Incremental First-Lien Term Loans) payable to all Lenders providing such Incremental First-Lien Term Loans, but exclusive of any arrangement, structuring or other fees payable in connection therewith that are not shared with all Lenders providing such Incremental First-Lien Term Loans), determined as of the initial funding date for such Incremental First-Lien Term Loans, may not exceed the “effective margin” then applicable to the Initial First-Lien Term Loans or any other Incremental First-Lien Term Loans (determined on the same basis as provided in the preceding parenthetical), unless the “effective margin” of all then existing First-Lien Term Loans is increased in the amount of such excess. Any upfront fees and arrangement fees for any Incremental First-Lien Term Loan Facility will be negotiated with the Administrative Agent at the time of any request to provide commitments pursuant to such Incremental First-Lien Term Loan Facility. -------------------------------------------------------------------------------- EXHIBIT A Page 4      Existing Lenders may, but shall not be obligated without their prior written consent to, provide a commitment and/or make any loans pursuant to any Incremental First-Lien Term Loan Facility, and nothing contained in this Term Sheet or the Commitment Letter constitutes, or shall be deemed to constitute, a commitment with respect to any Incremental First-Lien Term Loan Facility. II.     Terms Applicable to All First-Lien Credit Facilities Administrative Agent:    DBTCA. Joint Lead Arrangers:    DBSI and MLPFS. Syndication Agent:    MLPFS. Documentation Agent:    CITLS. Lenders:    DBTCA, MLCC, CITLS and/or a syndicate of lenders formed by DB in consultation with the Borrower (the “Lenders”). Guaranties:    Each direct and indirect subsidiary of the Borrower (each, a “Guarantor” and, collectively, the “Guarantors”) shall be required to provide an unconditional guaranty of all amounts owing under the First-Lien Credit Facilities (the “Guaranties”). Such Guaranties shall be in form and substance satisfactory to the Commitment Parties and shall, to the extent requested by the Commitment Parties, also guarantee the obligations of the Borrower and its subsidiaries under interest rate swaps/foreign currency swaps or similar agreements with a Lender or its affiliates (the “Secured Hedging Agreements”). All Guaranties shall be guarantees of payment and not of collection. Notwithstanding anything to the contrary contained above, no non-U.S. subsidiary of the Borrower which is a “controlled foreign corporation” (within the meaning of Section 957 of the Internal Revenue Code) (each, a “CFC”) shall be required to provide a Guaranty (or constitute a Guarantor) if the furnishing of such Guaranty gives rise to adverse tax consequences to the Borrower or any of its subsidiaries. Security:    All amounts owing under the First-Lien Credit Facilities and (if applicable) the Secured Hedging Agreements (and all obligations under the Guaranties) will be secured by (x) a first priority perfected security interest in all stock, other equity interests and promissory notes owned by the Borrower and the Guarantors, provided that not more than 65% of the total outstanding voting stock of any CFC shall be required to be pledged -------------------------------------------------------------------------------- EXHIBIT A Page 5      if the pledging thereof would give rise to adverse tax consequences to the Borrower or any of its subsidiaries, and (y) a first priority perfected security interest in all other tangible and intangible assets (including, without limitation, receivables, cash, bank and securities deposit accounts, contract rights, securities, patents, trademarks, other intellectual property, inventory, equipment, real estate and leasehold interests) owned by the Borrower and the Guarantors (all of the foregoing, the “Collateral”), subject (in each case) to exceptions satisfactory to the Commitment Parties.    All documentation (collectively referred to herein as the “Security Agreements”) evidencing the security required pursuant to the immediately preceding paragraph (including any required collateral assignments of licenses or other contract rights) shall be in form and substance satisfactory to the Commitment Parties, and shall effectively create first priority security interests in the property purported to be covered thereby, with such exceptions as are acceptable to the Commitment Parties in their reasonable discretion. Intercreditor Matters:    The priority of the security interests in the Collateral and related creditors’ rights will be set forth in an intercreditor agreement (the “Intercreditor Agreement”) acceptable to the Commitment Parties, the Lenders under the First-Lien Credit Facilities and the lenders under the Second-Lien Credit Facility. The Intercreditor Agreement will provide (in each case, except to the extent the Administrative Agent otherwise determines), inter alia, for (i) subordination of security interests of the lenders under the Second-Lien Credit Facility to the security interests of the Lenders under the First-Lien Credit Facilities, (ii) “turnover” provisions with respect to Collateral proceeds, (iii) limitations on the voting rights of lenders under the Second-Lien Credit Facility with respect to the release of Collateral and the enforcement of remedies with respect to the Collateral and (iv) a waiver of the right of lenders under the Second-Lien Credit Facility to challenge any “debtor-in-possession financing” or other credit approved by the Lenders under the First-Lien Credit Facilities. Optional Commitment Reductions:    The unutilized portion of the total commitments under the Revolving Credit Facility may, upon three business days’ notice, be reduced or terminated by the Borrower without penalty in minimum amounts to be agreed. Voluntary Prepayments:    Voluntary prepayments may be made at any time on three business days’ notice in the case of Loans bearing interest at LIBOR (as defined below), or one business day’s notice in the case of Loans bearing interest at the Base Rate (as defined below) (or same day notice, in the case of Swingline -------------------------------------------------------------------------------- EXHIBIT A Page 6      Loans), without premium or penalty, in minimum principal amounts to be agreed; provided that voluntary prepayments of LIBOR Loans made on a date other than the last day of an interest period applicable thereto shall be subject to customary breakage costs. Voluntary prepayments of First-Lien Term Loans shall apply to reduce future scheduled amortization payments of First-Lien Term Loans on a pro rata basis (based upon the then remaining amount of such scheduled amortization payments). Mandatory Repayments:    Mandatory repayments of First-Lien Term Loans shall be required from (a) 100% of the proceeds (net of taxes and costs and expenses in connection with the sale) from asset sales by the Borrower and its subsidiaries (subject to certain ordinary course and reinvestment exceptions to be mutually agreed upon), (b) 100% of the net proceeds from issuances of debt (with appropriate exceptions to be mutually agreed upon) by the Borrower and its subsidiaries, (c) 75% (reducing to lesser percentages to be mutually agreed upon based on meeting total leverage tests to be mutually agreed upon and so long as no default or event of default under the First-Lien Credit Facilities is in existence) of annual excess cash flow (to be defined to the satisfaction of the Commitment Parties) of the Borrower and its subsidiaries and (d) 100% of the net proceeds from insurance recovery and condemnation events of the Borrower and its subsidiaries (subject to certain reinvestment rights to be mutually agreed upon).    All mandatory repayments of First-Lien Term Loans made pursuant to clauses (a)-(d) above shall apply to reduce future scheduled amortization payments of the First-Lien Term Loans on a pro rata basis (based upon the then remaining amount of such scheduled amortization payments). To the extent the amount of any mandatory repayment which would otherwise be required as provided pursuant to clause (a), (b) or (d) of the preceding paragraph exceeds the aggregate principal amount of First-Lien Term Loans then outstanding, such excess shall apply to permanently reduce the commitments under the Revolving Credit Facility. In addition, (i) if at any time the outstandings pursuant to the Revolving Credit Facility (including Letter of Credit outstandings and Swingline Loans) exceed the aggregate commitments with respect thereto, prepayments of Revolving Loans and/or Swingline Loans (and/or the cash collateralization of Letters of Credit) shall be required in an amount equal to such excess and (ii) upon the occurrence of a change of control (to be defined on a basis satisfactory to the Commitment Parties), all commitments under the First-Lien Credit Facilities shall terminate and all outstanding Loans shall become due and payable. Interest Rates:    At the Borrower’s option, Loans may be maintained from time to time as (x) Base Rate Loans, which shall bear interest at the Base Rate in effect from time to time plus the Applicable Margin (as defined below) or -------------------------------------------------------------------------------- EXHIBIT A Page 7     (y) LIBOR Loans, which shall bear interest at LIBOR for the respective interest period plus the Applicable Margin, provided, that (I) all Swingline Loans shall bear interest only based upon the Base Rate and (II) until the earlier to occur of (i) the 30th day following the Closing Date or (ii) the date upon which DB shall determine in its sole discretion that the primary syndication of the First Lien Credit Facilities has been completed, LIBOR Loans in respect of the First-Lien Term Loans shall be restricted to a single one month interest period at all times, with such interest period to begin not sooner than 3 business days (nor later than 5 business days) after the Closing Date.   “Applicable Margin” shall mean (i) in the case of Loans of any tranche (other than Incremental First-Lien Term Loans), a percentage per annum equal to (I) in the case of Initial First-Lien Term Loans and Revolving Loans (A) maintained as Base Rate Loans, 2.75%, and (B) maintained as LIBOR Loans, 3.75%, and (II) in the case of Swingline Loans, 2.75%, and (ii) in the case of Incremental First-Lien Term Loans, such rate per annum as may be agreed to by and among the Borrower and the Lender(s) providing such Incremental Term Loans; provided that if the “effective margin” (determined as provided in the section hereof entitled “Uncommitted Incremental First-Lien Credit Facilities”) applicable to any Incremental First-Lien Term Loans would exceed the “effective margin” applicable to loans under the First-Lien Term Loan Facility and any other Incremental First-Lien Term Loan Facility in the absence of this proviso, the Applicable Margin for the First-Lien Term Loan Facility and any other such Incremental First-Lien Term Loan Facility shall be automatically increased such that the “effective margin” applicable to loans under the First-Lien Term Loan Facility or such other Incremental First-Lien Term Loan Facility, as the case may be, is equal to the “effective margin” for such Incremental First-Lien Term Loan Facility. So long as no default or event of default exists under the First-Lien Credit Facilities, the Applicable Margin for Revolving Loans and Swingline Loans shall be subject to quarterly adjustments to be determined (but, in any event, not commencing until the delivery of the Borrower’s financial statements in respect of its fiscal quarter ending at least six months after the Closing Date) based on meeting certain total leverage ratios to be agreed upon.   “Base Rate” shall mean the higher of (x) the rate that the Administrative Agent announces from time to time as its prime lending rate, as in effect from time to time, and (y) 1/2 of 1% in excess of the overnight federal funds rate.   “LIBOR” shall mean (a) with respect to each interest period for a LIBOR Loan, (i) the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such interest period commencing on the first day of such interest period appearing on Page 3750 of the Telerate screen (or any successor page) as of 11:00 A.M., London time, on -------------------------------------------------------------------------------- EXHIBIT A Page 8      the applicable interest determination date, provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this clause (a), the rate above instead shall be the offered quotation to first-class banks in the New York interbank Eurodollar market by the Administrative Agent for Dollar deposits of amounts in immediately available funds comparable to the outstanding principal amount of the LIBOR Loan of the Administrative Agent (in its capacity as a Lender (or, if the Administrative Agent is not a Lender with respect thereto, taking the average principal amount of the LIBOR Loan then being made by the various Lenders pursuant thereto)) with maturities comparable to the interest period applicable to such LIBOR Loan commencing two Business Days thereafter as of 10:00 A.M. (New York time) on the applicable interest determination date, in either case divided (and rounded upward to the nearest 1/16 of 1%) by (b) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves required by applicable law) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency funding or liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D).    Interest periods of 1, 2, 3 and 6 months or, in the case of Revolving Loans, to the extent agreed to by all Lenders with commitments and/or Loans under the Revolving Credit Facility, 9 or 12 months, shall be available in the case of LIBOR Loans.    The First-Lien Credit Facilities shall include customary protective provisions for such matters as defaulting banks, capital adequacy, increased costs, reserves, funding losses, illegality and withholding taxes. The Borrower shall have the right to replace any Lender (at par plus accrued interest and other amounts due to such Lender) that (i) charges a material amount in excess of that being charged by the other Lenders with respect to contingencies described in the immediately preceding sentence or (ii) refuses to consent to certain amendments or waivers of the First-Lien Credit Facilities which expressly require the consent of such Lender and which have been approved by the Required Lenders.    Interest in respect of Base Rate Loans shall be payable quarterly in arrears on the last business day of each calendar quarter. Interest in respect of LIBOR Loans shall be payable in arrears at the end of the applicable interest period and every three months in the case of interest periods in excess of three months. Interest will also be payable at the time of repayment of any Loans and at maturity. All interest on Base Rate Loans, LIBOR Loans and commitment fees and any other fees shall be based on a 360-day year and actual days elapsed (except for interest on Base Rate Loans calculated by reference to the prime lending rate, which shall be based on a year of 365 or 366 days, as applicable). -------------------------------------------------------------------------------- EXHIBIT A Page 9   Default Interest:    Overdue principal, interest and other amounts shall bear interest at a rate per annum equal to the greater of (i) the rate which is 2% in excess of the rate otherwise applicable to Base Rate Loans of the respective tranche under the First-Lien Credit Facilities from time to time and (ii) the rate which is 2% in excess of the rate then borne by such borrowings. Such interest shall be payable on demand. Commitment Fee:    A commitment fee, at a per annum rate of 0.50%, on the daily undrawn portion of the commitments of each Lender under the Revolving Credit Facility (for such purpose, with outstanding Swingline Loans not being treated as utilization of the Revolving Credit Facility), will commence accruing on the Closing Date and will be payable quarterly in arrears. Letter of Credit Fees:    A letter of credit fee equal to the Applicable Margin for Revolving Loans maintained as LIBOR Loans on the outstanding stated amount of Letters of Credit (the “Letter of Credit Fee”) to be shared proportionately by the Lenders under the Revolving Credit Facility in accordance with their participation in the respective Letter of Credit, and a facing fee of 1/4 of 1% per annum (but in no event less than $500 per annum for each Letter of Credit) (the “Facing Fee”) to be paid to the issuer of each Letter of Credit for its own account, in each case calculated on the aggregate stated amount of all Letters of Credit for the stated duration thereof. Letter of Credit Fees and Facing Fees shall be payable quarterly in arrears. In addition, the issuer of a Letter of Credit will be paid its customary administrative charges in connection with Letters of Credit issued by it. Agent/Lender Fees:    The Administrative Agent, the Joint Lead Arrangers and the Lenders shall receive such fees as have been separately agreed upon. Assignments and Participations:    Neither the Borrower nor any Guarantor may assign its rights or obligations under the First-Lien Credit Facilities or its Guaranty, as applicable. Any Lender may assign, and may sell participations in, its rights and obligations under the First-Lien Credit Facilities, subject (x) in the case of participations, to customary restrictions on the voting rights of the participants and (y) in the case of assignments, to such limitations as may be established by the Administrative Agent (including (i) a minimum assignment amount of $1.0 million (or, if less, the entire amount of such assignor’s commitments and outstanding Loans at such time), (ii) an assignment fee in the amount of $3,500 to be paid by the respective assignor or assignee to the Administrative Agent and (iii) except in the case of an assignment to any Lender or its affiliates, the receipt of the consent of the Administrative Agent and, so long as no default or event of default exists under the First-Lien Credit Facilities and the Successful Syndication (as defined in the General Fee Letter) of the First-Lien Credit -------------------------------------------------------------------------------- EXHIBIT A Page 10      Facilities has occurred, the consent of the Borrower (such consent of the Administrative Agent and the Borrower, in any such case, not to be unreasonably withheld or delayed)). The First-Lien Credit Facilities shall provide for a mechanism which will allow for each assignee to become a direct signatory to the First-Lien Credit Facilities and will relieve the assigning Lender of its obligations with respect to the assigned portion of its commitment. Waivers and Amendments:    Amendments and waivers of the provisions of the loan documentation will require the approval of Lenders holding commitments and/or outstandings (as appropriate) representing more than 50% of the aggregate commitments and outstandings under the First-Lien Credit Facilities (the “Required Lenders”), except that (a) the consent of each Lender affected thereby will be required with respect to (i) increases in commitment amounts, (ii) reductions of principal, interest or fees and (iii) extensions of final scheduled maturities or times for payment of interest or fees, (b) the consent of all of the Lenders shall be required with respect to any change to the terms of the Intercreditor Agreement which has the effect of modifying the lien priority of any such Lender as against that of the lenders under the Second-Lien Credit Facility and with respect to any release of all or substantially all of (x) the Collateral or (y) the value of the Guaranties, (c) the consent of the Lenders holding a majority of the commitments under the Revolving Credit Facility shall be required to amend, modify or waive any condition precedent to the making of Revolving Loans and Swingline Loans or the issuance of Letters of Credit and (d) the consent of the Lenders holding a majority of the then outstanding First-Lien Term Loans shall be required to waive or defer a scheduled amortization of the First-Lien Term Loans; provided that if any of the matters described in clause (a) or (b) is agreed to by the Required Lenders and so long as no default or event of default then exists under the First-Lien Credit Facilities, the Borrower shall have the right to either (x) substitute any non-consenting Lender by having such Lender’s Loans and commitments assigned, at par (plus all accrued interest and other amounts due to such Lender), to one or more other institutions reasonably satisfactory to the Administrative Agent, subject to the assignment provisions or (y) with the consent of the Required Lenders, terminate the commitment of any non-consenting Lender, subject to repayment in full of all obligations of the Borrower owed to such Lender relating to the Loans and participations held by such Lender. Documentation; Governing Law:    The Lenders’ commitments for the First-Lien Credit Facilities will be subject to the negotiation, execution and delivery of definitive financing agreements (and related security documentation, intercreditor agreement, guaranties, etc.) consistent with the terms of this Term Sheet, in each case prepared by White & Case LLP as counsel to the Administrative Agent, -------------------------------------------------------------------------------- EXHIBIT A Page 11      and satisfactory to the Administrative Agent and the Lenders (including, without limitation, as to the terms, conditions, representations, covenants and events of default contained therein). All documentation shall be governed by the internal laws of the State of New York (except security documentation that the Administrative Agent determines should be governed by local law). Conditions Precedent:    As provided in Exhibit C to the Commitment Letter. .    In addition, it shall be a condition precedent to all extensions of credit that:    (i)     all representations and warranties shall be true and correct in all material respects on the Closing Date (and on any subsequent date upon which an extension of credit is made pursuant to the Revolving Credit Facility), before and after giving effect to all extensions of credit on such date; and    (ii)    no event of default under the First-Lien Credit Facilities or event which with the giving of notice or lapse of time or both would be an event of default under the First-Lien Credit Facilities, shall have occurred and be continuing or would result from the extensions of credit on such date. Representations and Warranties:    Those representations and warranties which are usual and customary for these types of facilities and such additional representations and warranties as the Commitment Parties shall deem appropriate in the context of the proposed Transaction. Covenants:    Those covenants usual and customary for these types of facilities and such additional covenants as the Commitment Parties shall deem appropriate in the context of the proposed Transaction (with customary exceptions and baskets to be agreed upon). Although the covenants have not yet been specifically determined, it is anticipated that the covenants shall in any event include, but not be limited to:    (i)       Limitations on other indebtedness (including contingent liabilities and seller notes).    (ii)      Limitations on mergers and acquisitions and dispositions of assets.    (iii)     Limitations on sale-leaseback transactions.    (iv)     Limitations on dividends and other restricted payments.    (v)      Limitations on voluntary prepayments of other indebtedness (including the Second-Lien Credit Facility) and amendments -------------------------------------------------------------------------------- EXHIBIT A Page 12      thereto, and amendments to organizational documents and other material agreements.    (vi)     Limitations on transactions with affiliates, formation of subsidiaries and issuance of equity interests.    (vii)    Limitations on (x) investments (including joint ventures and partnerships) and (y) holding cash and cash equivalents in excess of an amount to be agreed at any time Revolving Loans and Swingline Loans are outstanding.    (viii)  Maintenance of existence and properties; corporate separateness.    (ix)     Limitations on liens.    (x)      The following financial covenants, which shall be the sole financial maintenance covenants:    (a)    Maximum Total Debt to Adjusted Consolidated EBITDA Ratio, with quarterly adjustments after the Closing Date to be determined; and    (b)    Minimum Fixed Charge Coverage Ratio. 1    (xi)     Adequate insurance coverage.    (xii)    ERISA covenants.    (xiii)  Financial reporting, notice of environmental, ERISA-related matters and material litigation and visitation and inspection rights.    (xiv)   Compliance with laws, including environmental and ERISA.    (xv)    Payment of taxes and other liabilities.    (xvi)   Limitation on changes in nature of business.    (xvii) The obtaining of interest rate protection in amounts and for periods to be determined.    (xviii)Use of proceeds. Events of Default:    Those events of default usual and customary for these types of facilities and such additional events of default as the Commitment Parties shall deem appropriate in the context of the proposed Transaction, including,   -------------------------------------------------------------------------------- 1 Definition of Fixed Charges to include consolidated cash interest expenses, cash tax payments, required principal repayments and capital expenditures. -------------------------------------------------------------------------------- EXHIBIT A Page 13      without limitation, a change of control (to be defined to the satisfaction of the Commitment Parties) of the Borrower. Indemnification:    The documentation for the First-Lien Credit Facilities will contain customary indemnities for the Administrative Agent, the Joint Lead Arrangers, the Lenders and their respective employees, agents and affiliates (other than as a result of such person’s gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final and non-appealable decision). -------------------------------------------------------------------------------- EXHIBIT B SUMMARY OF CERTAIN TERMS OF SECOND-LIEN CREDIT FACILITY Unless otherwise defined herein, capitalized terms used herein and defined in the letter to which this Exhibit B is attached (the “Commitment Letter”) are used herein as therein defined.   Credit Facility:    Second-lien term loan facility in an aggregate principal amount of $175.0 million (the “Second-Lien Credit Facility”). Borrower:    WC Acquisition Holdings Corp. (the “Borrower”). Administrative Agent:    DBTCA. Joint Lead Arrangers:    DBSI and MLPFS. Syndication Agent:    MLPFS. Documentation Agent:    CITLS. Lenders:    DBTCA, MLCC, CITLS and/or a syndicate of lenders formed by DB in consultation with the Borrower (the “Lenders”). Use of Proceeds/ Availability:    The loans made pursuant to the Second-Lien Credit Facility (the “Second-Lien Term Loans”) may only be incurred on the date on which the Transaction is consummated (the “Closing Date”) and the proceeds thereof shall be utilized solely to finance, in part, the Refinancing and to pay the fees and expenses incurred in connection with the Transaction. Maturity:    The final maturity date of the Second-Lien Credit Facility shall be 7 years from the Closing Date (the “Second-Lien Term Loan Maturity Date”). Scheduled Amortization:    None. The aggregate principal amount of Second-Lien Term Loans shall be due and payable in full on the Second-Lien Term Loan Maturity Date. Ranking:    The Second-Lien Term Loans will be pari passu in right of payment with the First-Lien Credit Facilities. Guaranties:    Each direct and indirect subsidiary of the Borrower (each, a “Guarantor” and, collectively, the “Guarantors”) shall be required to provide an unconditional guaranty of all amounts owing under the Second-Lien -------------------------------------------------------------------------------- EXHIBIT B Page 2      Credit Facility (the “Guaranties”). Such Guaranties shall be in form and substance satisfactory to the Commitment Parties. All Guaranties shall be guarantees of payment and not of collection. Notwithstanding anything to the contrary contained above, no non-U.S. subsidiary of the Borrower which is a “controlled foreign corporation” (within the meaning of Section 957 of the Internal Revenue Code) (each, a “CFC”) shall be required to provide a Guaranty (or constitute a Guarantor) if the furnishing of such Guaranty gives rise to adverse tax consequences to the Borrower or any of its subsidiaries. Security:    The Borrower and each Guarantor shall grant valid and perfected second-priority liens and security interests in the Collateral (as defined in the First-Lien Term Sheet). All documentation evidencing the security required pursuant to the immediately preceding sentence shall be in form and substance satisfactory to the Commitment Parties. Intercreditor Matters:    The priority of the security interests in the Collateral and related creditors’ rights will be set forth in an intercreditor agreement (the “Intercreditor Agreement”) acceptable to the Commitment Parties, the lenders under the First-Lien Credit Facilities and the Lenders under the Second-Lien Credit Facility. The Intercreditor Agreement will provide (in each case, except to the extent the Administrative Agent otherwise determines), inter alia, for (i) subordination of security interests of the Lenders under the Second-Lien Credit Facility to the security interests of the lenders under the First-Lien Credit Facilities, (ii) “turnover” provisions with respect to Collateral proceeds, (iii) limitations on the voting rights of Lenders under the Second-Lien Credit Facility with respect to the release of Collateral and the enforcement of remedies with respect to the Collateral and (iv) a waiver of the right of Lenders under the Second-Lien Credit Facility to challenge any “debtor-in-possession financing” or other credit approved by the lenders under the First-Lien Credit Facilities. Optional Prepayment:    After the termination of all commitments, and the repayment in full in cash of all obligations, under the First-Lien Credit Facilities (the “First-Lien Credit Facilities Discharge”), voluntary prepayments may be made at any time on three business days’ notice, without premium or penalty (except as otherwise provided under the heading “Prepayment Fee” below), in minimum principal amounts to be agreed; provided that voluntary prepayments made on a date other than the last day of an interest period applicable thereto shall be subject to customary breakage costs. Mandatory Prepayment:    After the First-Lien Credit Facilities Discharge, the Borrower will prepay the Second-Lien Term Loans on the same basis as First-Lien Terms Loans -------------------------------------------------------------------------------- EXHIBIT B Page 3      are to be repaid under the First-Lien Credit Facilities (as described opposite the heading “Mandatory Repayments” in the First-Lien Term Sheet) with proceeds received by the Borrower and its subsidiaries in excess of the amount thereof required to be permanently repaid to the lenders under the First-Lien Credit Facilities. Change of Control:    Each holder of Second-Lien Term Loans will be entitled to require the Borrower, and the Borrower must offer, to repay the Second-Lien Term Loans held by such holder at a price of 101% of the principal amount thereof, plus accrued interest, upon the occurrence of a change of control (to be defined to the satisfaction of the Commitment Parties). Prepayment Fee:    Voluntary prepayments of Second-Lien Term Loans, and mandatory prepayments of Second-Lien Term Loans required from transactions described in clauses (a) and (b) of the section of the First-Lien Term Sheet entitled “Mandatory Repayments”, in each case prior to the second anniversary of the Closing Date, will require payment of a fee as follows:    (A)   if during the year after the Closing Date, an amount equal to 2% of such prepayment, and    (B)   if during the second year after the Closing Date, an amount equal to 1% of such prepayment. Interest Rates:    At the Borrower’s option, Second-Lien Term Loans may be maintained from time to time as (x) Base Rate Loans, which shall bear interest at the Base Rate (as defined below) in effect from time to time plus the Applicable Margin (as defined below) or (y) LIBOR Loans, which shall bear interest at LIBOR for the respective interest period plus the Applicable Margin, provided, that until the earlier to occur of (i) the 30th day following the Closing Date or (ii) the date upon which DB shall determine in its sole discretion that the primary syndication of the Second-Lien Credit Facility has been completed, LIBOR Loans shall be restricted to a single one month interest period at all times, with such interest period to begin not sooner than 3 business days (nor later than 5 business days) after the Closing Date.    “Applicable Margin” shall mean a percentage per annum equal to, in the case of Second-Lien Term Loans (A) maintained as Base Rate Loans, 6.00%, and (B) maintained as Eurodollar Loans, 7.00%.    “Base Rate” shall mean the higher of (x) the rate that the Administrative Agent announces from time to time as its prime lending rate, as in effect from time to time, and (y) 1/2 of 1% in excess of the overnight federal funds rate.    “LIBOR” shall mean (a) with respect to each interest period for a LIBOR Loan, (i) the rate per annum determined on the basis of the rate for -------------------------------------------------------------------------------- EXHIBIT B Page 4      deposits in Dollars for a period equal to such interest period commencing on the first day of such interest period appearing on Page 3750 of the Telerate screen (or any successor page) as of 11:00 A.M., London time, on the applicable interest determination date, provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this clause (a), the rate above instead shall be the offered quotation to first-class banks in the New York interbank Eurodollar market by the Administrative Agent for Dollar deposits of amounts in immediately available funds comparable to the outstanding principal amount of the LIBOR Loan of the Administrative Agent (in its capacity as a Lender (or, if the Administrative Agent is not a Lender with respect thereto, taking the average principal amount of the LIBOR Loan then being made by the various Lenders pursuant thereto)) with maturities comparable to the interest period applicable to such LIBOR Loan commencing two Business Days thereafter as of 10:00 A.M. (New York time) on the applicable interest determination date, in either case divided (and rounded upward to the nearest 1/16 of 1%) by (b) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves required by applicable law) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency funding or liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D).    Interest periods of 1, 2, 3 and 6 months shall be available in the case of Eurodollar Loans.    The Second-Lien Credit Facility shall include customary protective provisions for such matters as defaulting banks, capital adequacy, increased costs, reserves, funding losses, illegality and withholding taxes. The Borrower shall have the right to replace any Lender that (i) charges a material amount in excess of that being charged by the other Lenders with respect to contingencies described in the immediately preceding sentence or (ii) refuses to consent to certain amendments or waivers of the Second-Lien Credit Facility which expressly require the consent of such Lender and which have been approved by the Required Lenders (as defined below).    Interest in respect of Base Rate Loans shall be payable quarterly in arrears on the last business day of each calendar quarter. Interest in respect of LIBOR Loans shall be payable in arrears at the end of the applicable interest period and every three months in the case of interest periods in excess of three months. Interest will also be payable at the time of repayment of any Second-Lien Term Loans and at maturity. All interest on Base Rate Loans, LIBOR Loans and fees shall be based on a 360-day year and actual days elapsed (except for interest on Base Rate Loans calculated by reference to the prime lending rate, which shall be based on a year of 365 or 366 days, as applicable). -------------------------------------------------------------------------------- EXHIBIT B Page 5   Default Interest:    Overdue principal, interest and other amounts shall bear interest at a rate per annum equal to the greater of (i) the rate which is 2% in excess of the rate otherwise applicable to Base Rate Loans from time to time and (ii) the rate which is 2% in excess of the rate then borne by such borrowings. Such interest shall be payable on demand. Administrative Agent/Lender Fees:    The Administrative Agent, the Joint Lead Arrangers and the Lenders shall receive such fees as have been separately agreed upon. Assignments and Participations:    Neither the Borrower nor any Guarantor may assign its rights or obligations under the Second-Lien Credit Facility or its Guaranty, as applicable. Any Lender may assign, and may sell participations in, its rights and obligations under the Second-Lien Credit Facility, subject (x) in the case of participations, to customary restrictions on the voting rights of the participants and (y) in the case of assignments, to such limitations as may be established by the Administrative Agent (including (i) a minimum assignment amount of $1.0 million (or, if less, the entire amount of such assignor’s commitments and outstanding Second-Lien Term Loans at such time), (ii) an assignment fee in the amount of $3,500 to be paid by the respective assignor or assignee to the Administrative Agent and (iii) except in the case of an assignment to any Lender or its affiliates, the receipt of the consent of the Administrative Agent and, so long as no default or event of default exists under the Second-Lien Credit Facility and the Successful Syndication (as defined in the General Fee Letter) of the Second-Lien Credit Facility has occurred, the consent of the Borrower (such consent of the Administrative Agent and the Borrower, in any such case, not to be unreasonably withheld or delayed)). The Second-Lien Credit Facility shall provide for a mechanism which will allow for each assignee to become a direct signatory to the Second-Lien Credit Facility and will relieve the assigning Lender of its obligations with respect to the assigned portion of its outstanding Second-Lien Term Loans. Waivers and Amendments:    Subject to the terms of the Intercreditor Agreement, amendments and waivers of the provisions of the loan documentation will require the approval of Lenders holding commitments or outstandings (as appropriate) representing more than 50% of the aggregate commitments or outstandings under the Second-Lien Credit Facility (the “Required Lenders”), except that (a) the consent of all of the Lenders affected thereby will be required with respect to (i) increases in commitment amounts, (ii) reductions of principal, interest or fees and (iii) extensions of final scheduled maturities or times for payment of interest or fees, and -------------------------------------------------------------------------------- EXHIBIT B Page 6      (b) the consent of all of the Lenders shall be required with respect to releases of all or substantially all of (x) the Collateral or (y) the value of the Guaranties; provided that if any of the matters described in clause (a) or (b) is agreed to by the Required Lenders and so long as no default or event of default then exists under the Second-Lien Credit Facility, the Borrower shall have the right to either (x) substitute any non-consenting Lender by having its Second-Lien Term Loans and commitments assigned, at par, to one or more other institutions, subject to the assignment provisions or (y) with the consent of the Required Lenders, terminate the commitment of any non-consenting Lender, subject to repayment in full of all obligations of the Borrower owed to such Lender relating to the Second-Lien Term Loans and participations held by such Lender, including a prepayment fee to the extent provided under the heading “Prepayment Fee” above. Documentation/ Governing Law:    The Lenders’ commitments for the Second-Lien Facility will be subject to the negotiation, execution and delivery of definitive financing agreements (and related security documentation, intercreditor agreement, guaranties, etc.) consistent with the terms of this Term Sheet, in each case prepared by White & Case LLP as counsel to the Administrative Agent, and satisfactory to the Administrative Agent and the Lenders (including, without limitation, as to the terms, conditions, representations, covenants and events of default contained therein). All documentation shall be governed by New York law (except security documentation that the Administrative Agent determines should be governed by local law). Conditions Precedent:    As provided in Exhibit C to the Commitment Letter.    In addition, it shall be a condition precedent to the making of the Second-Lien Term Loans that:    (i)     all representations and warranties shall be true and correct in all material respects on the Closing Date, before and after giving effect to all extensions of credit on such date; and    (ii)    no event of default under the Second-Lien Credit Facility or event which with the giving of notice or lapse of time or both would be an event of default under the Second-Lien Credit Facility, shall have occurred and be continuing or would result from the extensions of credit on such date. Representations and Warranties:    The documentation for the Second-Lien Credit Facility will contain representations and warranties substantially similar to the representations and warranties contained in the First-Lien Credit Facilities. -------------------------------------------------------------------------------- EXHIBIT B Page 7   Covenants:    The documentation for the Second-Lien Credit Facility will contain covenants substantially similar to the covenants contained in the First-Lien Credit Facilities with such modifications thereto as shall be determined by the Commitment Parties; provided, that (i) the financial covenant levels in the documentation for the Second-Lien Credit Facility will be increased or decreased (by amounts satisfactory to the Commitment Parties) from the corresponding levels of the financial covenants in the documentation for the First-Lien Credit Facilities, in each case to make them less restrictive and (ii) the other covenants in the documentation for the Second-Lien Credit Facility shall be no more restrictive to the Borrower and its subsidiaries than those set forth in the documentation for the First-Lien Credit Facilities (except that the debt incurrence covenant shall restrict amounts outstanding under the First-Lien Credit Facilities). Events of Default:    The documentation for the Second-Lien Credit Facility will contain events of default substantially similar to those contained in the First-Lien Credit Facilities with such modifications thereto as shall be determined by the Commitment Parties (including materiality thresholds in excess of those applicable to the First-Lien Credit Facilities); provided that, unless otherwise determined by DB, (i) no event of default shall occur under the Second-Lien Credit Facility upon a change of control and (ii) the cross default to the First-Lien Credit Facilities included in the Second-Lien Credit Facility will be subject to a standstill period to be agreed upon. Indemnification:    The documentation for the Second-Lien Credit Facility will contain customary indemnities for the Administrative Agent, the Joint Lead Arrangers, each Lender and their respective affiliates (other than as a result of the gross negligence or willful misconduct of the party to be indemnified). -------------------------------------------------------------------------------- EXHIBIT C CONDITIONS PRECEDENT TO THE FIRST-LIEN CREDIT FACILITIES AND THE SECOND-LIEN CREDIT FACILITY Those conditions precedent that are usual and customary for these types of facilities, and such additional conditions precedent as the Commitment Parties shall deem appropriate in the context of the proposed Transaction. Unless otherwise defined, capitalized terms used herein and defined in the letter to which this Exhibit C is attached are used herein as therein defined. The use of the terms “Administrative Agent”, “Lenders” and “Required Lenders” herein shall mean the Administrative Agent, the Lenders or the Required Lenders, as the case may be, under each of the First-Lien Credit Facilities and the Second-Lien Credit Facility. Without limiting the foregoing, the following conditions shall apply:     (i) Each Commitment Party shall be reasonably satisfied with the Merger Agreement (including the schedules and exhibits thereto) (it being understood that the execution version of the Merger Agreement dated as of August 11, 2006 is satisfactory); and the Merger Agreement shall not have been amended or modified or any condition therein waived to the extent such amendment, modification or waiver is adverse to the interests of the Lenders in any material respect without the prior written consent of each Commitment Party. The Mergers shall have been consummated in accordance with the terms of the Merger Agreement (except as modified or waived in accordance with the immediately preceding sentence) and in compliance with applicable law and regulatory approvals.     (ii) The Borrower, USA, Poland and their respective subsidiaries shall have unrestricted cash on hand of at least $50.0 million and no Revolving Loans or Swingline Loans shall be outstanding.     (iii) Concurrently with the funding of the Credit Facilities, all obligations of the Company, USA, Poland and their respective subsidiaries with respect to the indebtedness and preferred stock being refinanced or purchased pursuant to the Refinancing shall have been paid in full and cancelled, and all commitments, security interests and guaranties in connection therewith shall have been terminated and released, or appropriate arrangements therefor made, all to the reasonable satisfaction of the Administrative Agent. After giving effect to the consummation of the Transaction, the Company, USA, Poland and their respective subsidiaries shall have no outstanding preferred equity or indebtedness (including contingent liabilities in respect thereof), except for (i) indebtedness incurred pursuant to the Credit Facilities and (ii) such other existing indebtedness, if any, as shall be permitted by the Commitment Parties and the Required Lenders (the “Existing Indebtedness”), and all stock of USA and Poland shall be owned (directly or indirectly) by the Borrower free and clear of liens (other than those securing the Credit Facilities). If any Existing Indebtedness is permitted to remain outstanding after giving effect to the Transaction, all terms and conditions thereof shall be required to be reasonably satisfactory to the Commitment Parties and the Required Lenders. -------------------------------------------------------------------------------- EXHIBIT C Page 2     (iv) All material governmental (domestic and foreign and local, state and federal) and material third party approvals and/or consents necessary in connection with the Credit Facilities shall have been obtained and remain in effect, subject to such exceptions as may be agreed upon, and all applicable waiting periods shall have expired without any materially adverse action being taken by any competent authority which restrains, prevents, or imposes materially adverse conditions upon, the consummation of the Credit Facilities. Additionally, there shall not exist any judgment, order, injunction or other restraint prohibiting or imposing materially adverse conditions upon the Credit Facilities.     (v) No material litigation by any entity (private or governmental) shall be pending or threatened in writing with respect to the Credit Facilities or any documentation executed in connection therewith.     (vi) All Loans and all other financings to the Borrower (and all guaranties thereof and security therefor), as well as the Transaction and the consummation thereof, shall be in compliance with all applicable requirements of law, including Regulations T, U and X of the Federal Reserve Board (the “Margin Regulations”).     (vii) All costs, fees, expenses (including, without limitation, legal fees and expenses) and other compensation contemplated hereby, payable to the Administrative Agent, the Joint Lead Arrangers, the Lenders and White & Case LLP or otherwise payable in respect of the Transaction shall have been paid to the extent due.     (viii) The Guaranties, Security Agreements and Intercreditor Agreement required hereunder shall have been executed and delivered, and the Lenders under the First-Lien Credit Facilities and the Second-Lien Credit Facility shall have a first and second, respectively, priority perfected security interest in all assets of the Borrower and the Guarantors as and to the extent required above. The Administrative Agent shall have received endorsements naming the Administrative Agent, on behalf of the Lenders, as an additional insured or loss payee, as the case may be, under all insurance policies to be maintained with respect to the properties of the Borrower and its subsidiaries forming part of the Collateral.     (ix) The negotiation, execution and delivery of customary definitive documentation (including customary legal opinions (including from FCC counsel), officers’ certificates and other customary documents) with respect to each Credit Facility in form and substance reasonably satisfactory to the Commitment Parties. The Lenders shall have received customary and reasonably satisfactory certifications as to the financial condition and solvency of the Borrower and each Guarantor (after giving effect to the Transaction and the incurrence of all indebtedness related thereto) from the chief financial officer of the Borrower.     (x) The Commitment Parties and the Lenders shall have received and be satisfied with (i) unaudited consolidated financial statements of each of USA and Poland for each of their fiscal quarters ended after March 31, 2006 and at least 45 days -------------------------------------------------------------------------------- EXHIBIT C Page 3 prior to the Closing Date, (ii) pro forma consolidated financial statements of the Borrower and its subsidiaries (including USA, Poland and its subsidiaries) giving effect to the Transaction, (iii) interim consolidated financial statements of each of USA and Poland for each month ended after the date of the last available quarterly financial statements and at least 30 days prior to the Closing Date and (iv) detailed projected consolidated financial statements of the Borrower and its subsidiaries for the seven fiscal years ending after the Closing Date, which projections shall (x) reflect the forecasted consolidated financial condition of the Borrower and its subsidiaries after giving effect to the Transaction and the related financing thereof, and (y) be prepared and approved by USA and Poland.     (xi) The Credit Facilities shall have obtained ratings (of any level) from Standard & Poor’s Ratings Services (“S&P”) and Moody’s Investors Service, Inc. (“Moody’s”), which ratings shall be in effect on the Closing Date.     (xii) The Commitment Parties shall have received satisfactory evidence that the Total Consolidated Indebtedness (to be defined on a basis satisfactory to the Commitment Parties) of the Borrower and its subsidiaries (determined on a pro forma basis after giving effect to the Transaction) does not exceed 4.6 multiplied by Adjusted Consolidated EBITDA (to be defined on a basis satisfactory to the Commitment Parties) of the Borrower and its subsidiaries for the twelve month period ending on the last day of the month ending no more than 30 days prior to the Closing Date.

                                                                                        EXHIBIT 10.3     PERFORMANCE SHARE GRANT AGREEMENT     [DATE]   [GRANTEE]               Re:     Prestige Brands Holdings, Inc. Grant of Performance Shares   Dear [GRANTEE]:   Prestige Brands Holdings, Inc. (the “Company”) is pleased to advise you that, pursuant to the Company’s 2005 Long-Term Equity Incentive Plan (the “Plan”), the Company’s Compensation Committee and Board of Directors have granted to you performance shares, as set forth below (the “Performance Shares”), subject to the terms and conditions set forth herein. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Plan.   As of the date hereof, you have been granted a performance share award in an aggregate amount equal to $_______ (the “Performance Award”). In order to calculate the amount of shares of common stock underlying the Performance Award (the “Performance Share Amount”), the Company has divided the Performance Award by $_______ (the “Initial Valuation Price”), the closing price of the Company’s common stock on [DATE]. The term of the Performance Award shall be from [DATE] through [DATE] (the “Performance Cycle”). Upon the expiration of the Performance Cycle, the Company shall calculate the value of the Performance Award in accordance with the formula set forth below (the “Formula”). To the extent the number calculated pursuant to the Formula is greater than zero, such value shall be paid to you in shares of the Company’s common stock, cash, other securities of the Company or any combination thereof, as the Compensation Committee may determine. For purposes of the Formula, the “Final Valuation Price” shall be the closing price of the Company’s common stock on the New York Stock Exchange or any other exchange on which such shares may then be traded on the last business day of the Performance Cycle.     Grant Date     [DATE]     Performance Award     $________     Initial Valuation Price     $________     Performance Share Amount     _________     Performance Cycle     _________     Formula     Performance Share Amount X (Final Valuation Price- Initial Valuation Price)     If the Company decides to pay the value calculated pursuant to the Formula, or a portion thereof, in shares of the Company’s common stock, the number of shares to be paid to you will equal such value divided by the Final Valuation Price. In order to be eligible to receive a payment pursuant to the Performance Award as described herein, you must be an employee of the Company on the date of expiration of the Performance Cycle. However, upon death, Retirement or Disability prior to the expiration of the Performance Cycle, you shall earn a Performance Award calculated by using the closing   -------------------------------------------------------------------------------- stock price of the Company’s common stock on the date your employment with the Company terminated as the Final Valuation Price; provided, that the value calculated pursuant to the Formula is greater than zero. 1.  Conformity with Plan.  The grant of Performance Shares is intended to conform in all respects with, and is subject to all applicable provisions of, the Plan (which is incorporated herein by reference). Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan. By executing and returning the enclosed copy of this Agreement, you acknowledge your receipt of this Agreement, the Plan and the other documents delivered herewith and agree to be bound by all of the terms of this Agreement and the Plan.   2.  Change in Control.  In the event of a Change in Control, the terms of the Plan shall govern the treatment of the Performance Award.   3.  Rights of Participants.  Nothing in this Agreement shall interfere with or limit in any way the right of the Company or its stockholders to terminate your duties as an employee at any time (with or without Cause), nor confer upon you any right to continue as an employee of the Company for any period of time, or to continue your present (or any other) rate of compensation.   4.  Remedies.  The parties hereto shall be entitled to enforce their rights under this Agreement specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The parties hereto acknowledge and agree that money damages would not be an adequate remedy for any breach of the provisions of this Agreement and that any party hereto may, in its sole discretion, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief (without posting bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement.   5.  Successors and Assigns.  Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and permitted assigns of the parties hereto whether so expressed or not.   6.  Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.   7.  Counterparts.  This Agreement may be executed simultaneously in two or more counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same Agreement.   8.  Descriptive Headings.  The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.   9.  Governing Law.  THE VALIDITY, CONSTRUCTION, INTERPRETATION, ADMINISTRATION AND EFFECT OF THE PLAN, AND OF ITS RULES AND REGULATIONS, AND RIGHTS RELATING TO THE PLAN AND TO THIS AGREEMENT, SHALL BE GOVERNED BY THE SUBSTANTIVE LAWS, BUT NOT THE CHOICE OF LAW RULES, OF THE STATE OF DELAWARE   2 --------------------------------------------------------------------------------   10.  Notices.   All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally or mailed by certified or registered mail, return receipt requested and postage prepaid, to the recipient. Such notices, demands and other communications shall be sent to you at the address appearing on the signature page to this Agreement and to the Company at Prestige Brands Holdings, Inc., 90 North Broadway, Irvington, New York 10533, Attn: Secretary, or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.   11.  Entire Agreement.  This Agreement, together with the Exhibits attached hereto, constitute the entire understanding between you and the Company, and supersede all other agreements, whether written or oral, with respect to your Performance Shares.   *    *    *    *    *                                     3 -------------------------------------------------------------------------------- Signature Page to Performance Shares Grant Agreement   Please execute the extra copy of this Agreement in the space below and return it to the Secretary at Prestige Brands Holdings, Inc. to confirm your understanding and acceptance of the agreements contained in this Agreement.                               Very truly yours,                                                                                      Prestige Brands Holdings, Inc.                                 By:_________________________________                                                        Name:                                                                                                                                                     Title:           Enclosures:    Agreement            Extra copy of this Agreement            Frequently Asked Questions            2005 Long-Term Equity Incentive Plan            Registration Statement on Form S-8     The undersigned hereby acknowledges having received and read all of the Enclosures referenced above. The Undersigned hereby agrees to be bound by all of the provisions set forth herein and in the Plan.   Dated as of ___________                               ____________________________________                             [GRANTEE]                             Address:

-------------------------------------------------------------------------------- SETTLEMENT AGREEMENT BETWEEN: NORD RESOURCES CORPORATION 1 Wetmore Road, Suite 203, Tucson, Arizona (“NORD”) AND: NICHOLAS TINTOR 1466 Crescent Road, Mississauga, Ontario (“TINTOR”) WHEREAS TINTOR was employed by NORD as President and Chief Executive Officer from February 15, 2006 until August 21, 2006; AND WHEREAS TINTOR, through counsel, Sarah Wright, made certain claims and allegations against NORD by letter of August 31, 2006; AND WHEREAS NORD denies liability to TINTOR as alleged or at all; AND WHEREAS TINTOR has served as a member of NORD’s Board of Directors since February 15, 2006; and AND WHEREAS NORD and TINTOR have agreed that it is in the best interests of all concerned to resolve any and all claims and execute a full and complete General Mutual Release of all claims quickly and amicably. -------------------------------------------------------------------------------- - 2 - NOW WITNESS FOR AND IN CONSIDERATION of the following covenants contained herein the parties mutually agree as follows: 1.              NORD will pay TINTOR the gross sum of $233,000 U.S. (the “Settlement Amount”). 2.               The Settlement Amount referred to in section 1 will be paid in cash (except as described below in section 3) as follows : (A) $70,000 U.S. will be paid to TINTOR on or before October 31, 2006 on the condition that TINTOR delivers to NORD a properly executed Settlement Agreement and Mutual General Release. (B) The balance of $163,000 U.S. will be paid within seven (7) days of the closing date of: (i) a registered equity offering and/or a debt project financing in which NORD raises not less than an aggregate amount of $15 million U.S. (a “Financing”). The parties agree that for the purposes of this provision Financing will include multiple transactions between October 1, 2006 and January 7, 2007 where the aggregate amount equals or exceeds $15 million U.S. or (ii) a significant corporate transaction (a “Significant Transaction”) in which (A) any person (either alone or together with all affiliates and associates of such person)any company(ies), corporation(s) or any other business entity howsoever structured becomes the beneficial owner, directly or indirectly, of 51% or more of NORD’s outstanding common shares, (B) there is a sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of NORD’s assets, or -------------------------------------------------------------------------------- - 3 - (C) ) there is a sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of NORD’s assets valued at $12 million U.S. or greater. 3.              Notwithstanding section 2(B), if NORD does not close a Financing or a Significant Transaction prior to January 7, 2007 (the “Determination Date”), then NORD will, subject to compliance with any and all securities laws, pay the balance of the Settlement Amount of $163,000 U.S. to TINTOR in fully paid and non-assessable shares of common stock (the “Settlement Shares”) with a deemed issue price per share equal to the volume weighted average price of NORD’s common stock during the ten trading days immediately preceding the Determination Date on the primary market on which NORD’s common stock may then be trading. TINTOR acknowledges that NORD’s common stock presently trade on the Pink Sheets, LLC, and that the Settlement Shares have not been and will not be registered under the Securities Act of 1933, as amended, or under any state securities laws. 4.              TINTOR will resign as a Director of the Board of NORD immediately upon execution of this Settlement Agreement. 5.              TINTOR agrees to execute any and all documents pertaining to the implementation of this Settlement Agreement including any regulatory and other such documents upon review and approval, which will not be unreasonably withheld. 6.               TINTOR has reviewed and approved the Form 8-K regarding the settlement, a copy of which is attached hereto as Appendix “A”. 7.              Payment of the settlement sum is in full and final satisfaction of any and all claims of TINTOR with respect to NORD, its directors, officers and employees, including but not limited to any claims for options or any future issuance of shares other than as described herein. This Settlement Agreement, however, does not affect the shares of NORD common stock that are currently owned by TINTOR which will remain the property of TINTOR. -------------------------------------------------------------------------------- - 4 - 8.              In the event of a material and fundamental breach of this Settlement Agreement, TINTOR’s and NORD’s remedies are not limited to the breach of this Settlement Agreement. In the event of a material and fundamental breach of the Settlement Agreement, the parties may pursue whatever damage claims they wish, and their remedies and claims are not limited in any way notwithstanding any other provision in the Settlement Agreement, Mutual General Release or settlement documents necessary to effectuate the settlement. However, TINTOR may not pursue any damage claims beyond the terms of this Settlement Agreement unless and until he pays to NORD all money paid under this Settlement Agreement and returns to NORD all shares provided to TINTOR pursuant to this Settlement Agreement. TINTOR must elect either to be bound by the terms of this Settlement Agreement or choose to pursue other damage claims and must repay all monies paid under this Settlement Agreement and return all shares provided under this Settlement Agreement no later than March 1, 2007, failing which TINTOR’s rights will be governed by the terms of this Settlement Agreement, the Mutual General Release and other settlement documents necessary to effectuate the settlement. In the event that such damages are claimed, then TINTOR or NORD, as the case may be, relinquishes all rights under this Settlement Agreement and Mutual General Release. 9.               The parties agree that the terms of their settlement and this Settlement Agreement are strictly confidential and that they will not disclose such terms to anyone at all, save (to the extent necessary) their professional advisors, pursuant to an Order of a court of competent jurisdiction, pursuant to a properly authorized request for information by a government agency or in accordance with NORD’s or TINTOR’s regulatory obligations. 10.              The parties agree that neither of them will make derogatory or negative remarks concerning the other, either directly or indirectly, whether orally or in writing. 11.              This Agreement may be executed in several counterparts, each of which will be deemed to be an original and all of which will together constitute one and the same instrument. -------------------------------------------------------------------------------- - 5 - 12.               Delivery of an executed copy of this Agreement by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy will be deemed to be execution and delivery of this Agreement as of the date first above written. IN WITNESS WHEREOF the parties have hereunto set their hands and seals this 29th day of September, 2006. Signed, Sealed and Delivered by Nicholas )   Tintor in the presence of: )     )   /s/ John Cook )   Witness (Signature) ) /s/ Nicholas Tintor   ) NICHOLAS TINTOR John Cook )   Name (please print) )     )   330 Bay Street, Suite 1505 )   Address )   Toronto, Ontario M5H 2S8 )   City, Province )     )   Mining Engineer     Occupation     The Corporate Seal of )   NORD RESOURCES CORPORATION )   was affixed in the presence of: )     )     ) C/S Per: /s/ Erland Anderson )   Authorized Signatory )   --------------------------------------------------------------------------------

AMENDMENT TO EMPLOYMENT AGREEMENT This AMENDMENT (the "Amendment") by and between Carrizo Oil & Gas, Inc., a Texas corporation (the "Company"), and S. P. Johnson, IV (the "Executive"), effective as of January 23, 2006, is an amendment to that certain Employment Agreement by and between the Company and the Executive dated as of June 13, 1997 (the "Employment Agreement"). RECITALS The Company and the Executive have previously entered into the Employment Agreement to provide for terms and conditions of the Executive's employment by the Company; and The Company and the Executive have agreed to make certain mutually beneficial changes to the Employment Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Section 3(c)(i) of the Employment Agreement is amended to read hereafter as follows: "(i) the assignment to the Executive of any duties materially inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 2 of this Agreement, or any other action by the Company which results in a material diminution, in absolute terms, in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;" 2. Section 3(c) of the Employment Agreement is hereby amended by adding the following to the end thereof: "Notwithstanding any provision to the contrary, in order for any event(s) in subparagraph (i) through (vi) above to constitute "Good Reason" for purposes of this Agreement, (A) the Executive must notify the Company via Notice of Termination within 180 days following the occurrence of the event(s) that the Executive intends to terminate his employment with the Company because of the occurrence of Good Reason (which event must be described by the Executive in reasonable detail in the Notice of Termination) and (B) within 60 days after receiving such Notice of Termination from the Executive, the Company must fail to reinstate the Executive to the position he was in, or otherwise cure the circumstances giving rise to Good Reason." 1 --------------------------------------------------------------------------------   3. Section 3(d) of the Employment Agreement is amended to read hereafter as follows: "(d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason or without any reason during a Window Period, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(d) of this Agreement. The failure by the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Company hereunder or preclude the Company from asserting such fact or circumstance in enforcing the Company's rights hereunder." 4. Section 4(a)(i)(D) of the Employment Agreement is amended to read hereafter as follows: "D. Effective as of the Date of Termination, (1) immediate vesting and exercisability of, and termination of any restrictions on sale or transfer (other than any such restriction arising by operation of law) with respect to, each and every stock option, restricted stock award, restricted stock unit award and other equity-based award and performance award (each, a "Compensatory Award") that is outstanding as of a time immediately prior to the Date of Termination and (2) unless a longer post-employment term is provided in the applicable award agreement, the extension of the term during which each and every Compensatory Award may be exercised by the Executive until the earlier of (x) the first anniversary of the Date of Termination or (y) the date upon which the right to exercise any Compensatory Award would have expired if the Executive had continued to be employed by the Company under the terms of this Agreement until the Final Expiration Date; and" 5. Section 6 of the Employment Agreement is amended to read hereafter as follows:   "6. Full Settlement; Resolution of Disputes. (a) The Company's obligation to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any setoff, counterclaim, recoupment, defense, mitigation or other claim, right or action which the Company may have against the Executive or others. In the event (i) prior to a Change in Control, the Executive’s employment is terminated for any reason other than Executive’s voluntary termination (with or without Good Reason), or (ii) within two years after a Change in Control, the Executive’s employment is terminated by the Company or the Executive for any reason, the Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any arbitration pursuant to Section 6(b) (regardless of the outcome thereof) initiated by the Company, the Executive or others regarding the validity or enforceability of, or liability under, any provision of this Agreement or   2 --------------------------------------------------------------------------------   any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any such payment pursuant to this Agreement), plus in each case interest on any delayed payment at the annual percentage rate which is three percentage points above the interest rate shown as the Prime Rate in the Money Rates column in the then most recently published edition of The Wall Street Journal (Southwest Edition), or, if such rate is not then so published on at least a weekly basis, the interest rate announced by Chase Manhattan Bank (or its successor), from time to time, as its Base Rate (or prime lending rate), from the date those amounts were required to have been paid or reimbursed to the Employee until those amounts are finally and fully paid or reimbursed; provided, however, that in no event shall the amount of interest contracted for, charged or received hereunder exceed the maximum non-usurious amount of interest allowed by applicable law; provided, further, that if the Executive is not the prevailing party in any such arbitration, then he shall, upon the conclusion thereof, repay to the Company any amounts that were previously advanced pursuant to this sentence by the Company as payment of legal fees and expenses. (b) Any dispute arising out of or relating to this Agreement, including the breach, termination or validity thereof, shall be finally resolved by arbitration in accordance with the CPR Institute for Dispute Resolution Rules for Non-Administered Arbitration in effect on the date of this Agreement by a single arbitrator selected in accordance with the CPR Rules. The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16, and judgment on the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. The place of arbitration shall be in Harris County, Texas. The arbitrator's decision must be based on the provisions of this Agreement and the relevant facts, and the arbitrator's reasoned decision and award shall be binding on both parties. Nothing herein is or shall be deemed to preclude the Company's resort to the injunctive relief prescribed in this Agreement, including any injunctive relief implemented by the arbitrator pursuant to this Section 6(b). The parties will each bear their own attorneys' fees and costs in connection with any dispute, except in the circumstances in which the Company is required to advance the Executive’s attorneys’ fees in accordance with Section 6(a). (c) If, upon a termination within two years following a Change in Control, there shall be any dispute between the Company and the Executive concerning (i) in the event of any termination of the Executive’s employment by the Company, whether such termination was for Cause or Disability, or (ii) in the event of any termination of employment by the Executive, whether Good Reason existed or whether such termination occurred during a Window Period, then, unless and until there is a final, determination by an arbitrator declaring that such termination was for Cause or not for Disability or that the determination by the Executive of the existence of Good Reason was not made in good faith or that the termination by the Executive did not occur during a Window Period, the Company shall pay all amounts, and provide all benefits, to the Executive and/or the Executive’s family or other beneficiaries, as the case may be, that the   3 --------------------------------------------------------------------------------   Company would be required to pay or provide pursuant to Section 4(a) hereof as though such termination were by the Company without Cause or by the Executive with Good Reason or during a Window Period; provided, however, that the Company shall not be required to pay any disputed amounts pursuant to this paragraph except upon receipt of an undertaking by or on behalf of the Executive to repay all such amounts to which the Executive is ultimately adjudged by such arbitrator not to be entitled. (d) Notwithstanding any provision of Section 4, except in the case of a termination of employment within two years following a Change in Control, the Company's obligation to pay the amounts due on any termination of employment under Section 4 (other than the Accrued Obligations) are conditioned on the Executive's execution (without revocation during any applicable statutory revocation period) of a waiver and release of any and all claims against the Company and its affiliates in such form as may be prescribed by the Company." 6. Sections 10(a) and (b) of the Employment Agreement are hereby amended to read hereafter as follows: "10. Non-Compete and Non-Solicitation (a) The Executive recognizes that in each of the highly competitive businesses in which the Company is engaged, personal contact is of primary importance in securing new customers and in retaining the accounts and goodwill of present customers and protecting the business of the Company. The Executive, therefore, agrees that during the Employment Period and, if the Date of Termination occurs by reason of the Executive terminating his employment for reasons other than Disability or Good Reason and other than during a Window Period, for a period of one year after the Date of Termination, he will not either within 20 miles of any geographic location with respect to which he has devoted substantial attention to the material business interests of the Company or any of its affiliated companies or with respect to any immediate geologic trends in which the Company or any of its affiliated companies is active as of the Date of Termination, without regard, in either case, to whether the Executive has worked at such location (the "Relevant Geographic Area"), (i) accept employment or render service to any person that is engaged in a business directly competitive with the business then engaged in by the Company or any of its affiliated companies, (ii) enter into or take part in or lend his name, counsel or assistance to any business, either as proprietor, principal, investor, partner, director, officer, executive, consultant, advisor, agent, independent contractor, or in any other capacity whatsoever, for any purpose that would be competitive with the business of the Company or any of its affiliated companies or (iii) regardless of geographic area, directly or indirectly, either as principal, agent, independent contractor, consultant, director, officer, employee, employer, advisor, stockholder, partner or in any other individual or representative capacity whatsoever, either for his own benefit or for the benefit of any other person or entity either (A) hire, contract or solicit, or attempt any of the foregoing, with respect to hiring any employee of the Company or its affiliated companies, or (B) induce or otherwise counsel, advise or encourage any employee of the   4 --------------------------------------------------------------------------------   Company or its affiliated companies to leave the employment of the Company or its affiliated companies (all of the foregoing activities described in (i), (ii) and (iii) are collectively referred to as the "Prohibited Activity"). For the avoidance of doubt, the provisions of this Section 10 will not apply following a termination of the Executive's employment by the Company with or without Cause, by the Executive due to Disability or Good Reason or by the Executive during a Window Period. (b) In addition to all other remedies at law or in equity which the Company may have for breach of a provision of this Section 10 by the Executive, it is agreed that in the event of any breach or attempted or threatened breach of any such provision, the Company shall be entitled, upon application to any court of proper jurisdiction, to a temporary restraining order or preliminary injunction (without the necessity of (i) proving irreparable harm, (ii) establishing that monetary damages are inadequate or (iii) posting any bond with respect thereto) against the Executive prohibiting such breach or attempted or threatened breach by proving only the existence of such breach or attempted or threatened breach. If the provisions of this Section 10 should ever be deemed to exceed the time, geographic or occupational limitations permitted by the applicable law, the Executive and the Company agree that such provisions shall be and are hereby reformed to the maximum time, geographic or occupational limitations permitted by the applicable law. " 7. Section 12(g) of the Employment Agreement is hereby amended to read hereafter as follows: "(g) The Executive's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive 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; provided, however, that any claim for "Good Reason" termination must be raised within 180 days following the occurrence of the event giving rise to the right to terminate for "Good Reason" as set forth in Section 3(c) hereof." 8. If any provision provided herein or in the Employment Agreement results in the imposition of an excise tax under the provisions of Section 409A of the Internal Revenue Code and related regulations and Treasury pronouncements ("Section 409A"), the Executive and the Company agree that each will use good faith efforts to reform any such provision to avoid imposition of any such excise tax in the manner that the Executive and the Company mutually determine are appropriate to comply with Section 409A. 9. By execution of this Amendment, Executive acknowledges and agrees that he has no present claim against the Company for a breach of the Employment Agreement or any right to terminate employment for Good Reason, and the Company acknowledges and agrees that it has no present claim against the Executive for breach of the Employment Agreement and no present grounds on which to terminate Executive for Cause. 5 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. CARRIZO OIL & GAS, INC. By: /s/ Paul F. Boling    Name: Paul F. Boling Title: Chief Financial Officer, Secretary  and Treasurer EXECUTIVE /s/ S.P. Johnson, IV   S.P. Johnson, IV     6 --------------------------------------------------------------------------------